CO129-582-7 Taxation 6-6-1939 - 5-2-1940 — Page 114

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would not be continued as a peace measure without the express

pproval of the Legislative Council.

Alte rnative proposals of the Committee of the European

Chamber of Commerce some of which have also been suggested by

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the Chinese are not commend able for the most part.

As indicated

decision may be delayed for some time

and outcome may be that additional revenue raised here

would

not suffice for adequate gift by this Colony to H. M. Government

towards general war expenses, for I assume that you would be

Pbeing pur Through reluctant to approve the foregoing income tax measure though

ing against strong unofficial opposition. Assume however that

substantial additional revenue will be obtained from some source

I should like to proceed as soon as possible with certain local

defence expenditure detailed below. If additional revenue is not

available immediately expenditure could be met from surplus

balances. There are expected to be at least $13,000,000

(Hong Kong) at the 31st.December, 1939, and will be made fully

liquid by the refund of advances made from them to the Loan

Account, if the balance of the 1934 local loan can be issued,

as to which I shall be telegraphing shortly. Depletion of sur-

plus resultant on the proposed expenditure might appear dangerous

but I suggest that we may justifiably take the Exchange Fund

surplus into account as supplementary reserve.

Details the first proposed expenditure are:-

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(1) To begin at once the construction of 2 minesweepers which are

urgently necessary for the defence of Hong Kong. Both the larger

dockyards here could undertake the work at once. Cost is estim-

ated as being of the order of $1,750,000(Hong Kong)each.

(2) Provided that such purchase is feasible (a) to provide funds

for the purchase of, say, 10 aeroplanes which are

essentially

necessary for defensive reconnaissance purposes together with

sufficiency of training type aeroplanes. (b) to begin to train

pilots