7. C. G. Follows 8. y. Follows
Sir Sydney Caine
23-6-474 8-8-47-
I agree generally. One is inclined to forget that the 1940 Ordinance was not ideal but a compromise with a powerful vested interest. Your point about amortization of capital and provision for depreciation is I think correct but Mr. Follows is wrong in his paragraph 3. Prior to the 1940 amendment a fixed sum of $170/482 was put aside yearly, sufficient to amortise the whole capital by 1975. This was reduced to a summt exceeding $92,577 plus the interest and dividends from the investments held on account of the reserve. It appears that this capital reserve has been absorbed by the war losses. The figures to which the Company wishes to revert, namely $170,164.96 approximates closely to the original figure.
The Company was allowed to deduct the companies tax, imposed as one of the war tax s in lieu of income tax, from its Profits before going 50-50 with' government in respect of the surplus above the amount required to pay a 12% dividend. A similar problem arises in connection with royalties paid by other utility companies in Hong Kong which were all introduced in the pre-income tax era.
The royalty of $4 on each exchange line derived from the original telephone ordinance. Latterly the Company informed me privately they wished to rescind this fixed charge basis as it was being abused by certain Chinese subscribers.
4 To Follows
7.8.47.
8-8-47
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