Mr. Buck to Mr. Ray.

No. 424.]

Sir: As a matter of some interest, I have the honor to inclose herewith a copy of a communication from Rev. James W. Doughty, an American missionary, together with a copy of my reply thereto, upon the subject of payment of income tax by our missionaries in Japan. I also inclose copies of instructions of the revenue officials of Yokohama concerning payment of income tax, published in the Japan Mail on the 13th ultimo.

There has been much inquiry from missionaries concerning this subject. Some of them are of the opinion that, because their incomes are derived from the United States in the form of salary for mission work, a proper construction of the provisions of law in respect to income tax would exempt them from that tax, while others take the view that a reasonable interpretation of the law makes salaries of missionaries subject to tax, and that, even if, through any technicality, the payment of such tax could be avoided, it would be unwise to make serious opposition to payment, because the irritation of the Japanese officials, whose friendship it is important to cultivate in all proper ways, that a contest would naturally cause might result in injury to the successful prosecution of their work.

After a careful examination of the law, I see no reasonable interpretation [Page 761] that will warrant objection to pay the tax and bringing the question into the courts, as some have proposed; and I have uniformly advised payment on the grounds set out in my reply to Mr. Doughty herewith.

In closing it may be proper to add that there is no discrimination against foreign missionaries complained of or made. Buddhist and Shinto priests are, I am told, also subject to tax on their incomes, the only question raised being whether incomes received by missionaries from abroad should be taxed as are incomes derived from local sources.

I have, etc.,

A. E. Buck.
[Inclosure 1.]

Mr. Doughty to Mr. Buck.

Dear Sir: I am sorry to trouble you, but I am uncertain as to the matter of income tax. I understand that you have stated that you think the missionaries come under the law. I have been reading over the law and came across the following passage:

  • “5. Although all incomes realized from property, trades, businesses, or occupations in places where the income-tax law is in force must be reported, the incomes falling under any of the following heads need not be reported, as they are not taxable incomes:
  • “3. Incomes realized from property, trade, business, or occupations in a foreign country or in places where the income-tax law is not in force.”

The above, I observe, is not the law itself, but instructions issued as explanation of the law, and was published in the Japan Mail of April 14, and also in a recent issue of the Kobe Chronicle. I presume you have seen the above, but if I had not heard that you think we will have to pay the tax I should have assumed that the above exempted us. If not too much trouble, will you kindly let me know why you think we are not exempt under the above instruction.

Jas. W. Doughty.
[Inclosure 2.]

Mr. Buck to Rev. Doughty.

Dear Sir: I have to acknowledge the receipt of your letter of the 30th ultimo, in which you express the opinion that missionaries should be exempted from the income tax under the instructions issued by the revenue officials of Yokohama, as reported in the Japan Mail of April 14, and requesting me to let you know why I think differently.

The portion of the regulations referred to, quoted by you, reads as follows:

  • “8. * * * Incomes falling under any of the following heads need not be reported, as they are not taxable incomes:
  • “3. Incomes realized from property, trade, businesses, or occupations in a foreign country or in places where the income-tax law is not in force.”

I fail to see how the above sections apply in any way to a missionary laboring in Japan. The obvious and only possible meaning of the instruction is that “incomes realized from property, trade, etc., in a foreign country (America, Europe, etc.) or in places where the income-tax law is not in force (Formosa, the Loo Choo and Bonin Islands)” are not taxable incomes. But the occupation of the missionaries in question is in Japan, where the income tax is in force, and they therefore are included under the first paragraph of the instructions referred to, which reads in part as follows:

“Any person who has in any part of this country, where the income-tax law is in [Page 762] force, a residence or place of abode, or who resides in a fixed place for one year or more, and has an income of 300 yen or more per annum, is under obligation to pay income tax.”

Under paragraph 7, section 8, income derived from a business or profession, is denned to mean “income derived from commercial, industrial, and other businesses or professions or scientific and technical occupations, and from all classes of labor not otherwise enumerated” which certainly is comprehensive enough to include the missionary profession; and much as I wish that the missionaries in Japan may be relieved of all possible financial burdens, I can see no ground, under my own interpretation of the law or that of the Japanese Government furnished me by the finance department at my request—which coincides with my opinion—for a claim by the missionaries for exemption from the income tax. Moreover, it is my opinion that, even if there were a technical ground for such a claim—which I can not find—it would be better as a matter of policy for the missionaries to pay the tax than to make objections that might prejudice their work in the eyes of the Japanese officials under whose protection, in a large measure, they now are.

By section 5 of paragraph 5 of the regulations quoted, “traveling expenses, educational funds,” etc., are declared to be exempt from the income tax. Accordingly it is my opinion that special allowance made by the missionary boards for the purposes mentioned, distinct from the salary, need not be included in the report of income made to the officials, though I am not aware what interpretation the Japanese authorities put upon that section.

A. E. Buck.