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No. 3. (No. 43.) Sir, — Government House, Wellington, July, 18^7. In reply to your circular despatch, dated the Ist May last, transmitting, for the consideration of Government here, a copy of a letter from the Board of Trade, asking to be supplied with certain information, I have the honour to state that Ministers state that it is quite impossible to make out any statement with regard to the matter referred to in paragraphs (a) and (b) of the letter from the Board of Trade. It appears that importers are not required to certify in their entries the particulars referred to in these paragraphs, and that it would be in vain to expect them to do so, as they have not themselves the required knowledge. 2, A list of the detentions (referred to in paragraph (c) of the letter from the Board of Trade) in the colony is forwarded herewith. It is to be observed that these detentions have been made entirely through the efforts of Customs officers. Neither importers nor colonial manufacturers have aided the department in detecting goods liable to be dealt with under the Merchandise Marks Act. I have, &c, JAMES PEENDEEGAST. The Eight Hon. J. Chamberlain, &c, Secretary of State for the Colonies.

A.-2, 1898, No. 3.

No. 4. (No. 45.) Sir, — Government House, 26th July, 1897. In reply to your despatch No. 17, dated the 6th May last, transmitting copy of correspondence respecting income-tax levied in the colony upon the British ship " Chilena," I have the honour to forward a report on the subject furnished to the Government here by the Commissioner of Taxes, and to state that Mr. McKenzie, the Acting Colonial Treasurer, signifies concurrence in the views expressed by the Commissioner in that report. I have, &c, JAMES PEENDEEGAST. The Eight Hon. J. Chamberlain, &c, Secretary of State for the Colonies.

A.-2, 1898. No. 4.

(Memorandum.) Land- and Income-tax Department, Wellington, Ist July, 1897. Hebewith I beg to submit, for your information, my remarks on a letter addressed by the Chamber of Shipping of the United Kingdom, London, to the Under-Secretary of State for the Colonies, respecting income-tax levied on the British ship " Chilena." As to the contention that the regulations under which the tax has been levied are ultra vires, and inconsistent with the Land and Income Assessment Act, I have only to say that such regulations were prepared by the Law Officers of the Crown in New Zealand, and I have not the slightest ground for supposing that they are otherwise than in strict accordance with law. The legality or otherwise of these regulations has not been called in question in the colony, and if questioned I have no doubt whatever they would be upheld. On the general principle as to whether a colony is entitled to assess for taxation the profits derived from shipping business originating in such colony I have to say that this appears absolutely unquestionable, having been affirmed by the English Court of Appeal, the decision being followed by the Supreme Court in South Australia in a case between the P. and O. Company and the Taxation Department in Adelaide. I believe it is argued that an injustice exists because the British income-tax is levied on all profits derived from abroad by persons resident in Great Britain, and that if the colonies levy a tax on freights homeward there is a double charge. The injustice, if it exists, and the double charge, if double charge there be, rest with the Imperial Government, which levies tax on profits earned everywhere, including, of course, both outward and inward freights earned by shipowners resident in Great Britain. I cannot help thinking that a colony would be more justified than the Imperial Government in assessing the freights of vessels, both outward and inward, for taxation. An income-tax has now been imposed in nearly all the colonies, having been adopted in New South Wales, Victoria, South Australia, Tasmania, and New Zealand, and the provisions as to taxation of shipping are practically the same in all the five colonies.

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