File No. 812.512/888.
The Acting Secretary of
State to Special Agent Silliman.
Department of State,
Washington,
November 22, 1915.
Sir: Referring to your unnumbered despatch
dated September 25 [18], 1915, with which you enclose a memorandum of
the Secretary of the Treasury, presenting arguments in support of the
claimed equitable nature of the mining decree of March 1, 1915, there is
enclosed an extract from a memorandum entitled “The New Mexican Mining
Taxes,” and you are instructed to bring the statements therein contained
to the attention of the appropriate authorities as a reply made by an
interested American company to the said arguments of the Secretary of
the Treasury.
You will further state that the Department considers it highly probable
that the de facto Government of Mexico, upon further consideration of
the matter, will perceive the inadvisability, from the standpoint of the
future prosperity of Mexico, of imposing such severe burdens upon one of
its principal industries and will likewise not be inattentive to the
injustice of subjecting the large amount of foreign capital invested in
that industry to the greatly increased taxes provided by the decree,
which, as the Department believes, will, unless amended, result
disastrously to much of that capital.
In conclusion you will request a careful and early re-consideration of
the question of mining taxes in the light of the foregoing and of the
statements contained in the enclosed memorandum.
I am [etc.]
For the Acting Secretary of State:
Wilbur J. Carr.
[Inclosure—Extract.]
the new mexican mining taxes.
[After quoting the argument in favor of the new law by the Secretary
of Hacienda, forwarded to the Department by Mr. Silliman in his
September 18, the memorandum continues:]
The [above] argument refers only to the property tax, and does not
mention the tax on the product, which is by far the heavier burden
on operating properties. In the argument every large business is
considered a monopoly, and it holds that it is more just that the
mining properties be divided into small units, because some large
properties have not done work for a number of years. It calls the
aim of the new decree to bring this about “perfectly justified, and
sanctioned by the proceedings of all civilized governments.” It
therefore legislates against the principle of cooperation,
association and concerted action. How a federal government promoting
such principles can expect to promote modern industry, or even to
maintain itself, is not indicated.
The United States income tax—a tax on net profit—should not be cited
as a rule and guide for a tax on property, which is a totally
different matter. Property may or may never produce income, and the
income tax is not a tax on property, no more than is the inheritance
tax.
It is hard to make comparisons between taxation in Mexico and
taxation in other countries, say in the United States, as the
systems of taxation are entirely different and as the yearly federal
tax on mining property in Mexico is only a small part of the federal
taxes which the miner has to pay.
[Page 954]
The tax on production has always been excessive; it now has been made
exorbitant and prohibitive; but this production or export tax is
ignored in the argument of the Carranza Government. Together with
the State tax, it would be 10% of the assay value of the gold and
silver produced, which most mining companies are unable to pay. It
would stop production.
The Carranza Government claims that the yearly tax on mining property
was low, and that it can justly be raised; but it does not consider
that in order to get the most revenue from the industry the first
requisite is that mining be carried on and properties be worked. In
Mexico the amount derived in taxes from mining is immeasurably
higher than the amount derived from the tax on mining property, and
unless mining property is held by private owners it will not be
worked. Private owners are more active in obtaining results from
their properties than the government can possibly be.
The lower the tax is made on mining property and on mining titles,
the more will be acquired by individuals and the more will be done
to make the properties productive. To raise the tax on mining
property is to impede development. As the yearly federal tax on
mining property in Mexico is only a small part of the federal tax
which the miner has to pay—the tax on production being ever so much
more burdensome—it is useless to compare this special tax with the
amounts paid in other countries. In Mexico the miner pays for his
mineral right according to the amount of surface by which it is
covered, whether the ground is valuable or not, whether his work is
profitable or unprofitable, whether he works or not. And, moreover,
he pays on his gross production. In the United States he pays a
federal tax on his profits. Corporations are charged 1% of their
profits. But there is no federal tax in the United States with which
the Mexican federal mining tax can be compared.
