File No. 639.003/31.


No. 68.]

Sir: Referring to your No. 29 of March 1, and to your No. 53 of June 15, I have the honor to report as follows on the working of the municipal surtax upon articles of import levied by the commune of Santo Domingo:

As stated in my No. 64 of July 8, this municipal surtax as enacted by the municipality and approved by Congress was not a consumption tax. At first it had the effect of imposing a double tax on merchandise shipped from the commune of Santo Domingo to interior cities in other communes, as the municipalities in the interior also collected a similar surtax. The complaints and protests were so numerous that the municipality of Santo Domingo about December, 1910, decided not to collect the tax on goods invoiced direct from here to the interior, and to refund the tax by means of a “waybill rebate.” This was done by administrative action, and nothing is known of any action of Congress in the matter. So that at present the municipal surtax is a consumption tax.

I have been very often in conference with the general receiver of Dominican customs, and from a memorandum furnished me by him, as to the practical working of the municipal surtax, I quote as follows:

As to the practical effect of this tax on commerce of the country, it must be admitted and understood that the ordinary commercial statistics such as prepared by the receivership, covering foreign trade, would not in themselves be conclusive. There are innumerable conditions and circumstances which would affect such a showing in addition to this single item of taxation. For instance, the new customs tariff which went into effect January 1, 1910, provided substantially reduced rates on many articles of importation, and even though such articles had not previously been taxed by the municipality, or had been taxed at a lower rate than provided in the new municipal tariff law, the net result would be a reduction and therefore would not tend to curtail or shut out such importations. On the contrary, such importations might increase in volume owing to the tariff encouragement. The general conditions and prosperity of the country also affect such a statistical showing. Hence, any specific figures showing the quantities of rice, flour, cement, etc., imported during the previous years as compared with the same importations for the past year would be entirely misleading if intended to demonstrate that the recargo municipal has had the actual effect in practice of restricting importations. One way of determining the result of the new municipal tax would be a comparison of the amounts collected by the municipality under the bid tariff and under the [Page 146] new. The figures obtained from the Ayuntamiento covering the past 10 years transactions are stated herewith:

1901 $9,555.97
1902 10,566.87
1903 6,544.05
1904 13,605.39
1905 18,109.39
1906 24,109.41
1907 1 40,818.68
1908 20,076.31
1909 16,786.11
1910 21,808.54

Note.—Or a yearly average of $18, 198; new recargo only in operation during concluding part of 1910.

The member of the Ayuntamiento who prepared the new tariff estimated that it would yield $40,000 per year. That yield will bear comparison with the table incorporated above, and furnishes answer to the question propounded as to the practical effect. However, it must be added that the same member now states that the annual expectation will not reach $40,000, on account of having been changed to conform to a consumption tax. On July 11, 1911, actual payments were commenced by the Ayuntamiento to merchants for and on account of taxes previously paid on imported goods sold outside of the comuń.

Very late official information, dated July 13, 1911, direct from the Ayuntamiento, has been obtained, to wit:

In the six months there has been collected from the entrances of this year $9,066.57 and of 1910 consigned as values to the collection in the budget $7,745.34 that make a total of $16,811.91. There is still much to collect of the first six months.

The items pending collection, as stated, from the half year 1911, just closed, will Offset those due in the earlier period, but collected January-June, inclusive, 1911, so that the total reported, $16,811.91, may be accepted as normal for a half year under the new recargo. It certainly furnishes further answer, and of a concrete nature, too, of the practical effect concerning which particular information is sought.

It should not be necessary to attempt to prove by statistics the effect of any tax or multiplication of taxes. The principle of supply and demand governs. There is a limit to taxation on commerce beyond which it can not carry the load.

The lapse of nearly one year since the indirect tariff legislation went into effect, and since the first report on the subject was prepared and submitted, BIA, August 29, 1910, general receiver to the Bureau of Insular Affairs, has brought forth developments which afford food for reflection and a new viewpoint from which a further discussion can be had.

The Dominican customs tariff of 1910, compiled and drafted by the general receivership and submitted to the Dominican Government for its consideration and subsequent enactment, has been in operation since January 1, 1911. Its success has exceeded sanguine expectations, and the encouragement it gave many lines of trade in the Republic, long stifled by improvident tariff laws and rulings, has made possible a net result entirely satisfactory, in the face of and notwithstanding obstacles in its path. Such was the recargo municipal for Santo Domingo, considered untimely, ill advised, and unwarranted because ultra vires if a plain interpretation be given Article III of the American-Dominican convention of February 8, 1907. This provision bears drectly upon and was framed to control any modification of the customs tariff, assumed to refer to both direct and indirect acts or attempts in contravention of the law cited.

From the very first the position taken by the receivership has been that the issue raised was one of principle, not practice. The safeguards incorporated [Page 147] in Article III of the convention are eminently proper, if the best interests of the Dominican Government and its foreign obligations are at all times to be the object of serious concern. The good effect so far achieved and the foundation laid for years to come should not be jeopardized or undermined by the imprudent legislative handiwork of those who know absolutely little or nothing of the true needs of the situation.

Something already has been accomplished as a result of the agitation of this subject, for a part of the additional burden imposed by the recargo municipal has been lightened, particulars as outlined herein. The opinion is expressed, in this connection, that if the Dominican Government will go on record as admitting, tacitly at any rate, that the Article The involved bears some intrinsic relation to tariff legislation of the country during the life of the convention, and agrees “not to do it again,” perhaps no further complaints will be raised against the Santo Domingo recargo municipal in its present modified application.

I have, etc.,

William W. Russell.
  1. At first glance the 1907 collections will appear abnormal, and so was the case. Importations of that year actually were less at port of Santo Domingo than in 1908, yet recargo municipal tax collected in 1907 more than doubled that of 1908. Explanation offered is that in 1907 the treasurer in charge was a very old man, perhaps of 80 years—a virtual pensioner. His office work became so much in arrears that the president of the Ayuntamiento took matters in hand, appointed extra collectors, who rushed matters and not only collected on current accounts but many items due and pending from previous years (a customary state of affairs in Dominican fiscal matters), so that the year’s showing was a record breaker, as indicated in the tabulated statement.