File No. 837.51/309
[Enclosure—Translation]
The Cuban Secretary of the Treasury
(
De Cancio) to the Cuban Secretary of State
(
Desvernine)
Sir: I have the honor to reply through
you to the list of questions placed in my hands by the
Subsecretary of your Department who called at my office
accompanied by the Secretary of the Legation of the United
States, Acting Chargé d’Affaires.
The information desired is as follows:
- 1.
- Definite and specific information in regard to the
amount derived from the stamp tax at the end of six
months.
- 2.
- Whether the revenue derived from the taxes may
lawfully be diverted by the Government of Cuba to any
other purpose than the payment of interest and the
retirement of bonds authorized by law.
- 3.
- If the Cuban Government has authority to divert any
part of such revenue to other purposes—what is the
extent of this authority, and for what purpose may it be
diverted, and in that case, what guaranty is there for
the payment of interest and amortization of the
bonds?
- [4.]
- Copy of the law of July 31, 1917.
With reference to the first question, I append an official
statement of the revenue obtained from September 1, 1917, the
date upon which the law of July 31, 1917, creating new taxes,
became effective, down to April 30, 1918; but call attention to
the fact that the final returns for the month of April are on
this date (May 6) still pending, for the Accounting Division of
this Department has not received final returns from some of the
tax offices and customhouses, but in any case the final figures
will show an increase rather than a decrease in the amount
already known.
I include the returns from the so-called “loan tax of 1904,”
during the same period because this tax was also created for the
purpose of guaranteeing the public debt or the loan of 1904.
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| Returns from: |
Customhouses |
Branch tax offices |
| 1917 stamp tax |
$128,469.24 |
$2,275,057.57 |
| Sugar and molasses taxes |
|
4,092,760.89 |
| 1904 stamp tax |
340,083.30 |
2,269,206.84 |
|
$468,552.54 |
$8,637,025.30 |
The tax upon sugar and molasses became effective November 1,
1917; that is to say, it is applicable only to the zafra or sugar year of 1917–18. The tax
upon sugar is divided into two parts: the ordinary and the
extraordinary, the former being 10 cents per sack and the latter
an additional 10 cents, assessable as long as sugar is quoted in
Cuba at 3 cents or more per pound. It is expected that this
revenue will reach at least $5,000,000. Some of the taxes
provided for in the law of July 31, 1917, are not included in
the foregoing statement because they are annual taxes and when
the law became effective two months of the fiscal year 1917–18
had passed. Thus we are now beginning to collect the tax upon
the profits of sugar and tobacco companies, insurance companies,
banks, and others in the same class as determined by the text of
the law. It will be possible to have the exact figures upon this
revenue within four or five months, but the assessment is now
well under way and these taxes will show good returns.
As to the second point, that is to say, whether the revenue
derived from the taxes provided by this law may be diverted by
the Government of Cuba to other purposes than the payment of
interest and the retirement of bonds authorized by the law, I
beg to call attention to the text of the law itself, which is
very clear upon this point.
The President applied to Congress for funds with which to meet
the needs of the civil and international wars in which we were
engaged and in which we are still involved, and Congress
responded by creating the taxes in question, which according to
Article 2 of the law of July 31, 1917, are to be applied, first,
to the payment of interest and amortization of the bonds, and
second, to provide revenue for the budget in view of the
existing state of war and of the needs of the Treasury.
The bonds issued under authority of this law may: (a) be given also In guarantee or payment
of any obligations contracted by the Government in connection
with the wars; (b) be sold or
hypothecated for raising funds with which to make payments; (c) be used for purchasing and importing
gold coin for the maintenance of the credit and gold standard of
our monetary system; or (d) be exchanged
for outstanding bonds issued in accordance with the so-called
law of economic defense of January 1, 1915, known as the
“$5,000,000 issue.”
There remains the third question; that is, whether the Cuban
Government is authorized to divert this revenue to other
purposes, to what extent it is so authorized, and for what
purposes; and in that case, what guarantee is there for the
payment and amortization of the bonds?
The Cuban Government has over the revenue so derived the same
authority and control as over all other public revenue, though
it is understood that such revenue is destined to guarantee the
interest and amortization of the issue of the $30,000,000.
When the amortization is in its apogee, it will absorb
$3,000,000; this will be from January 1, 1920, on; and adding to
this sum $1,800,000 for interest, the burden upon the Treasury
will be $4,800,000. As this will be payable after January 1,
1920, when under the terms of the law amortization begins, we
shall probably have peace, international trade will have been
renewed with competition reestablished, prices will have
declined, and all materials required for the public service such
as fuel, forage, foods, etc., will have become considerably
cheaper; the equilibrium of the budget, even taking into account
the increasing demands of public instruction, public works,
sanitation, justice, etc., will have been assured, and the Cuban
Government will take care of all its obligations with the
assurance, order, and method heretofore observed, and which have
raised the public credit to a high level.
The same thing will happen in the case of these new taxes as in
the case of former taxes; there are no special funds in the
Cuban Treasury; the unity of the Treasury is a fact which has
subsisted throughout all the vicissitudes of the last 20 years,
as well during the military government of Cuba by the United
States from 1899 to 1902, as during the presidential term of
Estrada Palma, and then under the provisional government of Cuba
by the United
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States,
and from the presidency of General José Miguel Gomez down to the
present time.
The new bonds will have the same guarantee as those of 1904 and
subsequent issues; that is to say, the good faith of the Cuban
Government and the solvency of the Cuban Treasury.
I enclose a copy of the Boletin Oficial of
this Department, wherein is printed the text of the law of July
31, 1917.
I shall be pleased to give any further information.
Your obedient servant,
