No. 14, Financial

1. Continuing the subject of my Despatch No 10 of the 13th February 1866, I have the honor to enclose for your information
newspaper reports of debates in the Legislative Assembly whose
proceedings have not as yet been formally communicated to me.

2. The results of these deliberations appear to be that a majority
of the Assembly have agreed to the abolition of the Real Estate Tax
and Salaries Tax, to the reduction of Trades and Liquor Licence
Duties, and of the import duty upon milch cows, to the imposition of
import duties upon lumber and hay, and to the contraction of two
loans of $100,000 (£20,681), and £50,000 ($242,500) respectively.

3. Leaving out of the calculation the reduction of liquor licence
duties and of the import duty on milch cows (which I am not able to
estimate but which would probably be an unimportant amount), the
following statement shows the financial position of the Colony as
apparently contemplated by the Assembly.

Estimated Revenue for 1866 . . . . . . . . . . . . . . . . . $206,376

Deduct: Real Estate Tax (abolition proposed) . . .$50,000

Salary Tax (abolition proposed). . . . . . 2,500

Trades Licence Duties (proposed reduction)  2,385

54,885

_______

$151,491

Add: Lumber Duty (to be imposed) . . say . . $5000

Hay Duty (to be imposed). . . . say . . 3000

8,000

_______

 Total Revenue for 1866 . . . . . . . . . . . . . . . . . . . $159,491

_______

Expenditure already voted for 1866 . . . . . . . . . . . . . $202,063

Revenue as above . . . . . . . . . . . . . . . . . . . . . . 159,491

_______

42,572

Add balance due to Bank of 24th February 1866 . . . . . . . 73,793

_______

Defecit . . . . . . . . . . . . . . . . . . . . . . . . . . $116,365

_______

4. To meet this deficit of $116,365 (£23,992) the Assembly appear to
propose, first, a loan of $100,000 (£20,618) bearing interest at 12
per cent per annum, and, second, a loan of £50,000 ($242,500) bearing
interest at 6 per cent per annum and to be paid off by a sinking fund
of 4 per cent per annum, and that the first loan should be paid off
out of the proceeds of the second.

5. The Colony has already raised a loan of £4000 ($194,000) in
respect of which 10 per cent per annum of £4000 ($19,400) are payable
for interest and sinking fund. This loan was by statute received and
made a charge upon the general Revenue of the Colony. The
proceedings of the Assembly now appear to have been that having
first resolved to lessen that general Revenue by abolishing and
reducing the Real Estate Tax and other Taxes to the amount of nearly
$55,000 out of an estimated Revenue of $206,376 (thereby reducing it
to $151,491), the
next resolve to raise additional loans upon (I presume) that
diminished security.

6. It is worthy of remark that, irrespective of interest upon the
proposed $100,000 loan, the interest and sinking fund of the existing
£40,000 loan and the proposed £50,000 loan will amount to £9000
($43,650) per annum—an amount equal to more than one fifth of the
estimated Revenue and to more than one fourth of the Revenue as
proposed by the Assembly to be reduced.

7. It cannot be supposed that the measures above detailed will meet
the approval of the Legislative Council, and I think you will agree
with me in the opinion that the credit of the Colony which must be
injuriously affected by such proposals, would in the event of their
adoption be utterly destroyed.

8. The ground upon which the Real Estate Tax is sought to be
abolished seems to be that it is intended to introduce (at some time
or other) a Bill, which, if passed, would make real property
throughout the Colony the subject of municipal taxation only, and
relieve it from taxation for general colonial purposes. Only one
town in the Colony, (Victoria), has yet been incorporated, and in
that instance the experiment of municipal government has signally
failed, and there is but one other place in the Colony, (Nanaimo),
deserving the name of a town and that containing more than 800
inhabitants who are almost exclusively coal miners and labouring
people. Assuming the real property in those two places to be taxed,
as proposed, for municipal purposes it would seem that all other real
property throughout the Colony could be wholly relieved from taxation.

9. I may here state as a curious coincidence of facts that on the
day when the Resolution to abolish the Real Estate Tax was passed,
seven of the Members of the Assembly who form part of the majority by
whom it was carried were collectively in arrear of Real Estate Tax by
$892 (£184) which was due on the
8th November 1865 and for the recovery of which, if not soon
paid, resort must be had to the process provided by Law.

10. With reference to the reduction of the Trades and Liquor Licence
duties, and of the import duty on milch cows, I have only to observe
that any reductions of Revenue at this time are much to be deprecated
unless imperatively called for.

11. The proposed abolition of the salary tax is however open to
strong objection inasmuch as it was imposed last year with the object
(which it has fulfilled) of reaching a class of the community which
in the absence of indirect taxation might be considered to be wholly
untaxed. The tax was an impost of one per cent upon salaries and
wages above £150 per annum and I think an increase of the rate would
obviously under existing circumstances have been more reasonable than
the abolition of the tax.

12. The expediency of levying import duties upon lumber and hay is
open to much question. Four fifths of the lumber imported into the
Colony come from British Columbia, and I cannot but regard the
imposition of a duty upon lumber imported thence as an impolitic
obstacle in the way of commerce and as a probable cause of irritation
and injury to both Colonies.

13. I ought not to omit to state that I believe it to be the
intention of the majority of the Assembly to embody in an
Appropriation Act such of their finanical Resolutions (those treated
of in this Despatch among the number) as from their nature would
require to be enacted by all Branches of the Legislature before they
would be of any legal force. This course is doubtless contemplated
on the supposition that the Legislative Council will prefer to pass
an Appropriation Act so incumbered rather than either to modify it or
to reject it altogether, inasmuch as by modifying it they would come
into collision with the Assembly and by wholly rejecting the
Appropriation Bill they would leave the Executive Government without
any legal authority to incur expenditure.

14. It is needless for me to point out how much injury to the credit
and interests of the Colony such a position of legislative affairs
must necessarily involve. It has been only through the exercise of
great forbearance that I have been able to avert a collision between
the Executive Government and the Assembly which some of the Members
of the majority have without disguise declared it to be their
intention to bring about.

15. In conclusion I have only to express my regret that with the view
of keeping Her Majesty's Government informed on a subject as yet
incomplete, I should feel it my duty to trouble you so frequently and
at such length.