File No. 639.003/28.
In the first place I have handed Mr. Velázquez a memorandum setting forth
the position of our Government in regard to these taxes. This memorandum
was carefully gone over, and the minister stated that he would like to
answer by a countermemorandum, copies and translations of which I
herewith inclose. I have had frequent interviews with the general
receiver of customs on this subject, and I will send in my full report
on the workings of the two taxes in question as soon as I can obtain all
the data from the receiver’s office.
[Inclosure 1.]
The American Minister
to the Acting Minister for Foreign
Affairs.
[Memorandum.]
[The memorandum begins with a verbatim copy of the Secretary’s
despatch No. 29, above, from the first paragraph, “On August 16,
1910,” etc., to the end of the sixth paragraph, “as required by
article 3 of the convention of February 8, 1907.” It then
proceeds:]
In thus emphasizing the principle involved, namely, the right of the
United States under the convention to have its agreement or consent
a prerequisite to any modification in the import duties, the
Government of the United States reserves for the present its right
hereafter to make any specific objections to the recently levied
duties aforesaid which further careful study and examination may
show to be necessary.
From the preliminary study already made it would, however, appear
that the recently approved municipal taxes of the Commune of Santo
Domingo, at least, threaten injuriously to affect the import customs
revenues, which so largely serve the bond issue with which the
Dominican Republic is discharging its obligations to its creditors
and concessionaires. Moreover it would seem that the recent
legislation is likely to prove prejudicial to the best interests of
the Republic in the matter.
[Inclosure 2.]
The Acting Minister for
Foreign Affairs to the American
Minister.
[Counter
memorandum—Translation.]
Office of the Secretary of State for Finance and
Commerce,
Santo
Domingo, April 16,
1911.
Dear Mr. Russell: The position taken in
your memorandum against the right of the Dominican Republic to
sanction the municipal surtax for the city of Santo Domingo, and the
stamp tax, is not in accordance with the opinion of the Government
on that point.
The convention celebrated on February 8, 1907, between the United
States: of America and the Dominican Republic provides, in article
3, that the import duties of the Dominican Republic can not be
modified except by previous agreement between the two Governments.
But the same article, in establishing the condition that said import
duties must never fall below $2,000,000 annually, excludes all idea
except that the said modification is what
might reduce the revenues. The United States, in stipulating that
condition, could have had no other object in view than that of
protecting the interests of the holders of Dominican bonds; and
these are perfectly safeguarded as long as the customs import duties
are not reduced to $2,000,000.
The stamp tax you refer to is not a creation of latter days. It was
voted in 1904, reformed in 1906, and again reformed in 1910; but not
only is it anterior to the convention, which did not annul it, but
when reformed in 1910 was notably reduced as regards articles of
import. There is no ground then to suppose that the modification of
the stamp tax law is prejudicial to the customs revenues since,
instead of reducing them, the probabilities of their being increased
have been augmented.
The municipal surtaxes are likewise not a creation posterior to the
convention. Since the birth of the Republic the constitution has
recognized in the municipalities the right to create usance and
consumption taxes for the commune, which are made legal by
Congress.
The schedule of municipal surtaxes at present in force in the city of
Santo Domingo is a modification of a tax that was in existence for
many years previous.
And what influence that tax has in reducing the customs revenues is
shown by the income from the Santo Domingo customhouse last year,
when the new municipal surtax went into effect, compared with the
year 1909. The revenue increased, as is shown by figures, since the
surtax is so low that it can not reduce consumption.
[Page 144]
But it is pertinent to observe that, even in the excessive case,
scarcely probable, that a reduction of the customs revenues is
produced as a necessary consequence of the establishment of these
municipal consumption taxes, it would be indispensable, in changing
the laws by which they were instituted, as a condition sine qua non, that the customs revenues were
not exceeding $2,000,000’ annually.
Outside of that case—the reduction of the customs revenues below the
minimum established by the convention—no criticism can be made of
any consumption tax whatever that the Republic sees fit to
establish, as the previous agreement between the two Governments
under the convention of February 8, 1907, is only necessary for the
modification of the import customs duties, with special care that
the customs revenues of this nature do not fall below a certain and
definite sum.
The convention has not touched on the sovereign right of the
Dominican Republic to create taxes of all sorts, as, for example, an
export tax, more directly connected with import duties than
municipal taxes. It is understood that the convention having had for
its object the guarantee of the import duties for the payment of the
5 per cent bonds, the agreement of both Governments, in accordance
with the provisions of the convention, is indispensable for any
modification of the working of the tariff, any change in which might
make a notable and perennial reduction in said import duties.
But that agreement is not necessary nor proper, neither under the
convention nor under our laws, while the tariff remains intact, and
when, moreover, there is no ground for foreseeing an alarming
reduction of said duties. That would be contrary to the spirit and
letter, not only of our laws, but of the convention itself. It would
be contrary to the interests of the parties, both charged with the
development and prosperity of the Dominican Republic, in a national
sense, as well as in its municipal functions.
Yours, truly,
