CO129-582-17 War expenditure- contribution to H.M. Government 2-10-1939 - 12-10-1939 — Page 13

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(a) Defence expenditure to constitute a separate Defence Budget. Revenue to be credited to this Budget would consist of the proceeds

of income tax which would be introduced immediately without waiting

for preliminery enquiry suggested by the Taxation Committee Report

of April 1939. The standard rate suggested in the first place is 20% with surcharge of 5 on excess of income above about £1,000 and 10% above about 22,000. To become effective from the 1st April 1940 which is the earliest date considered to be administratively

practicable

C

A

Following expenses would be met from income tax

proceeds;-(a) administrative costs of Income Tax Department (b)

existing Defence Services excluding defence contribution 1.e.

Volunteer Forces and Air Raid Precautions estimate for which in

1940/41 totals $1,600,000 for 15 months (o) special war expenditure

e g, cost of German Internees, Censorship, Department of Information

(d) acquisition or construction in Hong Kong of small vessels or

aircraft or both for the defence of the Colony provided naval or

Air Force Authorities consider such expenditure useful (e) balance

to be voted as a free gift to his Majesty's Government additional

to fixed Defence contribution in aid of general war expenditure.

Yield of income tax at 10 was very approximately

estimated by the Texation Committee at $ 10,000,000 per annua. Part.

of this would be offset by loss to the United Kingdom exchequer

owing to Dominion income tax relief. Total available for purposes of

(d) and (e) combined should be of the order of 17,500,000 per annum

unless expenses under (c) are unexpectedly heavy owing to e.g. to

full mobilization of volunteers.

*