Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, with the Annual Message of the President, December 6, 1875, Volume I
No. 235.
Mr. Davis
to Mr. Fish.
Berlin, October 13, 1874. (Received October 30.)
Sir: I have the honor to inclose copies of correspondence with several Americans, respecting the imposition of an income-tax upon Americans residing within the limits of the German Empire.
The complaints come simultaneously from Frankfort-on-the-Main, from Hanover, and from Dresden.
I thought I should be justified, under these circumstances, in incurring the expense of consulting a competent lawyer concerning the laws imposing these taxes. I also inclose his report respecting Prussian laws, together with a translation and a comment upon it by Consul-General Kreismann. You will observe that a further communication is promised, respecting the laws of Saxony.
Our last treaty with Hanover (volume of treaties, page 454) made provision only (Article X) for the case of residence for business purposes. This treaty is understood to have been abrogated by the conquest of that country and its annexation to Prussia.
Our treaty with the Hanseatic Republics is broader, (volume of treaties, page 463, Article VIII.) Protection is to be afforded to transient citizens on the same terms which are usual or customary with natives or citizens. But it may be said that this treaty also was abrogated, as to Frankfort, by the conquest and annexation of the whole territories of that state to Prussia.
The treaty of 1828 with Prussia provides only for a commercial residence, (volume of treaties, page 724, Article VIII.)
In all cases which have come to the knowledge of the legation the tax has been imposed upon persons claiming to be American citizens, and residing temporarily within the German Empire, either for purposes of education or for some similar object.
The several questions would, therefore, appear to involve the application of similar principles, unless the status of a naturalized citizen may be deemed to be affected by one of the German naturalization treaties. Other similar cases will undoubtedly be presented for the decision of the legation.
I have a decided opinion upon these cases.
Assuming that the German government is acting in good faith, and under general laws applicable alike to its own citizens and to all foreigners, I think that it is due to its sovereignty to concede to it the right to determine, through its own officers and in its own courts, what [Page 480] residents and what property are to be taxed within its limits. Should this result in any case in a substantial miscarriage of justice, it will be for the Department of State, and not for this legation, to determine whether the injury is such as to justify political interference with the municipal regulations of the German governments; and I am free to say that it also seems to me that persons who live here year after year, enjoying the protection of the laws of this country, can have little cause of complaint if they are called upon to contribute to the support of those laws.
Yet I think that, as the question is likely to be wide-reaching, it is due to the Department to ask for instructions on the cases as they stand. If the Department differs from me, I shall be pleased to have it indicate the line of argument in which I am to present its views, and I need not add that I shall endeavor to fully carry out its instructions.
I have, &c.,
Mr. Wolf to Mr. Davis.
Dear Sir: I take the liberty of inclosing you a protest by me against the right of the Prussian government to levy an income-tax from me, as an American citizen temporarily residing in Frankfort, where I am staying for purposes relative to the education of my children, and doing no business whatever, and having no investments in Prussian stocks of any kind, and living on the revenues of capital employed in American and Austrian securities. A protest of very near same tenor, in German, I forwarded some months ago to the Prussian general government tax-commission, at Wiesbaden, without any result.
I would now call your excellency’s kind attention to this my protest, and hoping it may meet with due consideration, and that your excellency will thereupon take such steps in this matter as you may think just and right under the circumstances.
I have the honor to be, your excellency’s obedient servant,
His Excellency J. C. B. Davis,
Minister of the United States of America,
Berlin.
Protest of Louis Leo Wolf, a citizen of the United States of America, from the city of New York, pro tempore residing in Frankfort-on-the-Main, against the arbitrary increase of a general government income-tax imposed upon him by the Prussian authorities specially, as well as against the right of levying such income-tax generally from him.
I was born upon the dominions of Christian VI, King of Denmark, in the year 1806, A. D. In 1830 my father and all his children emigrated to the United States, settling in the city of New York. Having taken the oath of allegiance, I became a citizen in the year 1835. Although I have spent several years in Austria, I have preserved my rights as a United States citizen ever since unimpaired. In the year 1870–’71, I moved to Frankfort-on-the-Main, and am living here, prior to my return to the United States, for purpose of education of four minor children. I do not carry on any trade or profession, and support myself and family from revenues derived by investments in the United States and Austria. When I removed to Frankfort no income-tax was demanded from me.
About a year and a half afterward a tax was demanded from me, amounting to forty-eight thalers. Ignorance (fancying this to be a corporation-tax, which to pay I certainly should not object to as long as I reside here) made me pay this income-tax without protest.
