CO129-582-7 Taxation 6-6-1939 - 5-2-1940 — Page 23

23

vet reached you.

The line I took was that such

offers should be considered on their merits in the

light of the financial and constitutional position of

the individual Colonies concerned and I suggested that

in the case of Hong Kong it would be unwise to

discourage such a contribution.

I am therefore in agreement with the terms

of the draft telegram opposite, and as the Governor

asks for a reply by tomorrow I am sending these papers

forward direct. In normal times the proposal to

constitute a separate Defence Budget to be financed

from a special item of revenue (in this case, income

tax) earmarked for the purpose would, I believe, be

contrary to accepted accounting procedure;

earmarking revenue in this way has, I think, generally

been frowned upon in the past. But under war

conditions I would not suggest that we should raise

any objection, more particularly as there is less

likely to be local objection to the introduction of

income tax if it is separately provided for in this

way. As Sir John Campbell points out, income tax

once imposed has a wav of becoming a permanent

feature of taxation. Having lively recollections of

the controversies aroused by the introduction of

income tax in another Colony, I should certainly let

Hong Kong insert the thin end of the wedge in their

own way.

Jagreed

Itm.

10.10.29.

1

agree.

(0, 10,

39

M.M