751G.5 MSP/3–1152: Telegram
The Minister at Saigon (Heath) to the Department of State
1765. Dept pass MSA; rptd info Paris 624. At meeting with HC Secy Gautier, Fin Counselor Valls and Acting Econ Counselor Cattan, [Page 64] Tobler, Bartlett and I discussed STEM proposal send ltr re need budgetary data to Viets Natl Comite Amer econ aid in advance its reunion next week, the first meeting comite since Oct. Both Leg and STEM agreed it might afford appropriate opportunity present once again need for current receipt and expenditure data of Viets Govt at natl and regional levels. Copy text STEM letter being forwarded MSA with copy State.1 Ltr does not threaten any econ sanction on part STEM if budgetary data not forthcoming. It stresses importance having such budgetary info as soon as possible in view imminent congressional hearings MSA program.
Gautier thoroughly accord both spirit and substance STEM démarche indicating Fr attempting exert similar pressure obtain financial data thru its position in institute of issue and thru Fr admin comite for milit aid to Vietnam. Said institutes restricted comite, on which Fr in effect has two out of three votes, has not acted on pending Viets application for loan because lack appropriate documentation re Viets receipts and expenditures. Walls stated it seemed now agreed by Vietnam that institutes restricted comite could not act without such documentation. He hoped data in some form or other might be presented at any moment. Gautier hoped Fr and Amers could exchange any info they obtained re Viets Govt finances.
Gautier, when associated subj Viets taxation informally raised, stated that he had urged Huu during latter months 1951 to reform tax system. He repeated claim often presented Fr sources that Fr presently pay 90 percent of direct taxes. Gautier’s own thinking involved:
(a) Reinstituting personal or head tax at possibly 100 piasters a person; (b) Adjusting income tax deduction to take account cost of living, (c) Adding real war tax, and (d) Wiping out illegal taxes collected by various semi-autonomous mil-polit groups. His objective would be not only make everyone pay more, but everyone pay something.
Re new Viets under-Min of Fin, Pham Van Hai, Gautier indicated he had not known him before but thought he would be methodical and conscientious.
Comment: Leg believes latest STEM move in complete accord Dept’s desire not condone bad admin practices on part Viets Govt. View controversial nature of tax question, particularly adjusting incidence thereof (presently small group relatively well-to-do Fr pay large share direct taxes and large masses Viets of almost all income groups pay indirect taxes), Leg intends submit recommendations soon to Dept re possible approaches Dept might wish Leg and STEM take in encouraging Vietnam reform taxes and tax collection.
[Page 65]Gautier said that he thought Huu would now really make some effective effort install budget system and increase tax revenues. Huu would probably not agree to publish his budget for fear opposition criticism and Gautier would not insist that he do provided authentic budget be shown Fr. He agreed budget must also be made available US in Vietnam’s own interest.
Meanwhile, he, Gautier, and his counselors would keep us informed of all polit and econ developments.
- The draft letter has not been identified in Department of State files.↩