890g.5123/–

The Consul at Baghdad ( Randolph ) to the Secretary of State

No. 524

Sir: I have the honor to refer to the Iraq Income Tax Law 1927, the text of which was published on pages 195–209 of Iraq Government Gazette No. 23 dated 4th June, 1927 (on file in the Library of the Department of State), and to enclose herewith three copies of the said “Iraq Income Tax Law 1927” printed in booklet form.77

The Hills Brothers Company, an American firm, with head offices at 375 Washington Street, New York City, and a large office and date farm at Basra, Iraq, have written me from their Basra office as follows:

“Bussorah, Persian Gulf
Ref. L–B–547, 28th June 1927.

The American Consul

Bagdad.

Dear Sir:

As we believe that the government of the United States of America does not recognize that of Iraq, we beg to enquire if we, as an American Company, have the authority of the United States Government to pay taxes under the above mentioned law.

Yours very truly

The Hills Brothers Company
Per E. P. Southby.”

Other American firms with offices and businesses in Iraq are asking me similar questions.

The leading American companies in this consular district are as follows:

The Hills Brothers Company of Basra, date exporters. This company also has an experimental date farm where an attempt is being made to improve the quality and varieties of dates and also the methods and practices of packing dates for export. The said experimental farm probably represents a large loss to the company each year. Finally Hills Brothers Company are agents for the Buick automobile, the Goodyear automobile tire and other American manufactures but are prepared to give up all such agencies if necessary to avoid exorbitant income tax difficulties.

Mac Andrews & Forbes Company, an American firm, with a large branch in Basra and an office in Bagdad. The business of this firm is the buying of licorice root for shipment to America. The company also holds agencies for one or two American products which [Page 812] are sold in Iraq but which have comparatively speaking no great importance for the company.

Berth Levi & Co. (of Chicago and New York) an American company maintaining a representative and office here for the purpose of buying sheep casings (intestines) for shipment to America.

The Oppenheimer Casing Company (of Chicago) maintaining a representative and office here for the buying of sheep casings (intestines) for shipment to America.

The Singer Sewing Machine Company, which maintains many offices in Iraq where Singer Sewing machines are sold.

As the last named firm sells its machines in Iraq and makes profits out of its Iraq customers there does not appear to be any grounds on which to base claims for exemption from the Iraq income tax so far as ordinary justice goes, unless American extraterritorial rights under our Treaty of 1830 with the Ottoman Empire assure Americans such rights. The same can apparently be said about the business done by Mac Andrews & Forbes Company and the Hills Brothers Company in connection with the agencies they hold for different American products.

Will the Department kindly inform me what attitude American firms in Iraq should assume toward the Iraq Income Tax Law 1927 in connection with the above referred to business done by them?

Also, will the Department kindly inform me what attitude the above mentioned date, licorice root and casing firms should assume toward the Iraq Government if a demand is made under the said law for the payment of tax on their annual turnover. As these date, licorice root and casing firms buy only for shipment to their principals in America and sell in this country none of the stocks bought, the local offices make no profits and their books show no profits in connection with date, licorice root and casing purchases.

Will the Department kindly inform me what attitude American firms should assume toward the Iraq Income Tax Law 1927 in connection with the filing of declarations as to income and turnover in case an attempt is made to collect a tax from such American firms on their turnover?

Finally, May I request to be instructed as to whether it is the policy of the Department to demand for American companies exemptions in this connection which British and other foreign companies do not demand and are not accorded?

A telegraphic reply, although not absolutely necessary, would be helpful.

As regards American missionaries and their hospitals and schools in Iraq, reference is made to article 8 (d) of the said Law which apparently provides for exemptions in such cases.

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As regards the income of the American Consul at Bagdad, reference is made to Article 8 (e) of the said Law which provides for exemptions in such cases.

I have [etc.]

John Randolph
  1. Not reprinted.