to Mr. Evarts.
Vienna, March 15, 1879. (Received March 29.)
Sir: In obedience to your instructions, under date of February 18, 1879, requesting information touching the system of taxation of railroads in this empire, I have now the honor to make the following report. The systems of the two halves of the empire being established independently, as of two independent states, I give first that of—
I. On what general recognized “principle, if any, is the railroad taxation of Austria-Hungary based?”
Answer. On that of absolute assimilation to the system of taxation applied to individuals. The corporation is treated as if it were an individual owning the same property.
II. “In how far are the railroad companies taxed as owners of realty?”
Answer. All their realty is taxed. Their land, which is taken for the time from the adjoining agricultural lands, continues to be taxed as land, at the same rate as the lands adjoining it. Their town real estate is taxed in the same manner as the neighboring private real estate is taxed. There is for all owners of realty a “ground tax” and a separate “house tax,” so distinguishing between the value of the land and of the buildings erected thereon. The same rule and rate apply to railroad real property in the town.
III. “In how far as holders of personalty?”
Answer. They are considered as having no personalty which is not either produced or represented by franchise or income or net earnings of the same sort. And all these are taxed on the same principle as those of individuals. In Austria, all enterprises (Erwerbe), business undertakings, are taxed, whether undertaken by an individual or a share company, from that of shoemaker to that of construction of a great railroad. [Page 53] All are regarded in a certain sense as franchises, and so are annually taxed, but usually to a very small amount.
IV. “In how far are they subject to a franchise tax?”
Answer. They are subject to no franchise tax differing in principle from that applied, as above stated, to individuals (Erwerbstener). The amount of the original concession or franchise tax in the case of share railroads is 15.75 florins, or about $7.55 per annum, a trifling amount, of little significance, except as maintaining the principle of a franchise tax. But there is also by law an additional annual tax on the enterprise (Erwerbstener), regulated according to its capital and extent, and reaching at the highest 1,575 florins in the case of the largest enterprise, and as the ordinary tax.
V. “In how far is their stock taxed as personalty to its owners?”
Answer. Each share usually represents the nominal value of 200 florins, with the exception (I believe) of the Nordbahn, where they are issued at the rate of 1,000 florins per share. The issue of shares and of provincial certificates is subject to a stamp duty of 1.25 florins for each 200 florins of nominal value. At the same rate is taxed the issue of priority bonds issued by the company to their purchasers, except that where the bonds are temporary, having less than ten years to run and are issued in a particular name, the rate of tax is reduced to 1.25 florins for each 400 florins of nominal value, that is to say, is reduced one-half.
Where the bonds or shares bear coupons calling for 20 florins or less, each coupon bears a stamp tax of 7 kreuzers (3½ cents). When the coupon calls for larger sums, this stamp duty amounts to about 3⅛ per mille. These stamp duties properly affect the owner of the coupon, but are in fact usually assumed and paid by the company.
There appears to be no annual tax upon shares as such. But income from them is fully taxed to the owner at the income rate fixed by law.
VI. “What taxes are levied on the receipts of the companies, whether net or gross?”
Answer. Net receipts are ascertained as follows: All collections of money for transport, whether of passengers, luggage, freight, express goods, or other transport charges, and all sums derived from the letting, or rent, or other usufruct of property, which is not subject to other taxation—as to the land and house tax, for example—constitute the gross receipts. From this aggregate may be deducted the sums disbursed:
- For expenses of the administration of the company;
- For current running expenses;
- For maintenance of the road, including repairs, replacement of perishable property, of rails, bridges;
- All stamps and taxes paid in the course of their business, and, generally, all expenses incurred for conducting their enterprise and for maintaining an efficient condition of all its parts.
On the other hand, there may not be deducted from the gross income:
- Their payments of interest;
- The annual quotas paid for the liquidation of the capital or of the bonded debt of the enterprise, nor any repayment of capital;
- The fees paid to the directors for their services;
- The contributions made by the company to the pension fund for their employés.
The balance thus ascertained constitutes the net income of the enterprise. The average of these net sums for three years is taken as the net annual taxable income of the enterprise. From this the franchise taxes (Erwerbstener) are deducted. Upon the residue, an income tax of 5 per [Page 54] cent. is fixed as the regular annual tax for the next tax period of three years.
The taxes above mentioned are the regular legal rates, the ordinarium. But in late years the necessities of the treasury have increased. The annual finance law now establishes the additional levy to be made on this property; so that, in fact, the present taxes ar$ the double of the ordinarium, or income and franchise that is to say, amount to 10 per cent. on the net income, and in the case of the highest franchise to 3, 150 florins (Erwerbstener).
N. B.—The foregoing system is applied to the established and prosperous roads. Exceptions are made by law in favor of young and unprofitable enterprises, which are sometimes relieved from some of these burdens by special enactment.
Owing to the difficulty of obtaining here the facts touching the system in force in Hungary, I am not able at this time to respond to your inquiries so far as they relate to that kingdom. If it shall be possible to procure the requisite information from Buda-Pesth, I will transmit it to the Department in a subsequent dispatch. I shall also be able to forward some further and interesting explanations of the railroad system of Austria so soon as I receive some documents which have been promised to me by the kindness of Bitter von Chlumechi, the Austrian minister of commerce, in whose jurisdiction the railroads are comprised.
I have, &c.,