[Page 481]However, on my return from Italy, where I mostly spend the winter-season, the tax-commission imposed upon me an income-tax nearly four times the former amount. There against I protested, and not only against this arbitrary proceeding, but also against the right the Prussian government possesses of levying upon me any income-tax.
Of this protest, addressed in the German idiom to the tax-commission at Wiesbaden, setting forth the same arguments as in these presents, no notice has been taken.
Wherefore, I now and hereby lay this my protest before the representative of the United States at Berlin, requesting his excellency to act in this matter as he may think just and right in protecting the interests of American citizens residing temporarily within the Prussian dominions, and especially upon the following motives:
- 1.
- I do not, as before stated, carry on any business or profession, neither in Prussia nor elsewhere.
- 2.
- Naturally, not enjoying equal rights with subjects of Prussia, I am deprived of the right to vote, which at least they have, for or against any taxation to take place. Still I am taxed as if I were imbued with all such privileges of a Prussian subject; and a great deal, worse, and without any remedy, which they have, as I will show hereafter; for, as in my case, deriving my revenues from outside Prussia, I am—
- 3.
- Doubly taxed; for whence I derive the revenues they are subjected to a home-tax; so that, for the privilege of spending my revenues within Prussian dominions, I am to be taxed twice as heavy as their own subjects.
- 4.
- Moreover, the treaty of May, 1828, would be quite an illusion; for by that treaty American citizens are to enjoy, within the dominions of the King of Prussia, the treatment of the most favored nations, and a treatment corresponding with that of Prussians residing in the United States.
- 5.
- Prussians living in the United States, not following any business pursuits, nor having any occupation or profession, do not pay any tax to the General Government.
- 6.
- More than one-half of my revenues I spend all, yearly, in Vienna and Italy, where I pass the winter-months, notwithstanding I am forced to pay the full and overrated tax.
- 7.
- As before mentioned, the foreigner has no right to inquire or to know for what purposes the tax is to be applied. He is simply made to pay, or be executed by his personal property. Now, it is obvious, and by national economy, searched for well-known facts, that five-sixths of the taxation levied by the general government of Prussia goes for military purposes, building fortifications, &c. Now, am I, a citizen of the United States, temporarily residing in Prussia, to contribute to the expenses which a standing army of half a million men cause? Am I to forward (admitting indirectly) Prussian ambition to carry on warfare against nations that are on friendly terms with the United States, or, which is not so quite impossible, to carry on war against the United States themselves?
- Austria has quite lately prescribed an income-tax, but most justly and reasonably, only against subjects of the Austrian Empire.
- 8.
- I have called this income-tax a most arbitrary measure against foreigners: for, without any cause or motive, without inquiring into the state of your pecuniary matters, the tax-commission levies upon you this year, with as little right or justice, 50 thaler, as they would demand from you next year 500 thaler.
- 9.
- And, as a foreigner, you are deprived of any means to oppose such arbitrary proceedings, whilst the Prussian subject has, by bringing two of his fellow-citizens giving testimony that he has been overrated. The foreigner, being a stranger in the place, may hunt in vain for such testimony.
Although it is no more than just that, whilst an American citizen resides in a place abroad, he should contribute to local or corporation demands made upon him, I am in hopes, and trust that his excellency, our representative near the court of Berlin, will concur in my opinion, that the income-tax, as heretofore described, levied upon citizens of the United States living temporarily, without any occupation whatever, within the Prussian dominions, is not only unjust and contrary to the still-existing treaty, but likewise against rules laid down by international laws; and that his excellency will duly appreciate this my protest, and cause relief to be afforded, by extending his influence in this matter with the respective Prussian organs.
Mr. Wierss to Mr. Davis.
Dear Sir: Having protested as well last as this year against my being taxed, they have not only not listened to my protest, though I have made a written statement and stated that I was ready to swear to it, they have put me up to higher rate of taxation.
[Page 482]I have, for instance, $.20,000 California extension railroad bonds, which cost me at the rate of 84; they are at present 25, and do not pay any interest; also $8,000 Rockford and Rock Island railroad bonds, which cost me 80, worth now 15, and no interest; but this seems to make no difference here. I have to live from my capital, since the extension bonds do not pay interest, and therewith would humbly request you to assist me to get rid of such a high taxation, which I do not at all represent. Hoping and wishing that you will please do some steps accordingly, I remain, awaiting your kind reply.
Your most obedient servant,
His Excellency the Ambassador of the United States, Berlin.
Mr. Wierss to Mr. Davis.
