Foreign Relations of the United States Diplomatic Papers, 1934, Europe, Near East and Africa, Volume II

811.512362 Shipping/22

The Ambassador in Germany (Dodd) to the Secretary of State

No. 507

Berlin, February 6, 1934.
[Received February 17.]

Sir: I have the honor to inform the Department that in a communication dated August 30, 1933, the Consul General in Berlin requested the Embassy to bring the matter of the claim of the United States Lines Operations Inc., for exemption from the payment of the so called trade tax (Gewerbesteuer) levied on it by the municipality of Berlin, to the attention of the Foreign Office.

According to the Embassy’s information the United States Lines Operations Inc., is incorporated under the laws of the State of New York and has two branches in Germany, the chief office being at Hamburg and the second office in Berlin. The Hamburg office handles all matters relating to taxes in Germany. It appears that the question of the so called trade tax first arose in 1929, when the United States Lines Operations Inc., took over the vessels of the Shipping Board and the claim for exemption from the tax was refused by the Berlin city authorities. It appears further that representatives of the Consulate General in Berlin have taken this matter up with the municipal authorities here from time to time and that on June 24, 1933, the Chief Bürgermeister wrote a letter to Consul Geist, setting forth the reasons why the exemption sought could not be granted. A copy and translation of this letter are enclosed.¹⁰ Shortly thereafter the municipal authorities promised the Consulate General to postpone the application of the tax until the matter could be decided by the competent national authorities. Following this the Embassy took the matter up informally with the Foreign Office and a memorandum, copy of which is enclosed,¹¹ was left with Dr. Dehl, the competent official in the Ministry handling tax matters. Subsequently to this the Embassy has pressed on numerous occasions an answer as to the result of the examination of the matter in the light of the ruling of the United States Treasury Department regarding equivalent exemptions in the Revenue Acts cited in the Department’s instruction No. 3715 of February 20, 1925¹² and communicated to the Foreign Office in the Embassy’s note No. 1103 of March 20, 1925, a copy of which was sent to the Department with despatch No. 773 of February 17, 1931.¹¹ The Embassy is now in receipt of a note of reply from the Foreign Office bearing date of January 25, 1934, copy and translation of which are enclosed,¹¹ stating that the adverse decision of the Chief Bürgermeister of Berlin can not be interfered with by the Prussian Minister of the Interior because of prevailing legal regulations.

As of possible assistance to the Department in examining this case there is enclosed a copy of an opinion on the aspects of reciprocity in such matters by the law firm of Kirlin, Campbell, Hickox, Keating and McGann of New York¹¹ which was attached to the letter from the Consulate General to the Embassy, above referred to.

The letter from the Consulate General to the Embassy concludes with the following paragraph:

“It is obvious that the only position which we could take in this matter, if the German authorities do not instruct the Municipality of Berlin to forego the collection of the taxes discussed in the enclosed documents, is for the American Government to consider the Agreement of 1923,¹³ at an end and to proceed in the United States to levy the Federal Income Tax on the German lines operating in the United States. It is, however, known that the preponderance of the advantage lies on the German side in this matter, considering the importance of their representation in America and the volume of the business transacted compared to the single office in Berlin of the United States Lines.”

Before taking the matter up further with the Foreign Office I would be very glad to receive the Department’s instructions as to the action I am to take.

Respectfully yours,

William E. Dodd

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12. Foreign Relations, 1925, vol. ii, p. 198.
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13. Apparently the agreement by exchange of notes, 1923–1925, between the United States and Germany granting relief from double income tax on shipping profits, Executive Agreement Series No. 17; for correspondence, see Foreign Relations, 1925, vol. ii, pp. 188 ff.