No. 161.
Mr. Noyes to Mr. Evarts.

No. 263.]

Sir: On receipt of your instruction No. 132, of date February 18, 1879, I immediately addressed a note to Mr. Waddington, informing him of the important inquiry with which the commission, of which Mr. Charles Francis Adams, jr., is chairman, was occupied in regard to the methods of taxation as respects railroad securities, and requesting information in answer to the seven questions set forth in your instruction.

I have this morning received a reply from Mr. Waddington transmitting three notes which have been prepared by the various departments to which the subjects treated belong, and which are believed to answer the questions propounded by the commission.

I have the honor to inclose these documents with a copy and translation of Mr. Waddington’s letter.

I have, &c.,

[Inclosure 1 in duplicate No. 263.]

Mr. Waddington to Mr. Noyes.

General: In the letter which you did me the honor to write me on the 4th of March last, you expressed the wish to receive, on behalf of a commission appointed by the delegates of the railway companies of the United States, precise information in regard to the system of taxation applicable to the French railways.

The three notes inclosed, which emanate from the different competent administrations, will furnish an answer, General, to the questions you have propounded.

Accept the assurances of the high consideration, &c.



Ministry of Finance. Direction of the Office of Employment and General Inspection. Control of Financial Affairs. Department of Registration, Domains, and Stamp Duties. Taxation of Railways.

Railway companies are subject to the following regulations as regards taxes payable to the department of registration, domains, and stamp duties.

I. Railway grants to private companies are subject to the fixed registration tax only. All schedules of clauses and conditions contain a formal clause on this subject.

The sale of the grant by the company to a third party is, however, subject to the 2 per cent. tax established for the sale of personal property.

II. Documents furnishing evidence of the purchase of the necessary lands for the construction of railways are stamped and registered gratis, whenever such lands are purchased directly by the State (law of 22d Frimaire, year VII, art. 70, § 2, No. 1. Dec. Min. Fin., June 11, 1823), or when, being purchased by a company receiving a grant, this is done (as is almost always the case) by virtue of the law of May 3, 1841, concerning dispossession on the ground of public utility. Adjudications or transfers of works or supplies made by the government for railways without grants and not in [Page 346] operation are subject only to the fixed graduated tax (law of February 28, 1872, art. 1, No. 9). Adjudications or transfers of the same kind, made by companies that have received grants, are governed by the common law.

They are consequently subject to a tax of 2 or of 1 per cent. on the principal, according as they do or do not convey ownership of personal property (law of Frimaire 22, year VII, art. 69,§ 3, No. 1, and§ 5, No. 1), but the case arising, the law of June 11, 1879, may become operative; this law permits provisional registration, at the fixed rate, of transfers having the character of commercial transactions.

III. As to documents, &c., connected with their operation, railways are likewise subject to the common law. Thus, passage tickets and baggage checks or receipts pay, like receipts of individuals, a stamp duty of 10 centimes when the sum paid by the debtor exceeds 10 francs. (Law of August 23, 1871, art. 18.)

One exception, however, should be noticed; unlike other carriers by land or by water, for whom the freight list is purely optional, railway companies are obliged to deliver a stamped receipt for each shipment (law of May 13, 1863, art. 10), and the intermediate agents who unite packages sent to different destinations in one or more shipments are obliged to give a similar receipt for each person to whom the packages are addressed. (Law of March 30, 1872, art. 2.) But railway companies and package-men pay for each receipt, whatever be the dimensions of the paper, only 35 centimes (express) or 70 centimes (freight), including the stamp duty and the receipt of the party to whom the goods are addressed (laws of August 23, 1871, art. 2, February 28, 1872, art. 11, and March 30, 1872, art. 1), while other carriers must have all the papers that they think proper to draw up stamped, to wit, receipts on which the tax is 10 centimes, and other papers at a tax rate varying from 50 centimes to 3 francs, the décimes according to the dimensions of the paper. (Law of July 2, 1862, art. 17, and August 23, 1871, art. 2.)

Railway companies are also obliged, like other carriers, to give a stamped receipt at 35 centimes for the real or fictitious transportation by them of money or valuables. (Law of February 19, 1874, art. 10.)

IV. The shares and bonds issued by railway companies are subject to the same taxes as similar documents of other companies.

They are subject to a stamp duty, which is fixed at 50 centimes or 1 franc per cent., according to the duration of the company’s existence, and for bonds at 1 franc per cent. invariably. This tax may, by agreement, be converted into an annual tax of 5 centimes per cent. (Law of June 5, 1850, arts., 14, 22, 27, and 31.)

