811.20 Defense (M) Chile/39: Telegram

The Secretary of State to the Ambassador in Chile ( Bowers )

445. Department’s 407, October 24 and 383 of October 13.82 The Department and the Federal Loan Agency would appreciate very much an immediate report on the copper tax questions presented in these instructions.

Satisfactory solution of these matters is most important for the assured continuation of Chilean copper supplies on reasonable terms. Information received is to the effect that the Finance Committee of the Congress will report on these matters on November 11 and that decision will be reached shortly thereafter.

The Federal Loan Agency, which is executing the whole program for procuring adequate copper supplies for defense purposes after full and careful study of the whole situation is of the opinion that a reasonable compromise would be as follows: (a) That the present rates of the income tax remain unchanged on the income calculated on the basis of 10 cents c.i.f. New York, (b) That the additional income received as a result of increase in price above this 10 cent figure be subjected to an additional tax of 17 percent.

The result would be that all net income received on the basis of the 10 cent price would pay income tax of 33 percent and all income received additionally on price above 10 cents would pay a 50 percent tax.

It is calculated on the basis of prospective purchases of 500,000 tons at 11.75 cents this would bring the Chilean Government a tax revenue of roughly 8¾ million dollars more than it received on the basis of the 10 cent price, which should be satisfactory.

This is for your guidance in handling this matter with the appropriate authorities.

  1. Latter not printed.