No. 492.
Mr. Fish
to Mr. Evarts
.
Berne , March 7, 1878, (Received March 25.)
Sir: The adjourned session of the Federal Assembly closed on the 22d ultimo. Its transactions present but little worthy of mention. A member of the Federal Council remarked to me that it had been the most barren in results of any session which he had known. The principal subject which engaged its attention was the discussion of measures for the re-establishment of the financial equilibrium.
Switzerland, like every other country, has been greatly affected by the stagnation in business and prostration of her commercial industries and, in addition thereto, has had, for the past three years, an annual deficit in the budget. Her financial position is, however, such as to cause no grave apprehensions, and her government took measures at an early day for the purpose of relieving the financial embarrassments of her treasury.
In July, 1876, the Federal Assembly requested the Federal Council to present with the budget for 1877 a report on the financial position of the Confederation, and to submit, besides, propositions as to the measures to be taken to balance the expenses and revenues, while seeking principally to introduce economies which can be made without injury to the requirements of a good administration.
The message of the Federal Council was not, however, transmitted to the assembly until the session of last summer.
The deficit in the budget of 1875, which appears to have given rise to the call for the report, amounted to 827,666.82 francs; the deficit for 1876 to 1,185,484.35 francs; while that for 1877 is given at 3,226,000 francs and for 1878 at 2,376,000 francs, according to the budget.
The Federal Council attributes the large increase in expenditure almost entirely to the provisions of the constitution of 1874, and estimates the increase of expenditure which those provisions entail at 10,815,000 francs per annum while the corresponding increase of the [Page 830] federal revenue amounts to only 3,642,000 francs per annum; thus entailing an annual cost of 7,173,000 francs to the confederation.
The increase in expenditure for the military establishment alone is estimated at about 9,500,000 francs per annum.
The report of the Federal Council discusses at considerable length the various departments in which a reduction of expenditure could be effected or an increase of revenue obtained. For the purpose of showing the progress that had been made at the time of my arrival and after Mr. Rublee’s departure, I inclose, in addition to the report itself, a translation of the third section, as giving a sketch of the measures of financial reform in contemplation at that time.
When we consider that the debt of the confederation is about 34,500,000 francs, and that the total annual expenditures do not exceed 43,000,000 of francs, the problem does not appear to be a difficult one to solve. There are but few in America who would not at once say, cut down the army. It is, however, owing to the sudden calls that have been made in times of emergency that Switzerland is now burdened with 25,000,000, or about 70 per cent. of her debt. It is not, therefore, unnatural that in the present unsettled condition of Europe she should prefer to maintain her army without any extended reduction, rather than to incur the risk of having to organize in a hurry and at great expense, should occasion arise for the protection of her frontiers.
It has been the endeavor of the government to maintain the military system established by the law of November 13, 1874, and to give the working of that law a fair trial, while curtailing the expenditures in certain details, which were either unnecessary at the commencement, or have proved to be so as the organization became more fully developed. The measures of economy recommended by the Federal Council affecting the military department, amounted to an estimated increase of revenue of 1,168,000 francs per annum, and those affecting the department of post and telegraphs amounted to 1,248,000 francs per annum. Among the latter was a proposed change in the tariff for telegrams which went into effect last October, and from which an increase of 230,000 francs was anticipated. This anticipation has not, however, been realized, as the change has occasioned, during the first four months of its operation, a loss instead of a gain to the revenue.
The other savings in the postal department recommended by the Federal Council consisted principally in increased charges for the transmission of postal matter, the suppression of certain franking privileges accorded to officials, an increased charge for stamped envelopes (in effect since August, 1877), and the suppression of non-remunerative postal routes.
The Federal Council advocated the repayment of the loans of 1866 and 1871 as previously decreed, and were of opinion that it was impossible to convert these loans at a lower rate of interest. “Moreover, a conversion, even a partial one, would create an expense, inasmuch as from the experience of others, loans at 4½ per cent., even of the most solid character, could not be placed at that time at par. Finally, the political horizon is not sufficiently cloudless to allow us to compromise our credit in the future.”