The titles of shares and bonds are further subject to a transfer-tax of 50 centimes per cent., which is replaced for non-registered titles, and bonds, by an annual and obligatory tax of 20 centimes per cent. (Laws of June 23, 1857, art. 6, and June 29, 1872, art. 3.)

Finally, shares, bonds, and loans of railway companies are subject to a tax of 3 per cent. on the income which they yield. (Law of June 29, 1872, arts. 1, 2, and 3.)

V. Railway companies are obliged, under penalty of a fine of from 100 to 1,000 francs to exhibit their books, registers, titles, receipts, expenditures, and accounts to the officers of the department of registration, so that the latter may convince themselves that the stamps and registry laws are faithfully executed. (Laws of August 23, 1871, art. 22, and June 21, 1875, art. 7.)

VI. Railways operated by the government are subject to the same regulations as roads having received a grant, as regards taxes of all kinds.

Taxes paid by railway companies.

The first three questions propounded by the minister of United States in his letter of May 4 are the only ones that concern the department of direct taxes.

1st. On what principle is the tax based; that is, if a tax is paid by railways in France?

Railway companies are subject to the various direct taxes (principal and additional centimes), and thus contribute to the payment of the public burdens according to the amount of their presumptive income, in conformity with the principle of proportionality, which forms the basis of the laws governing direct taxes in France.

2d. To what extent are railway companies taxed as owners of real estate?

Railway companies are held to the payment of the land tax—a tax levied upon land [Page 347] not occupied by buildings, according to the net income which it yields. (Law of Frimaire 3, year VII.)

On lands occupied by the railway line and its dependencies, estimated on the same footing as the best tillable lands in the commune in which they are situated.

On depots, stations, buildings, &c., according to their net rentable value, which is determined by comparison with that of other property containing buildings, and situated in the same commune.

They pay, moreover, as a mortmain tax, which represents the rights of transmission between parties living and by decease (law of February 20, 1849), an amount, in addition to the land-tax, 0 fr., 87 c., 5 per franc on the computed amount of the land-tax established upon real estate, constituting in their hands an ordinary alienable property, and forming part neither of the railway nor of its dependencies.

They are subject to the door and window tax (law of Frimaire 4, year VII), which is levied upon the apertures of the dwellings of the employés of all the offices connected with their management, upon those of the waiting and refreshment rooms, repair shops, sheds for freight, &c. The income is presumed to be according to the importance of the premises, which importance depends upon the rentable value (land tax) and number of the apertures (door and window tax) to be assigned to them.

3d. What license do they pay?

Each company pays a fixed tax of 240 francs, and also a variable tax of 24 francs per myriametre, and a proportional tax calculated at the rate of one-twentieth of the real rentable value of the lodgings of the representatives of the company and of the offices, and at the rate of one-fortieth of that of the articles and buildings necessary for the operation of the road, and forming part of its industrial establishment, without diminishing the general additional centimes of the department and commune. The state is obliged to pay the same taxes as the companies on the lines operated by it.

Taxes paid by railway companies.

The first and the sixth questions are the only ones of those propounded by the minister of the United States in his communication of the 4th of March last that concern the department of indirect taxes. The law of the 9th of Vendémiaire, year VI, imposed, in a general way, an indirect tax upon all articles for transportation by land and water. This tax is computed in proportion to the price paid by travelers for the seats which they occupy. The law of Ventôse 5, year XII, extended this levy to the price paid for the transportation of goods by public land conveyances. These laws, which were passed at a time when there were no railways, were, in virtue of their general character, applicable to these means of communication as soon as they came into use.

Subsequently, railways were specially designated in the laws of July 14, 1855, and September 16, 1871.

Under the laws of Vendémiaire, year VII, and of Ventôse, year XII, the indirect tax was 10 per cent. of the amount paid by fare as travelers, and likewise 10 per cent. of that paid as freight. The law of Prairial 16, year VII, added 1 per cent. as a war tax, and the law of July 14, 1855, also added 1 per cent., which increased the tax successively to 11 and 12 per cent.

Finally, the law of September 16, 1871, imposed an additional tax of 10 per cent. on the passage money paid by railway travelers and by persons traveling by stage and steamboat, and likewise upon the amount paid for the transportation of baggage and goods, (by express) by the same means of conveyance. According to the provisions of the said law, however, this additional tax is not collected upon amounts less than 50 centimes.

