Foreign Relations of the United States, 1950, East Asia and the Pacific, Volume VI

896.00(R)/11–3050: Telegram

The Secretary of State to the Embassy in the Philippines

secret   priority

Washington, December 1, 1950—3 p. m.

1066. Re last para Embtel 1459, Nov 30.¹ From State, Treas, and ECA for Chapin, May and Checchi.² Foster’s memo approved by Pres Truman states tax legis as outlined in Bell Report believed essential first step toward preparing conditions in which aid program can be effective.³ NAC action NR 431, para one, indicates Phil Govt shld be informed Council considers program to produce additional revenue at least 200 million pesos appropriate condition precedent to granting large scale financial aid.⁴ Considered desirable you make perfectly clear to Phil Govt that US Govt regards tax legis essential precedent to granting large scale financial aid and to effective utilization such aid.

Last sentence reference tel appears reflect misconception US Govt position re inclusion or exemption invisibles in proposed 25 percent exchange tax. While Dept in Dept tel 1008⁵ expressed preference inclusion invisibles, essential you shld inform Phil Govt that US Govt regards inclusion or exemption as solely matter for determination by Phil Govt, which is not to regard such expression as limiting or intending to limit complete freedom judgment and action Phil Govt in presenting fon exchange proposal tax to US President and IMF.

Subsequent tel fols on approach to Amer business community.⁶

[State, Treas and ECA.]

Acheson

1. Not printed; it reported on the rapidly mounting opposition in the Philippines, including by the American business community, to proposed tax increases (896.00(R)/11–3050).
2. On November 23 Vincent Checchi was temporarily designated Special Representative of the Economic Cooperation Administration in the Philippines.
3. Presumably the reference here is to Foster’s memorandum of November 2 to President Truman, identified in the editorial note, p. 1511, which served as the terms of reference for the Foster Mission to the Philippines.
4. The reference here is to an action taken by the National Advisory Council on International Monetary and Financial Problems at its meeting on October 31.
5. Not printed; it gave the Department of State’s views on the desirability of a Philippine tax on foreign exchange as against a tax on imports (896.00/11–2150).
6. Telegram 1438, November 28, from Manila, not printed, reported that the American Chamber of Commerce in the Philippines had presented a memorandum to the Embassy protesting features of the proposed Philippine tax program which discriminated against Americans (896.00/11–2850). Telegram 1141, December 8, to Manila, not printed, stated that the Department of State was convening a meeting of December 11 with leading American businessmen with Philippine interests in order to discuss the current Philippine situation and stress the urgent necessity of temporary import or exchange taxes as an essential step in the stabilization of the Philippine economy (896.00R/12–850).