No. 174.
Mr. Everett to Mr. Evarts.

No. 109.]

Sir: Referring to your instruction No. 54, directing the legation to procure for the use of a committee appointed at a recent convention, at Columbus, of boards of railroad commissioners, certain information concerning the taxation of railroads and railroad securities in Germany, I have the honor to inclose, with translations, copies of the note and accompanying memorial received from the German Government in response to the legation’s request for the desired information, and to be, sir,

Your obedient servant,

[Page 380]
[Inclosure in No. 109. —Translation.]

Mr. von Bülow to Mr. Everett.

The undersigned has the honor to state, in reply to the respected note of March 8 of Mr. H. Sidney Everett, chargé d’affaires of the United States of America, that the taxation of railroads and railroad bonds has as yet not been uniformly regulated in Germany, but that, on the contrary, it varies in the different German states.

Since, of all the states in question, Prussia alone possesses private railroads of considerable extent, the undersigned, in transmitting the desired information, thought proper to confine himself to the regulations in force in Prussia.

A more detailed review of the above will be found in the memorial inclosed, and respectfully placed at the disposal of Mr. Everett by the undersigned, who also takes this occasion to renew the assurance of his most distinguished consideration.

  • von BÜLOW.
  • H. Sidney Everett,
    Chargé d’Affaires of the United States of America.
[Translation of the memorial accompanying the foregoing inclosure.]

Memorial concerning the taxation of railroads in Prussia.

i.—state taxes.

It was already prescribed by the law of November 3, 1838, concerning railroad enterprises (§ 38), that railroads were to pay a tax, the regulating of which was, however, reserved for a later period. The law at the same time provided “that railroad companies should remain free from license taxes (Gewerbesteuer).” § 38.

The introduction of the tax provided for ensued through the law of May 30, 1853, concerning the tax to be paid by railroads. Pursuant to the same, railroads are required to pay the state a percentage of their annual net receipts. Details will be found in §§ 3 and ff.

On March 16, 1867, a law was passed concerning the taxation of all railroads not owned by the state or by home railroad stock companies, the provisions of which are in unison with those of May 30, 1853.

Railroad bonds are not taxed as such by the state, but are subject, like all other evidences of indebtedness, to a single stamp tax, the proceeds of which flow into the state treasury.

ii.—other than state taxes.

The question as to whether, and to what extent, railroads and railroad bonds may be taxed by municipalities, circuits, and other communal associations, is not settled in Prussia by any legislative provisions.

The answer to this question depends rather, as railroads belong either to the state or to stock companies, upon the provisions which obtain as regards communal taxation of the fisc and of stock companies, which are different in different parts of the country. To the six questions contained in the esteemed note of the 8th ultimo, an answer applying uniformly to the whole state can only be given with reference to the following points:

  • (To 2.) In so far as the realty of railroads is subject to the State realty or buildings tax, which is not the case as regards the road-beds, the same are required to pay the taxes on realty imposed on the municipal and other communal associations in particular, with additions to the State realty and buildings tax.
  • (To 3.) As in Prussia, municipal and circuit taxes are nowhere levied in the form of a property tax, there is no distinct taxation of railroads as owners of personalty.
  • (To 4.) Railroads are only entitled to immunity from taxation as regards road-beds in so far as it is a question of the levying of communal real-estate taxes. (Compare with “To 2.”)
  • As regards the unjustifiable imposition of a communal income-tax upon them, more particular information will be furnished under “To 6.”
  • (To 5.) The stock belonging as well as the dividends accruing to holders are everywhere subject as their personalty to the income tax of municipalities, circuits, &c. The right of deduction is also not at present conceded to holders in those municipalities in which a railroad as such is subjected to an income tax.
  • The interest accruing to owners of railroad bonds is taxed as their personal property, in the same manner as the dividends of the stockholders; a tax upon the bonds as such is nowhere imposed.
  • (To 6 and. 1.) Communal and district taxes are nowhere imposed on gross receipts. In cases in which income taxation is imposed on railroads at all, the net receipts alone-are regardedas subject to taxation.

The surplus of the annual revenues over and above the annual expenditures is considered the net receipts; as expenditures, are regarded also the customary annual loss by use of buildings, utensils, &c. Further, the necessary additions to the renovation fund, as well as the amounts expended to pay interest on debts and commissions to officers and members of the supervision and ministerial councils, but not the amounts added to the capital reserve fund, or used for improvements, &c., or enlargements of buildings.

Such taxation of the net receipts of railroads, however, only takes place on the-basis of the special provisions contained in the regulations of the respective city and rural communities in the city-communities of the provinces of East and West Prussia, Brandenburg, Pomerania, Silesia, Saxony, Sleswic-Holsatia, Westphalia, and Ehineland, in the city of Frankfort-on-the-Main; and as regards private railways in the city communities of the province of Hanover, than in the rural communities of the provinces of Westphalia and Ehineland, and, further, on the basis of§ 14 of the circuit regulation of December 13, 1872, as regards the private railroads in the circuits in the provinces of East and West Prussia, Brandenburg, Pomerania, Silesia, and Saxony.

As entitled to tax are regarded only those communities and circuits in which there is a station, and not those communities through which the road merely lies.

The apportionment of the entire net receipts of the railroads among the individual communities and circuits entitled to tax is based on the proportion of the gross, receipts of the individual stations (internal business) to the entire gross receipts.