Dear Sir: I take the liberty to inform your excellency that the authorities of this city have not listened to my protest which I have made for two years, they having taxed me entirely too high. They forced me to make out a full statement of my assets and income, and nevertheless they still put my taxes each year higher than the year before, though my statement showed them that I had not the income they taxed me at. They took war-taxes from me, though I came here after the war with France had been ended, and by reclamation to Count of Bismarck they got to return it to me, and since then it seems to me they try to make that up again in taxing me higher every year. I hope that your excellency will please look into-this matter, because there seems to be no end in their taxing me still higher next year. I most humbly would request that the city authorities had to return to me for the last two years the tax which they took from me too much.
Your most obedient servant,
His Excellency the Minister of the United States, Berlin.
Mr. Appleton to Mr. Davis.
10 (2) Sidonian Strasse.
Dear Sir: May I ask your opinion respecting a matter which affects the interests of several of our countrymen besides myself living temporarily in this city?
Are we subject fairly to taxation? I received a few days since a circular letter which I herewith inclose, the purport of which, I am informed, is that I am to make a declaration of my property, on which an income-tax is to be levied.
I had supposed that an American, like myself, living temporarily abroad, pursuing no vocation, practicing no profession, occupied in no employment, and owning nothing in the country, was not a subject of taxation in a foreign country.
I have lived abroad for some years, and this is the first time I have been called upon to pay a tax.
I have been in Dresden now about two years, excepting an absence of about two months in each year, occupying furnished apartments, commorant, as I think the law-term is, having no intention to remain, and proposing before long to return to Boston, where I live.
As it is probable that you may have been applied to in cases analogous to my own as thus stated, I shall esteem it a favor if you will, at your early convenience, reply to this, and indicate the course I should take in the matter.
I am, very respectfully, &c.,
Of Boston, Mass., U. S. A.
P. S.—Can the absence from Saxony for two months in each year be construed into an interrupted residence? In such case, I am told that the stranger is held liable only after five years instead of two.
His Excellency Bancroft Davis,
Envoy, &c., &c., of the United States to
Germany.
Mr. Davis to Mr. Appleton.
Berlin, September 25, 1874.
Sir: I have the honor to acknowledge the receipt of your letter of the23d September, respecting the claims to collect from yon an income-tax. I shall transmit the correspondence to the Department of State for instructions. But in case you are paying faxes on your personal property in America, or in case you have paid income-tax to the United States, I think it well to enable me also to inform the Department of the place of assessment and payment of such taxes.
Awaiting your reply, I am, sir, your obedient servant,
B. B. Appleton, Esq.,
10 (2) Sidonian Sirasse, Dresden.
Mr. Appleton to Mr. Davis.
10 (2) Sidonian Strasse.
Dear Sir: I beg to express my thanks to you for your very prompt attention to my letter of September 23.
I am under still further obligations to you for calling attention of the State Department to the subject, as there are several Americans here in the same category with myself, as I had the honor to apprise you in my aforesaid communication of the 23d instant.
You suggest in your note that “in case I am paying taxes on my personal property in America, or hi case I may have paid income-tax to the United States, that it will be well to enable you to also inform the Department of the place of assessment and payment of such taxes.”
In answer, I have to state that all the property of which I am possessed is in the city of Boston, and that the taxes levied upon it, personal as well as real, and, I have no reason to doubt, income-tax also, have been regularly assessed, and duly paid by my representatives in Boston.
Renewing to you the expression of my thanks, I have the honor to be yours, &c.,
His Excellency Bancroft Davis,
Envoy, &c., of the United States to
Germany.
Mr. Jansen to Mr. Davis.
In reply to the inquiries made of me, verbally and in writing, on the subject of the liability of aliens to the class-tax, or classified income-tax, in the states of the German Empire, I have the honor to advise your excellency as follows:
1. The levying of class-taxes and classified income-taxes is regulated in the several states of the German Empire by the laws of those states, in Prussia by the laws of May 1, 1851, and May 25, 1873.
2. In Prussia all residents of the state, unless subject to the classified income-tax, &re made liable to the class-tax by said laws.
The classified income-tax in the continuation of the class-tax, commencing with incomes of more than 1,000 thalers per annum.
- (a)
- The class-tax is levied in 12 grades; the first grade commencing with an annual income of from 140 to 220 thalers, and amounting to 1 thaler per annum. The last and twelfth grade commences with a yearly income of from 900 to including 1,000 thalers, and a counts to 24 thalers per annum.
- (b)
- The classified income-tax is levied in forty grades and upwards; the first grade commencing with a yearly income of from more than 1,000 to 1,200 thalers inclusive, and amounting to 30 thaler per annum; fortieth grade, commencing with a yearly income of from 220,000 to 240,000 thalers, and amounting to 200 thaler per annum.
