to Mr. Evarts.
Brussels, May 7, 1879. (Received May 20.)
Sir: Referring to your No. 31, asking for particulars of railroad taxation in Belgium, I have the honor to say that immediately upon its reception I addressed a formal communication to the foreign office, setting forth in detail the information desired, and asked that the subject matter be referred to the minister of public works. I then called in person on the minister of public works and explained to him fully the nature and object of the information desired. He kindly promised to furnish me with what I was in quest of at as early a day as possible. In the mean time I pursued an examination myself among the lawyers, and gathered (mainly from Mr. Willemaers, an advocate of great prominence) that in the Kingdom of Belgium the railroads are managed, [Page 93] some directly by the state, and others by private companies constituted under the form of joint stock, and created exclusively for this particular object.
The lines of railroad comprised’ in the first category naturally pay no taxation, inasmuch as the general result is all for the benefit of the state.
It is to be remarked, however, that the management of the state railroads has a distinct organization in the public service, and a separate budget, which enables the yearly public revenue from this source to be ascertained, and consequently tariffs to be made, that the general interests may conform to the necessities of the treasury.
Railroad concessions made to private companies are granted for a period of 90 years.
The construction as well as the management of these lines is regulated by a table of charges imposed by the state.
The land necessary for the making of the roads and their appendages is purchased with the funds of the grantee, but in the name of the state, which becomes the sole proprietor. The state is equally proprietor of all buildings erected for the requirements of the working, and from which the grantee enjoys only a privilege.
The only right, as well as the only benefit, of the holder of the concession consists in the collection of the fares which he is authorized by the prescribed limits of the table of charges to claim as the price for the conveyance of passengers and transportation of merchandise.
The tariffs are nearly always established upon the same basis as those of the state. The state being the proprietor of the road and of the buildings, the result is, in consequence, that the real estate is exempt from taxes and duties imposed on private property.
The grantee, to insure the execution of the obligations imposed by the table of charges, is obliged to deposit a guarantee fund into the hands of an authorized officer of the state.
No concession of railroad to private persons or to companies can be set aside without the positive consent of the state.
In case of a breach of the prohibition, the government can order the line to be managed by the department of public works of the state on account of the corporation.
Generally, the table of charges stipulates the power of the government to make use of the lines granted for the transportation of troops, of military material, and of prison vans, &c., at reduced rates; also mail carriages, telegrams, and the necessary postal agents are conveyed free.
Usually, the deeds constituting the concession reserve to the government the privilege of purchasing the railroad after a working of a certain number of years.
The purchase is uniformly in accordance with the following conditions:
The net revenue of the last seven years of working is calculated; that of the two least favorable years is deducted, and the mean revenue of the five years after this deduction is capitalized at 5 per cent. Then a premium of 10 to 15 per cent is added to the above.
Some railroads possess a concession, granted by the state, for a minimum of the interest upon the capital invested in their construction.
The personal property and the materials for the working of such railroads are exempt from all taxes or duties.
The capital of the companies working lines to which concessions are made is fixed by agreement with the government.[Page 94]
It is not burdened by any particular tax, only its bonds are subject to proportional stamp duty, determined by the laws then existing.
The receipts of the line are not subject to any special previous taxation for the profit of the state, but the companies are obliged to pay more or less to the state, according to profits realized.
At the expiration of the term fixed by the concession, it falls to the state with the material, and the company is paid an amount therefor, after valuation, which may be agreed upon.
I could have forwarded this much some time since, but felt that you would prefer I should await the reply of the minister of public works. This I only received yesterday, and as the railroads of Belgium are directly under his supervision, nothing could be more authoritative than his statements. With his communication came a number of books pertinent to the subject in hand, all of which I have this day forwarded to you through the office of the United States dispatch agent in London.
The package of five, marked with red crayon No. 1 (sent under separate cover), is a work containing the organic arrangements regulating the administration of railroads managed by the government. These regulations apply equally to the postal, telegraphic, and marine service.
A royal decree of the 5th of October, 1876, gave to the marine an independent organization, and created for this service a distinct administration, continuing it, however, as a dependency of the department of public works.
A second royal decree of the 19th of November, 1877, promulgated by ministerial action on the 5th of December following, directed a separation of the administration of state railroads from that of the post and telegraphs, and gave to the first a new organization. The text of this new organization will be found in a document marked No. 2, and inclosed herewith.
Package No. 3 (sent under separate cover) contains two reports, giving for the years 1876 and 1877 the result of the operations of the state.
Railroads worked by companies to which concessions have been made, are subject to certain general conditions, specified in a pamphlet inclosed herewith and marked No. 4, and to special organic regulations, in which the government has no power to interfere.
The minister of public works prefaced his answers to my written questions with the statement that in Belgium the taxation of railways is divided into two classes—railways managed by the State and those managed by companies as grantees.
The first are exempt from all taxation. The second are taxable, according to the limits indicated further on, to the land tax, to the assessed taxes, and to licenses. They are not liable to any other tax.
These three taxes are laid upon the following basis:
The basis of this tax is the net revenue of real property (property built or unbuilt) calculated from the mean of a certain number of years, according to the rules laid down by the laws of the 3d day of the 3d month of the 7th year, of the 19th of the 6th month of the 9th year of the first French Republic; of the 15th September, 1807; of the 10th of January, 1824; of the 28th of March, 1828; of the 22d December, 1838; of the 25th March, 1847; of the 3d April, 1851; of the 7th June, 1867; and of the 5th July, 1871. The quota of the tax is at 7 per cent. of the taxable revenue.
