811.512362 Shipping/26

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

No. 1180

Sir: With reference to despatch No. 951 of June 20, 1934, on this subject,16 I have the honor to inform the Department that the tax expert of the Foreign Office, Dr. Dehl, now having returned from annual leave, the matter of the protection of American shipping companies [Page 501] from the imposition of the trade tax (Gewerbesteuer) was discussed with him on August 14, 1934, and a memorandum left, copy of which is enclosed.

During the course of the conversation with Dr. Dehl, it was emphasized that whereas in Germany, for example, the city of Berlin could impose such taxes independently of the jurisdiction of the Finance Ministry, the Federal Government alone could impose such taxes in the United States, and attention was again called to the last two paragraphs of the legal opinion sent as enclosure No. 6 with despatch No. 507 of February 6, 1934, a copy of which is in the possession of the Foreign Office.

Dr. Dehl acceded to the Embassy’s request, that he would take up the matter with the Finance Ministry and the Ministry of Economics in accordance with paragraph (c) of the copy of the memorandum enclosed and furnish the Embassy an answer in writing as to whether the Finance Ministry could issue the necessary instructions under the existing arrangement to free American shipping companies from the trade tax, and if this should prove impossible, he would secure the views of the competent Ministry as to the possibility of reaching an understanding for a further exchange of notes on the lines specified by the Department. Upon the receipt of the Foreign Office reply, this will be transmitted promptly for the Department’s consideration with the called for suggestions from the Embassy.

Respectfully yours,

William E. Dodd

In 1923, 1924 and 1925, the Embassy and the Ministry for Foreign Affairs exchanged notes effecting an arrangement between the United States and Germany for Relief from Double Taxation on Shipping Profits.

In a Memorandum dated September 2, 1933,17 the claim for the Trade Tax (Gewerbesteuer) against the United States Lines, Inc., was referred to. The Ministry replied to this Memorandum in its note verbale—V 958—of January 25, 1934,17 saying that the Prussian Minister of the Interior could not alter the decision of the Biirger-meister of Berlin who had decided that the company was not exempt from the Trade Tax. It is therefore noted that:

Under the United States Constitution, municipal subdivisions and States have no authority to place burdens, by taxation or otherwise, on foreign commerce.
It appears that the “Trade Taxes” (Gewerbesteuer) levied against the United States Lines, Inc., are imposed by German States and Municipalities without regulation by the Ministry of Finance. In this regard German shipping companies seem to enjoy more favorable treatment than United States shipping companies under the Reciprocal Agreement mentioned.
If it is impossible for the Ministry of Finance to issue such instructions as would align the situation on a completely reciprocal basis under the existing arrangement, the Department of State is desirous of endeavoring to reach an understanding for a further exchange of notes with a view to effecting an arrangement that would protect American shipping companies from the imposition of such taxes.

[By a note verbale of January 31, 1935, enclosed with despatch No. 1735, February 2, 1935, the German Government informed the American Embassy that the “competent German tax authorities have been given due instructions and have been requested to desist from collecting the trade tax demanded of the United States lines but not yet paid.” (811.512362 Shipping/28).

By instruction No. 374, March 19, 1935, the Embassy was instructed “to advise the Foreign Office in response to its note verbale of January 31, 1935, that reciprocity is granted by the United States in respect to the collection of such taxes” (811.512362 Shipping/29).]

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