811.512341 Shipping/58
The Secretary of State to the Swedish Chargé (Assarsson)
Sir: Adverting to the Legation’s memorandum of August 21, 1926, and to subsequent correspondence20 and interviews of the Minister at the Department in regard to the treatment of Swedish vessels in the matter of tax on income derived from operations in the Philippine Islands, I beg to confirm the statement made in the memorandum referred to and in the Department’s note to the Legation of May 21, 1927,21 to the effect that the provisions of the Acts of Congress, pursuant to which arrangements are entered into by the United States [Page 755] with foreign Governments for the reciprocal exemption from tax on income derived from the operation of American vessels in foreign countries and of foreign vessels in the United States, do not apply to the Philippine Islands. I desire also to confirm the information contained in the Department’s memorandum of January 26, 1927,22 to the effect that the existing income tax law of the Philippine Islands contained no provision for the reciprocal exemption from income tax on shipping, and that exceptional or preferential treatment had not been extended to British shipping in the Philippine Islands.
Inasmuch as the Acts of Congress, providing for the reciprocal exemption from taxes on income derived from the operation of vessels, do not apply to the Philippine Islands, and since the laws of the Philippine Islands do not provide for any reciprocal exemption, there is no authorization of law for extending to the Philippine Islands the arrangements which have been made for the exemption of foreign vessels from tax on income derived from operations in the United States. You will appreciate that in view of the foregoing the arrangement which the Legation, in its memorandum of August 21, 1926, stated the Swedish Government felt should be extended to the Philippine Islands, cannot, in the present state of the applicable law, be so extended.
With respect to the inquiry made orally by the Minister, whether American vessels in the Philippine Islands are exempt from tax on income, I beg to inform you that it is the understanding of the Department that, under existing law in the Philippine Islands, American vessels do not enjoy exemption from tax on income derived from the operation of vessels in the Philippine Islands. It may be stated, however, that it is the view of the Government of the United States that in the absence of a treaty between the United States and Sweden, granting to Swedish vessels the same treatment in the Philippine Islands that American vessels receive there in the matter of tax on income, the question whether American vessels are or are not exempt from tax on income in the Philippine Islands would have no bearing on the treatment which vessels of Sweden are entitled to receive.
I trust that the foregoing will remove any misunderstanding which exists regarding Swedish shipping in the Philippine Islands.
Accept [etc.]