No. 532.
Mr. Davis to Mr. Wallace.

No. 49.]

Sir: Your No. 159 of the 1st instant has been received. You therein communicate copy of the recent correspondence had with Aarifi Pasha, touching the tax imposed upon imported American alcohol. Your note to the minister of date December 29, 1882, is approved so far as it insists upon consideration of the treaty point.

It is, perhaps, natural that Turkey, having imposed upon the native manufacture of alcoholic beverages an internal-revenue tax considerably higher than the import duty allowed by treaty on the article of which those beverages are compounded, should seek to equalize revenues and prevent fraud by subjecting imported alcohol to an internal-revenue charge, after it has paid import duties, so as to equalize the tax on the raw fluid and the manufactured result. But such a proceeding is clearly contrary to the engagements of treaties. If the alcohol be converted into the beverage mastic, or into any other distinct article of trade, it becomes, in such modified form, liable to whatever internal tax may be assessed on the manufactured article. Until its nature is changed, however, by admixture or manufacture, it is simply for such purposes a raw material, on which a single duty, paid once for all, must suffice.

It may be that the internal-revenue tax imposed in Turkey upon alcohol there produced by distillation from wine, must, fermented lees and the like, is so high, relative to the import duty on distilled alcohol, as to amount to a prohibition of native distillation. If so, that is an economical error, not to be remedied by defying the provisions of treaties.

I am, &c.,

Acting Secretary.