If the yearly income exceeds 240,000 thalers, then the tax increased by 600 thalers from every additional 20,000 thalers.
It will be seen that only those persons having an annual income exceeding the sum [Page 484] of 140 thalers can be made to pay the class-tax, arid that those persons having an annual income of more than 1,000 thalers are made to pay classified income-tax. Those persons paying the class-tax, as a matter of course, do not pay any classified income-tax, and vice versa.
3. So far as the levying of the class-tax of aliens is concerned, the law provides as follows:
In the first place, article 1 of the general liability of the residents of the state, in its full text reads as follows:
“All those residents (inhabitants) whose yearly income does not exceed the sum of 1,000 thalers, are subject to the class-tax;” and article 5 in full text providing: “Exempt of the class-tax are a, c, d, e, f.”
(f) Aliens not having resided a full year at any one place within the state, with the exception of those who have a residence in the state for the purpose of profit and gain. Aliens may therefore be made to pay the class-tax—
- 1.
- Generally, when they have resided one year at any place.
- 2.
- When they have taken up their residence in the state for the purpose of profit and gain, immediately upon taking up such residence, without regard to the length or duration thereof. In such cases aliens, in pursuance of section 11 of the law, are to be made to pay the class-tax from and after the first day of the month following the one in which such residence has been taken up.
Relative to the classified income-tax as regards aliens, the law contains the following provisions. Section 16 in its full text provides in general:
“All residents (inhabitants) of the state, with the exception of the members of the royal family and the members of the two princely families of Hohenzollern, and all Prussians residing abroad, are subject to the classified income-tax, who of themselves, or in connection with any separate income of members of the family, making up their household, have an annual income of more than one thousand thalers.”
And section 18, concerning aliens, provides in full as follows:
“Aliens also owning real estate in the state, so far as the same all together affords an income of more than one thousand thalers, are, in consideration thereof, required to pay the classified income-tax.”
A like obligation applies to aliens who own within the state industrial (professional) or commercial establishments, or are partners thereof. Other aliens are subject to that tax only when they have resided in Prussia for the purposes of profit and gain for more than one year.
The meaning of the law is perfectly clear; but I bring to the notice of your excellency the following points:
- (a)
- Upon a full consideration of both sections 5f and 18, it is evident that aliens, for an income from real estate or business establishments in Prussia, not exceeding the sum of one thousand thalers per annum, if such aliens at no place within Prussia have a domicile or residence, cannot be made to pay class-taxes.
- (b)
- In the assessment of the income in this country in the case of aliens, Only such deductions can be taken into consideration as relate specially and expressly to revenues here; as, for instance, taxes, annuities, interest or balances of purchase-moneys, interests and debt arising from commercial and business transactions, but not the interest on personal debts.
- (c)
- To constitute such a residence of an alien as to establish his liability to be taxed, a continued personal presence of the alien in this country is necessary. Merely establishing a household in a case, for instance, in which the alien in question declares or proves by his action that his residence in Prussia for the time being is quite temporary, does not] suffice. Nor can, on the other hand, every temporary absence of the alien remove or interrupt this liability of being taxed when the same has once ensued.
I have been unable to furnish your excellency with this statement at an earlier time, for the reason that it was a matter not exactly within my line, and I had to submit the matter of the legislative enactments and commentaries on the subject to a close examination. So far as a report on the status of aliens in regard to the taxes in the kingdom of Saxony is concerned, I pray for a delay of a week, to enable a colleague in Saxony to furnish me the necessary material.
Very respectfully,
Attorney at Law and Notary.
Memorandum by Mr. Kreismann.
Having made an English translation of the paper of Mr. Attorney Jansen, left at the consulate by Mr. Fish this morning, the same is herewith respectfully returned.
[Page 485]It may not be inappropriate, perhaps, in this connection, to refer to the question of municipal income-taxes here, and in other Prussian and German cities, which are a constant cause of complaint for Americans residing in this and other cities in Germany in the pursuit of their studies or pleasure. So far as Berlin is concerned, the law of 1888, and the regulations in pursuance thereof of 1869, authorize a collection of such tax for municipal purposes of all persons who have an income of their own, and have their permanent domicile or have resided here for three months. But the city authorities here, in the case of Americans, have insisted upon the right of levying such tax also of persons who are married women and minors who have no income of their own, and no means other than suck as they are furnished by their husbands or parents.
It would be in the interest of many Americans if it could be determined what the law and their liability actually are in the premises.
Respectfully submitted.