They estimated the annual deficit which will have to be met until the requisite measures for the re-establishment of the financial equilibrium can be carried into effect at approximately 4,000,000 francs, including 2,000,000 for the payment of the loans, and deducting 630,000 francs as the amount to be realized by the alteration in telegraphic charges, suppression of franking, and increase of postal charges oh newspapers.
[Page 831]They recommended that the remedy should be sought in the increase of the revenue arising from a revision of the customs tariff.
The matter coming before the chambers of the Federal Assembly, was in each case referred to a commission for examination and report. These reports were presented at the winter session. The National Council warmly approved the views of the Federal Council as to the prompt repayment of the loans, and, in general, favored the measure suggested by the latter. They considered that the increased tariff of customs should be made to yield between 3,000,000 and 4,000,000 francs more than at present; and they recommended the increase of the present duties by two-tenths of their present rate until the revision of the tariff can be affected, or that certain articles should be made to pay a still higher rate of duty.
The Council of States were opposed to promiscuous increase of duties, and recommended instead:
- 1st.
- Tax on spirits and other alcoholic liquors, excepting such as are made from the refuse of wine or cider or with stone-fruits or berries.
- 2d.
- Tax on bank-notes, at the rate of one-half of one per cent, on the circulation.
- 3d.
- Tax on tobacco (in addition to the customs duties).
They estimated the first of these measures as likely to yield 5,000,000 francs, of which they suggested that one-fifth should be accorded to the cantons, leaving an annual increase of 4,000,000 francs to the federal revenue. The second was estimated as likely to yield 350,000, and the third 1,000,000 francs per annum.
They, however, agreed in most of the measures suggested by the Federal Council.
I inclose a copy of the federal decree of the 21st February, which was not, however, published until the last edition of the Feuille Fédérale, which shows the conclusion arrived at by the assembly.
The payment of the loans is to be carried out as decreed, reserving, however, the right to pay off the loan of 1871 more rapidly.
The floating debt, as soon as the amount thereof shall have been fixed, taking into consideration the indispensable requirements of the administration, shall be consolidated by a fixed loan with prescribed redemption.
The indemnities or pensions of those removed or retired from office are to be revised for the purpose of reduction.
Various measures in the postal and telegraphic departments, as well as that of the military, are decreed, which will diminish the expenditure while increasing the receipts of these two departments.
In regard to customs they have decreed “when the increase of receipts and diminution of expenditures in the various branches of administration shall have been determined, the remaining deficit shall be considered in the revision of the customs tariff.” This decree is to be considered in the preparation of the budget of 1879.
At the same time the Federal Council were invited by the assembly to consider a series of eight propositions adopted by the assembly, of which I inclose a copy and translation. Of these the second and eighth alone appear to have an interest for us.
Proposition No. 2 invites the Federal Council to revise the law regulating the fees of the chancery, and to introduce in that law a tax (“taxe de chancellerie”), or fee, for the authorization to acquire Swiss nationality. This would be equivalent with us to placing a tax on certificates of naturalization, were we to adopt similar legislation.
Proposition No. 8 invites the Federal Council to examine whether it [Page 832] would not be expedient, in case of an increase of expenses of the federal administration, to establish taxes upon the issue of bank-notes, upon alcoholic liquors and on tobacco, one-half of the product of these taxes to be accorded to the cantons and one-half to the confederation.
They appear, therefore, to have adopted the proposals contained in the report of the committee of the Council of States as to the three principal suggestions contained in their report, with a modification as to the amount to be accorded to the cantons. Should this proposal be carried out, and the estimated increase of revenue be thus obtained, the benefit accruing to the confederation would be 3,175,000 francs per annum, and a like sum to be distributed among the cantons.
You will find the discussion of the liquor and tobacco tax set forth in the report of the committee of the Council of States. I gather from the language of the report, and also from the conclusion arrived at by the assembly, that, while holding firmly to the doctrine of free trade, the financial situation compels them to resort to higher rates of duty for the purpose of revenue, but that such increase of duties will be imposed solely for that purpose and not for the protection of any particular industry.
I have, & c.,