CO129-623-8 Estimates of Expenditure- includes a report for the year ending March 1951 1-12-1949 - 31-3-1951 — Page 14

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(14) opposite encloses copies of Hong Kong's 1950/51 Estimates together with the usual clear despatch from the Governor summarising the present situation.

2.

The Governor commences by giving a brief account of the financial position up to the end of the financial year 1949/50. It is now estimated that revenue will amount to something over $260 million, whilst expenditure is expected to be under $190 million, resulting in an overall surplus of about $80 million. $342 million of this large surplus is accounted for, as has been noted earlier in connection with the quarterly reports, by a surplus under the duties head; exports of duty paid tobacco and kerosene were high owing to unsettled conditions in China and in the absence of draw-back a surplus resulted. Another important contribution to this total surplus was da

the

large influx of population during the year which naturally caused increased revenue from entertainment, transport, meals, liquor and gambling taxes and postal services. Internal security expenditure, including Police and Defence Forces, is expected to reach the very high level of 832 million; if this expenditure runs at the same level in 1950/51 it will, together with the $16 million which Hong Kong agreed to pay to

H. M. G. as a contribution towards the cost of the Garrison (which of course is not provided for in the 1950/51 Estimates) add up to a very considerable proportion of the Colony's revenue spente on security generally. If the estimated 880 million surplus is realised the total surplus balances at 31.3.50 will be g152 million; of this however some $63 million will in fact have been spent as rehabilitation loan expenditure.

3. As introduced into Legislative Council the Estimates for 1950/51 provide for revenue of 8192 million and expenditure of $199 million resulting in a deficit of $7 million. It was however made clear that the deficit had to be covered and that the intention was to bring revenue up to $204 million and thus produce a small surplus. It was eventually agreed to find the additional revenue required by:-(a) an increase in the standard rate of profits and earnings tax from 10% to 12% and (b) introducing a business registration tax of $300 per business per annum. One of the effects hoped for from the second tax is an increase in the yield from profits tax as businesses and all partners (complete with aliases) will be required to register this should make tax evasion more difficült. The estimated surplus is of course turned into an estimated deficit by Hong Kong's agreement to pay H. M. G. $16 million as a contribution towards the cost of the Garrison in 1950/51.

4. Other points of interest in connection with the Estimates are:-

(i) The Director of the Department of Commerce

and Industry has also assumed control of the Department of Supplies and Distribution which however will still have to continue during the current year as a separate

department;