895.63 Or 4/43
The Chargé in Japan (Neville) to the
Secretary of State
No. 992
Tokyo, October 2, 1934.
[Received October
22.]
Sir: I have the honor to transmit copies of two
letters dated August 6 and September 25, 1934, with their
enclosures,23 received from the American Consul in charge of the
Consulate General at Seoul, Chosen, in regard to the levying of income
tax upon the employees of the Oriental Consolidated Mining Company, an
American concern which operates gold mines at Unsan, Chosen.
The particular point at issue is the contention of the company that its
books are not subject to inspection by the tax authorities. The original
concession,24 a copy
of which was transmitted in this Embassy’s despatch No. 134 of September
23, 1932, contained a clause (Article XVII) giving the King of Korea the
right to inspect the company’s books. This Article was subsequently
deleted, and Article XII consequently rendered inoperative, in return
for a cash payment
[Page 825]
of Yen
200,000 and an annual payment of Yen 25,000, regardless of the output of
the mines. The company is of opinion that the deletion of the clause in
question carries permanent immunity from inspection by tax
officials.
An examination of the record seems to indicate that the original
concession and its subsequent modifications were drawn up without
reference to the possible imposition of an individual income tax. There
is no evidence of an intention on the part of the Government General of
Chosen to levy taxes on the company. It is obvious, however, that the
authorities in Chosen insist upon the right to inspect the company’s
books in order to verify the amounts paid to employees who are subject
to income tax under the law.
In view of the stringent provisions of income tax legislation in the
United States, I feel that the Embassy would not be justified in
supporting the company’s position in this matter without the
Department’s express approval. I am accordingly instructing Mr.
Langdon25 to withhold his proposed reply to the Government
General pending a review of the case in the Department.
Respectfully yours,
[Enclosure]
Proposed Reply by the American Consul at
Seoul (Langdon) to the Chief of the
Foreign Affairs Section, Japanese Government General of
Chosen (Tanaka)
Seoul, Chosen
, [September 25,
1934].
Sir: I have the honor to refer to your
letter of September 18, 1934,26 in regard to the application of the Chosen
Income Tax Law to the Oriental Consolidated Mining Company and its
employees.
The Consulate General does not dispute the Government General’s view
that the incomes of individual employees of the Company are taxable
under the Chosen Income Tax Law, inasmuch as there is no provision
in the Company’s charter upon which its employees might properly
claim exemption from such tax. With regard to the inspection of the
Company’s books, however, as Article 17 of the original charter,
containing the distinct sentence “Said officer (viz., the
representative of the sovereign) may inspect the books of the
Company”, was canceled without any reservation whatever, the
Consulate General cannot admit that there still resided in the
sovereign the right to inspect the books for particular purposes.
Such an interpretation would render the Company’s special right in
this respect valueless, as the
[Page 826]
inspection of books for one purpose may very
well be an inspection for every purpose.
It is your opinion that the cancelation of Article 17 did not
permanently extinguish the sovereign’s right to inspect the books of
the Oriental Consolidated Mining Company because books form the
basis of taxation. In the case of the Company, however, the whole
question of taxes was settled for the duration of the concession by
the agreement of March 27, 1899, to pay to the sovereign a fixed
annual sum of Yen 25,000 each year, regardless of the productiveness
of the mines. The principle that books form the basis of taxation,
therefore, would not seem to be applicable to the Oriental
Consolidated Mining Company.
As a practical way out of the difficulty, the Consulate General is
prepared to request the Oriental Consolidated Mining Company fully
to cooperate with the tax authorities at Neihen in the collection of
the income tax, by preparing a statement of third class income paid
by it as mentioned in Article 47 of the Tax Law and otherwise.
I have [etc.]
