No. 416.
Mr. Edwards to Mr. Evarts.

No. 71.]

Sir: Referring to your dispatch No. 39, addressed to Mr. Stoughton, relative to methods of taxation as respects railroads, and railroad securities, in use in Russia, I have the honor to report:

That the railroad companies are free from taxation as holders of property real or personal.
The stock is free from taxation to its owner.
On the 1st day of January, 1879, the government levied a tax of 25 per centum on all passenger tickets of the first class, 20 per centum on second class, and 15 per centum on third class. With the above exception, there is no direct tax on the receipts of the companies, net or gross.
The railroad companies of Russia are under the control and exercise of the government, and by their respective statutes subject to a general franchise tax.

But before the usual conditions of a franchise can be satisfactorily stated, an explanation must be given of the method followed to obtain it.

The founders of the company must, in accordance with the form instituted for that purpose in the empire, present to the minister of ways of communication an outline of the enterprise.

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By direction of the minister the matter is then intrusted to a board of engineers belonging to the ministry, with instructions to examine and report as to the feasibility of the project, and to prepare plans and estimates of construction. If after examination it be deemed beneficial to give effect to the enterprise, the plans and estimates are placed by the minister before the committee of ministers for their consideration and action, and, if approved, are submitted for the inspection of His Majesty the Emperor.

After the imperial sanction has been obtained for the organization of the company, the ministers of ways of communication and finance, elaborate the conditions of the concession, and the statutes of the company.

The concession, with the statutes elaborated and recommended by the ministers of ways of communication and of finance, are submitted to the committee of ministers, and if approved are presented for the inspection and sanction of His Majesty the Emperor.

The concession usually defines—

The name, object, and extent of the undertaking.
The duty of the founders of the company, including the amount of caution money to be deposited by the founders in a government depository in order to guarantee the establishment of the company within a specified time.

The statutes of the companies are the laws to be observed by the companies, and are invariably after the sanction of the Emperor printed and filed among the collection of laws for the empire.

The following appear to me to be the principal provisions of the statutes of the various companies:

They fix the duration of the franchise, usually from seventy-five to eighty-one years, at the expiration of which period the exclusive ownership of the entire line, with all the real estate and rolling-stock of the company, is vested in the government, without any payment therefor.
They specify the amount of the capital of the company, which is, usually, one-third in shares and two-thirds in bonds.
They define the number and dimension of the postal cars to be furnished by each company for the gratuitous transportation of post officials, mails, packages, &c.
They exact the gratuitous use by the government of the company’s telegraph.
They define the quantity of rails, rolling-stock, bridges, &c., which must be bought in Russia.
They determine the percentage of reduction, usually from 40 to 75 per cent., of the tariff by which soldiers under arms are to be transported.
They determine the percentage of the net receipts to be paid to the reserve fund and as dividends to shareholders.
They concede to the companies, free of cost, all government land, stone or other material within certain specified limits, and which may be required for the legitimate use of the company in the construction or improvement of their lines.
They declare the property shares and bonds of the companies exempt from taxation.
They guarantee to the companies an annual net revenue of five per cent. on the share and bonded capital.

I am trustworthily informed that with the exception of three companies the government pays annually to the various companies from 1½ to 4 per cent. of this guarantee.

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The companies are all under the control of the minister of ways of communication, who among other things determines the tariffs for passengers and freights.

It will be seen from the statements here presented that the government takes away from the founders substantially the control and exercise of the roads. The above answers are therefore as complete as circumstances will admit of their being made, and I trust they will be found satisfactory.

I have the honor, &c.,