No. 375.
Mr. Birney to Mr. Evarts.

No. 107.]

Sir: Your dispatch No. 94 requests information in regard to the systems of railway taxation in use in the Netherlands, as a subject of national interest. In answering your questions one or two general statements may be relevant.

The laws for the government of the Netherlands are, for the most part, general, not local nor special. The principle that seems to pervade her taxing system is to derive revenue for the state from the avails or products of property and the earnings of individuals or associations, avoiding as far as practicable encroachment upon the substance or principal.

Of the railways in the Netherlands, a part of them have been constructed and are owned by the government, and the remainder have been constructed and are owned by companies. In those built by the state the chief object appears to have been to supply gaps that seemed essential to the convenience of the people and of commerce, and which individual or private enterprise was not inclined to undertake.

The government gives leases of these roads to companies, allowing them to reserve for themselves 4½ per cent. of the net earnings, the government taking its compensation out of the balance of the receipts. No other return to the state is exacted. In most cases her compensation is small, not exceeding from 1 to 2 per cent, upon the cost.

The routine that private companies who undertake the building of railways have to observe is as follows: When organized, application is made on their behalf to the government for a concession authorizing them to build, own, and operate the road between certain named points upon a designated route. The feasibility and utility of the road is then a matter of consideration with the proper department of the government. If the concession is granted, the company undertaking is required to deposit with the government such sum of money as may be regarded as security amply sufficient for the completion of what is proposed. The main object of this requirement is to prevent damage to citizens by the issue of bonds and shares founded upon a work which might be abandoned after partial progress. Forfeiture to the government follows non-completion of the contract; restoration upon fulfillment.

When the road is ready for operating, the company is obliged to apply to the state for what here is called a “patent”; with us, a license. For this is paid, once a year, 2 per cent, upon the dividends of the business. If there are no dividends nothing is paid.

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This is not a requirement applicable to railroads exclusively. It is under a general provision of law embracing all similar classes of business. They pay nothing otherwise for the franchise.

It may be correctly stated that in the Netherlands there is no system of taxation made specially applicable to railroads as such. They come under the operation of general laws which apply equally to all pursuits that may be classified with them. Bankers, merchants, tradesmen, common carriers, and others are required by a law enacted in 1819, before any railroad was built, to obtain a license from the government, upon which they pay a percentage upon the extent of their business.

Thus, in regard to the realty of a road, it is taxed not as a specialty, but as agricultural land would be, upon the estimated yield it might give as such, and not upon the intrinsic value of the land. Also in respect to the personalty, such as rolling-stock, furniture at station-houses, and plant, regarded as implements of a mechanic would be, and as contributing to the result or dividends, no tax is assessed.

There is a general law requiring stamped paper to be used in business transactions for evidences of indebtedness, bonds, shares of stock, &c. Railways pay upon these as companies organized for any other business would pay. The cost of stamps is 5 cents (Netherlands) for each 100 florins, equivalent to 5 cents American upon each $100, expressed in the instrument.

Another general law assesses a tax according to the number of employés, classifying them according to their salaries and the district in which they live.

Bonds and stocks held by owners are not specifically taxed. There is, however, at the moment pending before the staats-general a project of the minister of finance to increase the revenue of the state by imposing upon bonds and securities of all kinds a tax of one per mill. If it should become a law, it would embrace bonds and shares of railways. As these statements cover all the information asked for in your six questions, it may not be necessary to reply further to them seriatim.

I have obtained a recent map of the Netherlands, with its railways, showing which belong to the state, which to companies, their length, when built, &c. It is forwarded with this by the same mail.

The whole system is very simple, and I hear of no complaint as to its practical operation.

I have, &c.,