The taxable revenue of unbuilt landed property is that which remains to the proprietor after deducting from the gross product the expense of [Page 95] cultivation, of sowing, of harvesting, and of keeping in order. It is calculated from the mean of a determined number of years.
For property built the taxable revenue is all that remains to the proprietor, after deduction from the mean renting value for a certain number of years of the sum necessary to indemnify him against wear and tear and to defray the expenses of repairs.
As will be seen further on, the surface taken up by the railroads, as well as the buildings which form an inherent part of these railroads, are exempt from the land tax.
- Renting value of the habitations and buildings.
- Doors and windows.
- Value of furniture.
- Male servants.
The laws relative to these taxes do not contain anything especially applicable to the companies which manage these railroads. As is stated further on, the buildings used by these companies are liable to the tax when they contain personal property.
This duty is exacted from persons, societies, companies, &c., who carry on a profession, an industry, or a commerce. It is based upon the amount of profit which the profession, industry, or commerce procures, or is supposed to be able to procure. It is stated further on how the license duties are levied on railroad companies, the only duty in reality which touches them.
The minister now proceeds to answer in detail the questions propounded:
1st and 6th. “On what general recognized principle, if any, is the taxation of the railroads in Belgium based? What taxes are levied upon the receipts of the companies, whether net or gross?”
The first article of the law of the 21st of May, 1819, upon the license duty (code of taxation, page 131), sanctions the following principle: No one can practice for himself, or any one in another’s name, without having a license; an industry or trade or shop is not exempted by article 3 of this law.
The license is based upon the proportionate amount of profit which each industry may realize, taking into account its usefulness, more or less great. (Law of July 21, 1821, litt. C.)
The workers of railroads are not by name indicated in the law of license duties. However, they are taxed by assimilation with contractors for transports No. 375 of the table No. 14 annexed to the law. (Code of taxes, page 182.)
The minimum duty is 6 francs, the maximum is 425 francs, in principal. The state collects besides 20 additional centimes upon this duty. The provinces and the parishes are authorized to add also some additional centimes, of which the amount varies according to their budget necessities.
Such is the system of imposing the license duty on railroad workers, inasmuch as they are not constituted into joint stock companies or into companies with limited liability by shares. But in Belgium, the grantee railroad companies all having a joint stock form, are taxed exclusively upon the annual profits, in conformity with the hereafter-mentioned legislative provisions.[Page 96]
- The table No. 9 annexed to the law of the 21st of May, 1819.
- The article 9 of the law of the 6th April, 1823.
- The article 3 of the law of the 22d January, 1849. (Code of taxes, pages 169, 196, 220.)
- The article 12 of the law of the 5th of July, collection administrative No. 132.
- The article 1 of the law of the 12th of March, 1874. (Same collection, No. 1439.)
It is understood by profits the interest of capital employed, the dividends, and generally all amounts divided in any “titres” whatsoever, including those which are affected” by the increase of the social capital and the reserve fund.
The duty is 2 per cent. upon these profits, independently of 20 additional centimes.
No taxation is due when the joint stock company closes its balance with a loss.
2d. Question. In how far are railroad companies taxed as holders of realty?
The land necessary for the construction of conceded railroads for a service of public usefulness being acquired in the name of the state, which is the proprietor, the companies are only usufructuaries until the expirations of their grants of railroads. (Court of appeal at Brussels, decree of March 2, 1850.)
The surface of land occupied by the railroads, being assimilated to the highway, is exempt from land tax. (Article 103 of the law of the 3d day of the 3d month of the 7th year of the first French Republic, code of taxes, page 42.)
The buildings which are inherent to the works are also exonerated from taxation, to wit: the squares and stations, warehouses, workshops, guard-houses and buildings used for lodgings for station-masters.
In short the only landed property, upon which the land tax is exacted is the surplus land, &c., which remains the property of the grantees outside of the railway.
3d. Question. “In how far as holders of personalty?”
In Belgium there is properly speaking no tax upon personalty.
However, the assessed taxes include a tax upon the furniture of habitations. The law which rules this tax (law of the 28th June, 1822, code of taxes, page 81) is applicable to railroad companies, as to all private persons, excepting for the furniture of offices and buildings which serve exclusively for the working.
4th. Question. “In how far are they subject to a franchise tax?”
Such a tax does not exist in Belgium.
5th. Question. “In how far is their stock taxed as personalty to its wner?”
The stock and bonds of railroad companies are not subject to any such special tax, but these “titres” fall under the general application of articles 1 and 2. No. 2 of the stamp law of the 21st March, 1839, is thus worded:
The stamp duty upon stocks and bonds and all other deeds at unlimited periods is payable after five years of their issue. It is fixed for those of 500 francs and under at 0.50 franc; for those above 500 francs to 1,000 francs at 1 franc; for those above 1,000 francs to 2,000 francs at 2 francs, and so on at 1 by 1,000 francs without fractions.
Article 10 of the law of the 24th March, 1873, exempts the registering of shares issued by companies “whose business is established in the kingdom.”
Through fear that my translation might be at fault in some particulars [Page 97] I inclose you the original, which possibly may be more satisfactory. I, also inclose a few printed slips marked No. 5, from the office of the minister of finance, upon the taxation of railroads applicable to his department.
If further information is desired, I would recommend the purchase of “Annuaire des chemins de fer Beiges.” It is a work comprising all the legislation, the jurisprudence, and statistics of all the railroads of Belgium since their origin. It comprises eight volumes, embracing the period from 1835, to 1876, and costs 52 francs.
Another useful book would be “Trade des transports par chemin de fer en Belgique,” which costs 10 francs. Either or both of these books I will purchase and forward if desired.
Trusting the above will answer all requirements,
I have, &c.,