667.003/136
The High Commissioner at Constantinople (Bristol) to the Secretary of State
[Received August 4.]
Sir: Since my unnumbered despatch of October 16th 192011 giving a review to that date of tariff developments in Turkey prior to, during the War, and since the armistice, I have had the honor to address several despatches to the Department on this question.
[Page 899]To summarize the situation to date, I would say that the specific and consumption taxes continue to be imposed in spite of notes addressed to the Sublime Porte by the Allied High Commissioners and by myself—(see my despatch #217 May 18th 1921). It is admitted by all concerned that the return to the 11% ad valorem will bring in 200,000 Ltq. monthly over present returns, and the reasons for retaining the present system are obscure. I believe, however, that these reasons are:
- a)
- By consenting to the return to the 11% ad valorem system the Turks would be partially accepting the reinstatement of the Capitulations.
- b)
- There are certain technical difficulties in reestablishing the ad valorem system which are valid. It permits of the falsifying of invoices and the consequent defrauding of the Ottoman Government. It is also difficult to get competent trained officials for the work of appraisal.
- c)
- The Allied representatives here do not press the return of the 11% ad valorem as their nationals would have to pay more than double the amount they are paying now for customs duties.
I have discussed informally with officials of the Foreign Office this whole question and have urged the desirability of returning at once to the 11% ad valorem system. I have pointed out to them that in 1914 the Powers had agreed in principle to the increase from eleven to fifteen percent ad valorem tariff for Turkey and that certain Powers had actually signed the Conventions granting this increase, so there could be no logical objection by the Powers to an arrangement for a provisional increase from eleven to fifteen percent to care for the immediate necessities of the Ottoman Treasury.
I am inclined to believe that in answering the latest notes addressed to the Sublime Porte on this question the Porte will indicate in its reply a willingness to return to the 11% ad valorem system if the Powers will consent to the provisional increase from 11% to 15% until the Peace Treaty has been signed and a permanent tariff system adopted for Turkey.
Miri Tax
The situation as regards the taxes on alcohol imported into Turkey is somewhat complicated. At the present time 93% of the alcohol imported into the Ottoman Empire is from the United States. As the greater part of the country is in the hands of the Nationalists the importations are more or less confined to Smyrna and Constantinople.
Early in 1920 the Ottoman authorities tripled the special tax of 5 paras per litre per degree which had been imposed during the War so that the duties today on this new basis represent 170% [Page 900] approximately of the value of the goods. I have protested against the payment of such taxes, and protests were also made by the Allied High Commissioners until February 5th, 1921, when they notified all concerned that in view of the serious financial situation they had consented to the imposition of this triple tax on their nationals as a provisional measure. The British High Commissioner in accepting this increase for his nationals made it a condition that all nationals importing alcohol into Turkey must also pay this tax. The question was referred to me through the Advisory Trade Commission, and I instructed my delegate on that Commission to decline to agree to this measure insofar as Americans were concerned. (See my despatch No. 178, of May 2, 1921, Minutes of Meeting No. 3.12)
In sending out my instructions in regard to this tax, I notified our Consuls that importers should be required to pay only the legal tax in effect before the War.
It appears that at Smyrna the American Consul carried out my instructions to the letter and notified importers that they need pay only the tax recognized by the Powers in 1911 of 37½ paras per kilo, although between 1911 and 1914 this tax had been doubled and the double tax had been paid by all importers, though under protest. The procedure followed in Smyrna is as follows:
Importers of American alcohol call at the American Consulate and deposit with the Consul the legal tax of 37½ paras per kilo; the Consul thereupon issues a permit to land the goods and the importer, accompanied by a cavass from the Consulate, proceeds to the customs house where the goods are then allowed to be brought in. This procedure has been followed now since March, 1921. It will, of course, be realized by the Department that as Smyrna is under the control of the Greek Military Authorities, they are the ones that are permitting this procedure and it is not the Ottoman Authorities who acquiesce in this method of importing alcohol.
As regards Constantinople, I notified several importers of American alcohol through our Consulate that they need pay only the tax which had been enforced in 1914, namely, 75 paras per kilo. However, when they called at the customs and offered to pay this import duty the official permits to land the alcohol were refused by the Ottoman Authorities. The result is that there are now some 400 drums of American alcohol in warehouses for which official teskeres to land have not been given. I have not felt justified in using a show of force to land this material here and have telegraphed the Department for instructions in this question. (See my telegram of July 2nd 1921 No. 212).
[Page 901]Consumption Tax on Oil at Smyrna
The situation in Smyrna as regards the customs duties on oil has not changed since my despatches No. 81 of March 8th13 and No. 85 of March 11th.14 The Standard Oil Company is continuing to pay the specific tax on petroleum into the American Consulate. It has also agreed that when the question of taxes have [has] been settled diplomatically that the Standard Oil Company will pay either the 11% ad valorem tax or the specific and consumption tax, whichever is decided, and to whomever the diplomatic negotiations directs that this sum should be paid.
In Constantinople, however, the Standard Oil Company is paying the specific and consumption taxes, which together are today considerably in excess of the 11% ad valorem. For the moment it doesn’t seem to the best interests of the Standard Oil Company that the American authorities should insist upon only 11% ad valorem customs duties being paid, but when certain negotiations have been consummated between the Standard Oil Company Officials and the Ottoman authorities in regard to its installation at Beicos, the Standard Oil Company will then be anxious to have the 11% ad valorem reestablished.
As I stated in my telegram above mentioned, I have reached an impasse in my efforts to accomplish the restoration of the pre-war system of taxation, and I can do nothing further without the instructions of my Government and their complete backing of any action which they direct me to undertake.
I have [etc.]