of the tax until the matter could be decided by the competent national authorities. Following this the Embassy took the matter up informally with the Foreign Office and a memorandum, copy of which is enclosed," was left with Dr. Dehl, the competent official in the Ministry handling tax matters. Subsequently to this the Embassy has pressed on numerous occasions an answer as to the result of the examination of the matter in the light of the ruling of the United States Treasury Department regarding equivalent exemptions in the Revenue Acts cited in the Department's instruction No. 3715 of February 20, 1925 12 and communicated to the Foreign Office in the Embassy's note No. 1103 of March 20, 1925, a copy of which was sent to the Department with despatch No. 773 of February 17, 1931." The Embassy is now in receipt of a note of reply from the Foreign Office bearing date of January 25, 1934, copy and translation of which are enclosed," stating that the adverse decision of the Chief Bürgermeister of Berlin can not be interfered with by the Prussian Minister of the Interior because of prevailing legal regulations. As of possible assistance to the Department in examining this case there is enclosed a copy of an opinion on the aspects of reciprocity in such matters by the law firm of Kirlin, Campbell, Hickox, Keating and McGann of New York" which was attached to the letter from the Consulate General to the Embassy, above referred to. The letter from the Consulate General to the Embassy concludes with the following paragraph: "It is obvious that the only position which we could take in this matter, if the German authorities do not instruct the Municipality of Berlin to forego the collection of the taxes discussed in the enclosed documents, is for the American Government to consider the Agreement of 1923,13 at an end and to proceed in the United States to levy the Federal Income Tax on the German lines operating in the United States. It is, however, known that the preponderance of the advantage lies on the German side in this matter, considering the importance of their representation in America and the volume of the business transacted compared to the single office in Berlin of the United States Lines." Before taking the matter up further with the Foreign Office I would be very glad to receive the Department's instructions as to the action I am to take. Respectfully yours, WILLIAM E. DODD 11 Not printed. 12 Foreign Relations, 1925, vol. II, p. 198. 13 Apparently the agreement by exchange of notes, 1923-1925, between the United States and Germany granting relief from double income tax on shipping profits, Executive Agreement Series No. 17; for correspondence, see Foreign Relations, 1925, vol. 11, pp. 188 ff. 811.512362 Shipping/24 The Secretary of State to the Ambassador in Germany (Dodd) No. 211 WASHINGTON, May 29, 1934. SIR: The Department refers to your despatch No. 507 dated February 6, 1934, concerning the desire of the United States Lines Operations, Incorporated, to secure exemption from the trade tax in Germany. Copies of a letter dated May 22, 1934, and of its enclosures, received from the Acting Secretary of Commerce dealing with this matter are transmitted herewith for your information.15 You will observe that the last paragraph of the letter from the Department of Commerce reads as follows: "If the German authorities decline to exempt the United States Lines from the trade tax assessed by Berlin and other German municipalities, under our interpretation of the scope of the existing arrangement between the two countries the situation presented would seem to make advisable a further exchange of notes with a view to effecting an arrangement that would protect American shipping companies from the imposition of such taxes. The Department is unable to suggest any other action that may be taken by this Government." You are accordingly instructed to take up this matter with the Foreign Office in an endeavor to reach an understanding for a further exchange of notes with a view to effecting an arrangement that would protect American shipping companies from the imposition of such taxes. You are requested to advise the Department in case the German Government will conclude such an arrangement, and you will transmit suggestions for the terms to be included in the notes to be exchanged. Upon the receipt of your report a further instruction will be sent to you setting forth the text of the notes to be exchanged on this subject. Very truly yours, For the Secretary of State: 811.512362 Shipping/26 The Ambassador in Germany (Dodd) to the Secretary of State No. 1180 16 BERLIN, August 17, 1934. [Received September 4.] SIR: With reference to despatch No. 951 of June 20, 1934, on this subject, I have the honor to inform the Department that the tax expert of the Foreign Office, Dr. Dehl, now having returned from annual leave, the matter of the protection of American shipping com 15 None printed. 