Mr. Buck to Mr. Hay.

No. 651.]

Sir: I have the honor to acknowledge the receipt of your instruction No. 405, of the 7th ultimo, as to the past attitude of the United States Government toward the controversy over the house tax and the income tax, and as to their actual attitude toward the reference to arbitration of the questions at issue.

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Dispatch No. 642, of May 14, showed my representations, made in obedience to instruction No. 399, of April 12, to which reference is made in the instruction under reply, in support of the view that the question in all its bearings should be referred to arbitration.

The result of the suggestion that the scope of the arbitration offered by the Japanese Government should be widened so as to include all subsidiary questions as well as that of the house tax, to which alone their offer of arbitration had reference, was the minister for foreign affair’s note of May 16, a copy of which I had the honor to forward with my dispatch No. 643, of the same date, in which he declined to widen the scope of arbitration, on the ground that the house-tax question was the only one at issue.

The positions which the British and other ministers have taken, from first to last, upon the house tax and the income tax and other points raised throughout the controversy, and the present positions of those ministers upon the reference to arbitration having been laid before the Department, in the absence of any new development in the situation, I have done nothing further since the receipt of the Baron Komura’s note of the 16th ultimo.

The instruction to which I now have the honor to reply, while recalling the fact that the United States Government still entertain doubts as to the validity both of the house tax and of the income tax (on incomes from property held under perpetual leases), reiterates their decision not to become a party to the arbitration, in view of the fact that the enjoyment of the results thereof is vouchsafed to American citizens.

The instruction further expresses the opinion of the United States Government that all questions which the parties to the arbitration wish included should better be referred, while they, not being a party to the arbitration, will leave the determination of questions to be referred to the participating powers, refraining from asking the reference of any question not requested by one or more of those powers.

I shall not fail to bear in mind the Department’s position as outlined in the instruction under acknowledgment, and shall act accordingly as the situation may require.

I have, etc.,

A. E. Buck.