[Inclosure.—Translation.]
Japanese minister for foreign
affairs to Mr. Buck.
Department of Foreign Affairs,
Tokyo, October 21, 1901.
No. 41.]
Monsieur le Ministre: His Imperial Majesty
has been pleased to sanction and to order to be promulgated the law
relating to leases in perpetuity granted to foreigners, which
received the consent of the Diet in its last session. His Majesty
has also caused two imperial ordinances to be issued in aid of the
law, and departmental ordinances and notifications, in execution
both of the law and imperial ordinances, have been issued.
I have the honor to refer your excellency for the full text of these
several enactments to the Official Gazette of the 21st ultimo.
These measures were conceived in a spirit of conciliation, and I
venture to hope that your excellency will find it possible to agree
with me that they furnish a just and equitable solution of the
several questions which have been raised respecting perpetual
leases.
I should, however, point out that the enactments referred to do not
have the effect of exempting the buildings standing on lands held by
foreigners under perpetual leases from the taxes and registration
fees which are leviable in respect to other buildings; neither do
they relieve foreigners from the obligation to pay income taxes in
respect of incomes derived from property held under such leases.
The Government of His Imperial Majesty have given the most careful
consideration to the observations which several of the foreign
representatives have been pleased to address to them on the subject,
and, although anxious to meet as far as possible the views of the
interested powers on this, no less than on other branches of the
question, they have been unable, I regret to say, to bring
themselves to the conclusion that the provisions of the treaties now
in force exempting property held under
[Page 688]
perpetual leases from taxation have the
extended meaning which has been claimed for them.
The Imperial Government experience no difficulty in admitting the
wide significance of the word “property” which appears in the
conventional stipulations referred to and which is chiefly
responsible for the issue which has been raised. The word is generic
in its nature, and, when used in its generic sense, it comprises
everything, movable as well as immovable, that is susceptible of
individual appropriation and exclusive enjoyment. But in the context
in which it is employed in the treaties the term is subject to a
controlling qualitative limitation.
That limitation specifically restricts the guaranty against taxation
to property held under leases in perpetuity. The property held under
perpetual leases is, in the opinion of the Imperial Government,
necessarily limited to the property granted by those leases, for it
seems clear to them that no property not actually granted by the
leases can be held under the leases.
By reference to the leases and the arrangements of an international
character under which the leases were issued, it will be found that
the property granted by the leases was exclusively land. The
buildings standing on the leased land formed no part of the granted
property. On the contrary, they have, without exception, been
erected since the leases were issued, and, equally without
exception, are the absolute property of the lessees.
The Imperial Government have drawn from this chain of circumstances
what seems to them to be the natural and inevitable conclusion that
the buildings standing on the leased land, not having been included
in the original grants and being still held wholly independently of
those grants, can not be said to be held under the leases in
question, and are, therefore, outside the purview of the
conventional engagements exempting property held under such leases
from taxation. Nor is it perceived how it would be possible to bring
such buildings within the scope of those engagements, unless it be
assumed, in contradiction of actual facts, that they, equally with
the land, belong to the Imperial Government and that they actually
form a part of the property granted by the leases.
If the contentions of the Imperial Government are correct, it follows
as a necessary corollary that the buildings in question are subject
in all respects to the revenue laws of the empire. They are, by
treaty, guaranteed national and most favored nation treatment in the
matter of taxation, and the Imperial Government are prepared to
assert that the taxes imposed are neither discriminatory nor
excessive.
The Imperial Government find it equally impossible to reconcile their
convictions with the claims which have been made respecting the
applicability of the income-tax law to incomes flowing from property
held by foreigners under leases in perpetuity.
The tax in question is limited to actual incomes. In no cases is it
applicable to sources of income. It is in its incidence and
attributes essentially a personal and not a property tax, and the
Imperial Government are unable to persuade themsevles that the
general imposition of that tax contravenes to any extent the
provisions of existing treaties, which exempt property held by
foreigners under leases in perpetuity from taxation.
Many foreigners have voluntarily paid both the building and income
taxes. Others, however, knowing that the question was under
consideration, have delayed action. The Imperial Government were not
in a position to express any decided opinion on the various points
raised in connection with perpetual leases until the necessary
enactments had been issued; and, accordingly, grace has hitherto
been allowed in the matter of the payment of the taxes in question.
But in view of what has been said, it will now be necessary to let
the provisions of law relating to the collection of taxes take their
usual course.
I avail, etc.,
Komura Jutaro,
Minister for Foreign
Affair.
