FOREIGN RELATIONS, 1934, VOLUME III



imposing upon them special services, and it is not "income or profit
received from sources within the United States", as provided in the
American Tax Law. It is still more unreasonable to consider the whole
amount of the subsidy as taxable income while it includes services in
other parts of the world.
  5. The Treasury Department decided not to recognize amortization
for ships completed after the date of the Armistice (Nov. 11, 1918).
However, these companies were obliged to build or acquire some expen-
sive ships to replace those chartered to the United States Shipping
Board, and speedy amortization was imminent owing to the high
expense for those ships. Furthermore it was impossible to anticipate
armistice at that time. In view of these facts, the Treasury Depart-
ment's decision upon the amortization of the Japanese ships is not
only rigorous, but seems to be unfair, as amortization is recognized
for American ships.
  6. For the above-mentioned reasons the Japanese Government sin-
cerely hopes that the American Government will not impose the tax
upon the charter fees and the subsidy, and will give favorable consid-
eration to the amortization for those ships for which the building con-
tracts were made or construction was already started on or before
Nov. 11, 1918.
  7. According to the notifications of the Treasury Department, 90
days time limit, beginning June 11, is given for the payment of these
taxes, but it is hoped that this time limit will be extended until these
questions are settled by the negotiations between the two Governments.


811.512394 Shipping/35
The Secretary of State to the Secretary of the Treasury (Morgenthau)

                                     WASHINGTON, August 3, 1934.
  MY DEAR MR. SECRETARY: There is enclosed a copy of a statement
which was, on July 26, 1934, read to an officer of the Department by
the Japanese Charge d'Affaires.28 The statement relates to additional
war profits tax which has been levied on three Japanese steamship
companies, Toyo Kisen Kaisha, Nippon Yusen Kaisha and Osaka
Shosen Kaisha, and concludes with an expression of hope that the
time limit given for the payment of these taxes "will be extended until
these questions are settled by the negotiations between the two Gov-
ernments".
   The Japanese Charge d'Affaires stated further that certain docu-
 ments relating to the matter were being forwarded by mail from

 - Supra.



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