The Minister in Egypt (Jardine) to the Secretary of State
[Received February 26—11:45 a.m.25]
27. Your 23, February 11 , 6 p.m.
- There was promulgated on February 11th law imposing excise taxation on matches and a decree providing means for collection and penalties for enforcement. Only article 1 and portion of article No. 7 of this decree, relating to police measures, submitted to General Assembly Mixed Court of Appeals under the decree of January 31, 1889. No part or portion of the decree was submitted to Legislative Assembly of Mixed Court under decree November 11, 1911.
- This law, consisting of two articles, establishes consumption or excise tax on matches at indicated rates. Article 1 of the decree states that all merchants or depositaries of matches shall declare quantity in their possession within 5 days of the coming into force of the decree. Article 2 provides that no matches may be removed from premises before declaration is made. Article 3 provides for search of any suspected establishment (though not of any foreign establishment without due notice to consul). Article 4 provides confiscation of any matches undeclared. Article 5 designates officials who may make seizures. Article 6 authorizes customs to exercise all necessary control and to demand from merchants statements and accounts relative to matches purchased, sold or deposited. Article 7 provides penalties for infraction not exceeding a week imprisonment and closing establishment 15 days to 6 months and for; collection of the tax notwithstanding.
- French and Italian representations identic. French aide-mémoire begins by reference to announcement of the Government that Assembly having approved article 1 of decree establishing the method of collection of an excise tax on matches stored in the country as well as penalties attached thereto. This [The] decree has become applicable to foreigners. French point out that taxation in question does not offer characteristics of consumption or excise tax as it affects imported goods which are not manufactured locally and which have already been subject to import duty. Question involves one of actual imposition having retroactive effect. French add that Mixed Court only asked to pronounce on certain articles of the decree although request was made to be consulted regarding entire provisions. Accordingly Assembly was unable to examine the facts for which penalties might be incurred and therefore, contrary to article 2, paragraph 2, of the decree of 1889, Assembly was not in a position to assure itself that proposed legislation contained no provision contrary to text of treaties and conventions. French Legation though not hostile to principle in itself regrets its inability to admit application to its nationals of a tax established under such conditions. Belgian representations same except for omission reference to principle.
- Judgment recognizing legality of excise tax on products of the soil or local industry rendered by Mixed Court in 1919  which expressed opinion that as such tax was neither direct land or personal its submittal to General Assembly Mixed Court unnecessary. Excise tax July 27, 1921, on certain liquids, foodstuffs and construction materials whether domestic or imported provided collection tax on imports at the time of their importation. Excise tax alcohol distilled in Egypt approved by General Assembly 1921 without protest of powers. No excise tax on imports ever submitted Legislative Assembly or previous last week to General Assembly.
- Decision Residency probably forthcoming Thursday,26 I am [now] informed.
- At first sitting Assembly, February 13th, articles 3, 5, 6 and 7 submitted and approval withheld at[. At] second sitting next day.[,] article 1 and portion article 7 submitted when Assembly approved motion declaring Government had promulgated decree on its own responsibility and, without approving or disapproving, provisions submitted considered not contrary to treaties. In view of conflicting interpretation[s] as to what took place in Assembly and character of influence exercised by the Government, both of which I am investigating, I conclude from conversations Assembly sought a way out of an embarrassing situation and in explanations now being given is seeking to justify its position. It is now contended that Assembly did [Page 157] not request entire text but took position law and decree inseparable and approval impossible articles submitted without recognizing legality tax. Assembly apparently shared general uncertainty extent its competence pronounce upon [question] involving taxation foreigners and sought way out of having [on] one hand by approval law to exceed its competence or on other hand by disapproval emphasize Egypt’s capitulatory obligations.
Add to paragraph 4: Excise taxes promulgated February 17, 1931, on cement, kerosene, denatured alcohol and gasoline whether domestic or imported contain no retroactive feature applicable imported products.