Mr. Hay to Mr. Buck.

No. 377.]

Sir: I have to acknowledge the receipt of your dispatches No. 591 of October 24 last and No. 593 of the 15th ultimo on the subject of the taxation of buildings erected on land held under leases in perpetuity in the former foreign settlements in Japan.

The view of the Japanese Government that buildings on perpetual leases are subject to the same taxes as other buildings, is plausibly and clearly stated. Not so cogent, however, is the reasoning adduced in support of its position that taxes on incomes derived from lands (or buildings and lands together) held in perpetual lease may be levied in addition to the annual rents stipulated in the lease or conveyance. For the present, however, the Department withholds the expression of any definite opinion on these points and will await your report of the action and views of other governments. If other interested governments contest these points, the Department would be glad to obtain copies of their notes or arguments in support of their contention.

* * ** * * *

I am, etc.,

John Hay.