CONFIDENTIAL #
XCC(77)54
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Copy No. Page 12 of 18
of 80
E
(g) Rates and Property Tax
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Honourable Members considered the question of the Cor- poration's liability for tax when they were asked to advise on the Mass Transit Railway Corporation Bill 1975. The appropriate extract from XCC(75)6 is at Annex E. In summary, it was agreed that the Cor- poration should not be exempted from taxes or rates; but that it might be allowed to discharge its liabilities for property tax and rates in the form of additional equity issues, to help it overcome its initial cash flow difficulties.
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It has been tentatively agreed with the Corporation that initial cash flow difficulties " should be assumed to exist until the Corporation achieves a positive net cash flow from railway operations, before allowing for the repayment of debt. The Cor- poration estimates that it should have a positive cash flow by 1983. It has also been tentatively agreed that for the next few years the only taxes of significance are rates, because profits tax liabilities on the railway arise in 1988 due to the heavy initial allowances deductable at the commencement of operation of the Railway. Finance Committee is being asked to approve the purchase of additional equity up to about $11 million to enable the Corporation to meet its liability for rates on railway property only up to 1983 (or whenever the Corporation achieves a positive cash flow). These would be rates on the Corporation's railway business and during the construction period would comprise rates on works areas and back-up areas. The cash flow tables at Annexes C and D reflect this tentative agreement.
First steps to be taken by the Government
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If the proposed construction programme is to be met, the Government will have to take quick action on the following matters:
(a)
Land:
(i)
the acquisition and clearance of MTR construc- tion, works and storage sites;
C.S. 166
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