The principle that has governed the fixing of the tax on railways is that that tax should leave intact such sums as, according to the tariffs established by the conditions and the total, form the amount paid by the traveler. On this amount the companies retain the equivalent of their tariffs, and pay to the government, whose agents they become in this respect, the tax which they have collected for its account.

Hence it appears that the tax bears only upon the net receipts of the companies. This, however, is true only as regards the tax of 10 per cent. established by the laws Vendémiaire, year VII, and of Ventôse, year XII, and as regards the dècimes established by the laws of Prairial, year VII, and July, 1855.

[Page 348]

According to the law of September 16, 1871, the additional tax of 10 per cent. established by that law bears, by way of exception, upon the net receipts of the companies increased by the first tax of 10 per cent. plus the two décimes. It is proper to add, however, that this additional tax does not affect tickets, the price of which is 50 Centimes and upward.

In short, on a net sum of 100 francs, received by the railway companies for their own account, and consisting of prices of tickets at 50 centimes and upward, the amount of tax due to the treasury and that of the sums collected from the public are established as follows:

Net receipts, company’s tariff 100.00
Former tax (principal, 10 francs; décimes, 2 francs) 12.00
Additional tax 11.20 francs 11.20
Duty, 23.20 francs on 123.20

price charged the public.

When the price of the tickets is less than 50 centimes, the additional tax established by the law of 187 L is not collected, as already remarked. The tax is then regulated as follows:

Net receipts for tickets sold at a price less than 50 centimes, company’s tariff 100
Former tax (principal, 10 francs; décimes, 2 francs) 12
Duty, 12 francs on 112

price charged the public.

The duty now collected by the office of indirect taxes on transportation by rail is therefore 23 francs 20 centimes per cent. on the net receipts, and 18 francs 83 centimes per cent. on the gross receipts for tickets sold at 50 centimes and upward, and 12 per cent. of the net receipts, or 10 francs 71 centimes per cent. of the gross receipts, for tickets sold at a price less than 50 centimes.

It is computed, not upon the amount that would be yielded if the entire capacity of the cars were occupied, but upon the amount actually received by the companies for places really occupied and for freight actually carried. It is collectible every six days, and is regulated at the expiration of every ten days according to the registers of the companies themselves, and under the supervision of an upper officer of the department of finance.

The tariffs above indicated are applied to large companies with roads of considerable extent.

Mere local railways, however, whose business is confined to the interior of certain large cities or within a limited radius around those cities, have the privilege, if they find the proportional duty, computed as above, too burdensome, of claiming the benefit of a law bearing date of June 28, 1833, modified by that of July 11, 1879, which has substituted for that proportional duty a fixed duty in favor of cars, which, in their regular trips from one fixed point to another, do not go beyond the limits of one city or beyond a radius of 40 kilometres from said limits. The tariff to be enforced under such conditions was fixed as follows by law of 1833, above referred to, and by that of July 11, 1879:

per car.

  • Of one and two places, 50 francs per year, principal and décimes.
  • Of three places, 75 francs per year, principal and décimes.
  • Of four places, 100 francs per year, principal and décimes.
  • Of five places, 120 francs per year, principal and décimes.
  • Of six places, 137.50 francs per year, principal and décimes.
  • For each place above 6 up to 50, inclusive, 12.50 francs per year, principal and décimes.
  • For each place above 50 up to 150, inclusive, 6.25 francs per year, principal and décimes.
  • For each place above 150, 3.125 francs per year, principal and décimes.

The fixed duty which is payable by railways not extending beyond a radius of more than 40 kilometres is collectible monthly in advance.

A law bearing date of March 21, 1874, established (as an extraordinary and temporary measure) a tax of 5 per cent. on the price of transportation of merchandise sent by slow trains. This tax was considered as being opposed to the development of industry and commerce, and it was declared inoperative on and after July 1, 1878, by the law of March 26 of the same year.

[Page 349]

It may be interesting to know the indirect yield of the railways in France. The results of the years 1875, 1876, 1877, and 1878, were as follows:

Years. Francs. Francs. Francs.
1875 55,566,210 13,475,782 69,041,992
1876 57,902,008 13,994,242 71,896,250
1877 57,457,166 14,645,322 71,502,488
1877 67,143,357 14,065,643 81,209,000

During the four years that it was in force (from March, 1874, to July, 1878) the tax of 5 per cent. on the price of transportation by slow trains yielded an average of from twenty-three to twenty-four millions per annum.