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the enactment of legislation providing for increased taxation, a matter with which I will deal later in this despatch. It was realised that this surplus was only nominal and that against it had to be set off the then indeterminate liability in respect of the Colony's contribution towards the cost of reinforcing the garrison. The subsequent agreement fixing this contribution at a figure of $16,000,000 has of course converted this nominal surplus into a deficit of just over $12 million.
10.
Nevertheless, the revenue estimate has again been framed on conservative lines. This is the only prudent course when so many items such as duties are liable to such violent fluctuations. For example, since the re-occupation, receipts from tobacco duties have varied between $18 million and $35 million and duties on hydrocarbon oils (mostly kerosene) between $2 million and $13 million. Then receipts from air traffic have recently dropped to 1/8th of the level last August. In such circumstances, it is a matter of deciding on a figure which is fairly certain to be realised. Allowance can only reasonably be made for a very moderate amount of exportation from duty paid stocks. If, owing to conditions obtaining during the year, dutiable commodities are exported on a whole- sale scale and no drawback is claimed, a satisfactory surplus will again result. There are, however, certain factors which seem to indicate that it would be unwise to be too optimistic in this respect. Exports from duty paid stocks have become rather patchy. Moreover, the whole godown space in the Colony is taken up and the banks are refusing to finance further imports unless they are furnished with evidence that storage space will be available. This naturally gives rise to a certain degree of concern.
11.
The revenue estimate includes a sum of $250,000 in respect of a new tax on electric signs in regard to which draft by-laws, now under the consideration of the Urban Council. The proposal is to licence neon and other electric signs. At first the proposal was to charge on a basis of $100 per annum for signs of up to 20 square feet with a further fee of $100 for each additional 10 square feet. However, a simpler scheme has since been worked out which will obviate the necessity for measuring all these signs. The electric companies are prepared to furnish particulars of the amperes required to operate each sign. From this the wattage can easily be calculated and the present proposal is to fix the licence fee at so much per watt. This will greatly reduce the cost of collection of the new tax.
12. When introduced into Legislative Council, the estimates of revenue and expenditure were as follows:-
Revenue Expenditure Deficit
•
$191,979,480 199,051,037 7,071,557
It was, however, made clear by the Financial Secretary that the intention of Government was to cover this deficit by an increase in the standard rate of Earnings and Profits Tax from 10% to 15%. Depending on the exact form which the amending Ordinance would take, it was estimated that this increase in direct taxation would be adequate not only to restore a balance between revenue and expenditure, but to provide as well for a surplus of several million dollars.
13.
As I have already explained, however, a number of changes were made in Select Committee in respect of matters which were not finalised when the draft estimates were printed. As a result of these changes, the deficit was increased to $8,699,603. Moreover, as was reported in my telegram No. 335
of the...
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