Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 7, 1915

File No. 812.512/831.

Special Agent Silliman to the Secretary of State.

Vera Cruz, September 18, 1915.

Sir: As bearing upon correspondence between the Department and myself regarding the recent mining tax decrees, I have the honor to transmit herewith copy and translation of a memorandum sent me by the Secretary of Hacienda, being his own comment upon the mining taxes, laws and decrees.

I have [etc.]

John R. Silliman.

[Inclosure—Translation.]

memorandum on mining taxes.

In conformity with the Law of March 25, 1905, mining properties paid taxes as follows:

• Up to 25 pertenencias, $2 Mexican gold per pertenencia per tercio (period of four months), or one dollar per tercio, 1/4 dollar per month.
• 25 pertenencias and over, $1 Mexican gold per pertenencia per tercio, or 1/2 dollar per tercio, or 1/8 dollar per month.

The exchange on New York from 1905 to 1912 reached an almost invariable point very close to 1/2 dollar per peso.

The decree dated March 1, 1915, fixes the following taxes:

• Up to 10 pertenencias, per tercio per pertenencia $4 Mexican gold, or $1 Mexican gold per month, 1/2 dollar per month.
• Up to 20 pertenencias, per tercio per pertenencia, $5 Mexican gold, or $1.25 Mexican gold per month, 5/8 dollar per month.
• Up to 50 pertenencias, per tercio per pertenencia, $6 Mexican gold, or $1.50 Mexican gold per month, 3/4 dollar per month.
• Over 50 pertenencias, per tercio per pertenencia, $8 Mexican gold, or $2 Mexican gold per month, one dollar per month.

The decree dated August 31 modified the above taxes, temporarily, and only for the two tercios included between the months of July of this year and February next, as follows:

• From July to October, per pertenencia, for any number, $2 Mexican gold, 1/4 dollar per month.
• From November 1915 to February 1916, per pertenencia, for any number, $2.66 Mexican gold, 1/3 dollar per month.
• From the 1st of March, 1916, the tax rate above mentioned as fixed in the decree of March 1 of this year will resume effect.

The law of 1905 favors monopoly, imposing upon the small interests, up to 25 pertenencias, double the tax paid by the large interests, over 25 pertenencias.

The law of March 1 of this year aims at a different purpose; that is, to favor the small interests, imposing lower taxes upon them than upon the large interests. This tendency is perfectly justified, and is sanctioned by the proceedings of all civilized governments.

The decree of March 1 of this year imposes upon the large interests, over 50 pertenencias, double the tax of the small property, 10 pertenencias. The intermediate properties between 10 and 50 pertenencias pay an ascending proportional rate.

In conformity with the income-tax law of the United States, the large interests in the United States pay taxes seven times greater than those paid by the small interests. In conformity with the Mexican mining law which will commence to operate next March, the large interests will only pay double the amount of taxes paid by the small interests. Thus the progressive increase in the mining tax is very moderate when compared with the income tax effective in the United States.

Comparing the tax fixed by the new law for the small interest with the old tax, it is seen that it is doubled, but this by no means indicates that it has been raised, because the old tax was excessively low. A tax of 1/2 dollar per month per pertenencia cannot be called high, and 1/2 dollar per month is the amount which will have to be paid beginning March 1 next year.

There are some concrete cases which may be cited of mining companies having more than one hundred pertenencias denounced in one mining district, and in some places they have been paying mining taxes during 15 or 20 years without doing one stroke of work on the properties denounced. The progressive tax tends toward eliminating these unjust and unproductive monopolies.

Some mine owners, attempting to show that the taxes are very high, argue by reducing to paper money the value of gold, and comparing this to the amounts formerly paid by them, when exchange was 1/2 dollar for one peso. This is not important, nor even worthy of consideration. The comparison should be made between an amount paid in gold, and another paid in the same kind of money.

The only weighty argument thus far presented by those interested in the reduction of the taxes is that the majority of mining interests have had to entirely or partially stop their work, due to the European war and the state of intranquillity prevailing in this country. But precisely because this reasoning was considered just, the decree of August 31 was issued, reducing considerably the taxes and ignoring the progressive increase, for the two tercios between July 1915 and February 1916.

The interested mine owners also find fault with the fact that the taxes are collected in gold, and not in paper money. They are not justified. For a long time export taxes, the stamp tax on oil, forest exploitation, etc., have been collected in gold, and gradually it will be decreed that other taxes be paid in gold, until all fiscal collections will be made in gold. This fiscal program of the Government, tending to consolidate the monetary system, can in no way be called unjust.

The concerns which produce articles for exportation can object less than any other to paying their taxes in gold. These concerns sell their products for gold, but, on the other hand, pay a great part of their running expenses in paper money. Therefore, they would be absurdly favored if they paid their taxes in paper money.