18 Not printed. panies from the imposition of the trade tax (Gewerbesteuer) was discussed with him on August 14, 1934, and a memorandum left, copy of which is enclosed. During the course of the conversation with Dr. Dehl, it was emphasized that whereas in Germany, for example, the city of Berlin could impose such taxes independently of the jurisdiction of the Finance Ministry, the Federal Government alone could impose such taxes in the United States, and attention was again called to the last two paragraphs of the legal opinion sent as enclosure No. 6 with despatch No. 507 of February 6, 1934, a copy of which is in the possession of the Foreign Office. Dr. Dehl acceded to the Embassy's request, that he would take up the matter with the Finance Ministry and the Ministry of Economics in accordance with paragraph (c) of the copy of the memorandum enclosed and furnish the Embassy an answer in writing as to whether the Finance Ministry could issue the necessary instructions under the existing arrangement to free American shipping companies from the trade tax, and if this should prove impossible, he would secure the views of the competent Ministry as to the possibility of reaching an understanding for a further exchange of notes on the lines specified by the Department. Upon the receipt of the Foreign Office reply, this will be transmitted promptly for the Department's consideration with the called for suggestions from the Embassy. Respectfully yours, WILLIAM E. DODD [Enclosure-Memorandum] BERLIN, August 14, 1934. In 1923, 1924 and 1925, the Embassy and the Ministry for Foreign Affairs exchanged notes effecting an arrangement between the United States and Germany for Relief from Double Taxation on Shipping Profits. 17 17 In a Memorandum dated September 2, 1933, the claim for the Trade Tax (Gewerbesteuer) against the United States Lines, Inc., was referred to. The Ministry replied to this Memorandum in its note verbale-V 958-of January 25, 1934, saying that the Prussian Minister of the Interior could not alter the decision of the Bürgermeister of Berlin who had decided that the company was not exempt from the Trade Tax. It is therefore noted that: (a) Under the United States Constitution, municipal subdivisions and States have no authority to place burdens, by taxation or otherwise, on foreign commerce. 17 Not printed. (b) It appears that the "Trade Taxes" (Gewerbesteuer) levied against the United States Lines, Inc., are imposed by German States and Municipalities without regulation by the Ministry of Finance. In this regard German shipping companies seem to enjoy more favorable treatment than United States shipping companies under the Reciprocal Agreement mentioned. (c) If it is impossible for the Ministry of Finance to issue such instructions as would align the situation on a completely reciprocal basis under the existing arrangement, the Department of State is desirous of endeavoring to reach an understanding for a further exchange of notes with a view to effecting an arrangement that would protect American shipping companies from the imposition of such taxes. [By a note verbale of January 31, 1935, enclosed with despatch No. 1735, February 2, 1935, the German Government informed the American Embassy that the "competent German tax authorities have been given due instructions and have been requested to desist from collecting the trade tax demanded of the United States lines but not yet paid." (811.512362 Shipping/28). By instruction No. 374, March 19, 1935, the Embassy was instructed "to advise the Foreign Office in response to its note verbale of January 31, 1935, that reciprocity is granted by the United States in respect to the collection of such taxes" (811.512362 Shipping/29).] REPRESENTATIONS BY THE GERMAN GOVERNMENT REGARDING SPECIAL TAX ON THE USE OF CERTAIN FOREIGN-BUILT BOATS IN THE UNITED STATES 811.512 Boats/50 St. 1b 18 The German Embassy to the Department of State [Translation] With reference to the communication of August 1 of this year (811.512 Boats/45) from the Acting Secretary of State,19 the German Embassy has the honor to request the Department of State again for a decision with regard to the tax on vessels built abroad, provided in the Revenue Act of 1932 (Section 761 (b)).20 The matter has been pending for more than a year without such a decision having been secured so far, although the Department of State on its part had made "a request" of the competent officials "for an early expression of their views", according to the communication of April 4th of this year.19 18 For previous correspondence, see Foreign Relations, 1928, vol. 11, pp. 936 ff. 19 Not printed. 20 47 Stat. 277. The Embassy would be so much the more grateful for information, as a violation of a provision of the German-American Commercial Treaty is involved, which is, in the opinion of the Government, perfectly 21 unambiguous. WASHINGTON, October 19, 1933. 811.512 Boats/60 The German Embassy to the Department of State [Translation] 22 With reference to the valued note of the Department of State of February 16th of this year (811.512 Boats/56) 23 the Embassy has the honor to call the attention of the Department of State to the fact that the Revenue Act of 1934 is now before the Senate Committee on Finance and, as reported, will come up for consideration this week. The Embassy would be very thankful for an examination and, if possible, for appropriate information as to whether or not on the part of the American Government these deliberations might be an occasion for settling, by a suitable wording of the Revenue Act of 1934, the question of the import tax on boats built abroad (Section 761 of the Revenue Act of 1932), which question has been pending for so long. The Embassy would be especially obliged for any effort in this direction. WASHINGTON, March 12, 1934. 811.512 Boats/61 24 Memorandum by the Legal Adviser (Hackworth) [WASHINGTON,] March 20, 1934. The attached note from the German Embassy dated March 12, 1934, requests the Department to give consideration to the desirability of suggesting an amendment to the Revenue Act of 1934 to the Senate Committee on Finance regarding the special internal tax on the use of foreign built boats, imposed by Section 761 (b) of the Revenue Act of 1932. According to the German Embassy's note the Senate Committee on Finance has the Revenue Act of 1934 under consideration at the present time. 21 Treaty signed at Washington, December 8, 1923, Foreign Relations, 1923, vol. п, р. 29. 22 File translation revised. Not printed; now filed under 811.512 Boats/58. 23 |