815.512 Stamp Tax/7

The Secretary of State to the Minister in Honduras (Summerlin)

No. 328

Sir: The Department refers to correspondence with your Legation during the years 1927 and 1928,1 concerning the Decree of October 5, 1927, establishing a system of stamp taxation in Honduras and to despatch No. 414 of June 29, 1928, from the American Consulate at Tegucigalpa,2 a copy of which it appears was sent to the Legation and which refers to the same subject and reports that the British Consulate at Tegucigalpa has lodged a protest on behalf of British insurance companies against certain provisions of this Decree.

The Decree provides for a tax of 100 pesos per annum to be assessed against the agents of foreign insurance companies while no provision is made in the law for a tax against the agents of Honduran companies. The Decree further provides for a tax of 1% upon the value of the premium of life insurance policies of foreign companies as against a tax of 1/2% assessed upon the value of premiums of such policies of Honduran companies.

The Department considers that these provisions of the Decree were in violation of certain provisions of Article VIII of the Treaty of 1864 between the United States and Honduras3 which was in force when the Decree was passed. It is provided in this Article that with respect to matters enumerated therein, the citizens of the two countries shall not be charged in the other country with any higher impost or tax than are the native citizens, and one of the matters enumerated in that Article is that relating to the sale of personal property “of every sort and denomination”. The Department is of the opinion that the Treaty provision on this point is broad enough to cover the sale of policies of insurance and that, therefore, the attempt by Honduras to hamper the sale of insurance policies by foreign companies through higher taxes than are imposed upon native companies was in [Page 227]violation of the provisions of the Article mentioned, especially as one measure of discrimination was a tax upon the value of the premiums of life insurance companies.

The Department is further of the opinion that the provisions which have been mentioned as contained in the Decree in question, are in conflict with provisions of Article I of the Treaty of Friendship, Commerce and Consular Eights between the United States and Honduras4 which has superseded the Treaty of 1864 and which was proclaimed July 23, 1928.

It is provided in Article I of the Treaty of 1928, that nationals of one contracting party shall be permitted to engage in commercial activities within the territories of the other upon the same terms as nationals of the state of residence and it is further provided that nationals of one country within the territories of the other shall not be subjected to the payment of any internal taxes or charges other or higher than those that are exacted of and paid by the nationals of such other country.

The provisions of the Decree to which reference has been made seem clearly to conflict with both these provisions of Article I of the Treaty of 1928.

Unless you perceive some good reason to the contrary, the Department desires you to bring the matter to the attention of the Foreign Office, on behalf of American insurance companies doing business in Honduras, in the light of the foregoing and to express the hope that it will be found possible promptly to modify the provisions of the Decree in the points indicated so as to remove the matter of conflict with the treaty.

The Department also desires you to report as to the results, if any, which were accomplished by the protest reported to have been lodged by the British Consulate against the indicated provisions of this Decree.

I am [etc.]

For the Secretary of State:
Francis White
  1. Previous correspondence not printed.
  2. Not printed.
  3. William M. Malloy (ed.), Treaties, Conventions, etc., Between the United States of America and Other Powers, 1776–1909 (Washington, Government Printing Office, 1910), vol. i, p. 952.
  4. Signed December 7, 1927, Foreign Relations, 1927, vol. iii, p. 92.