amount paid for the transportation of property between the Territory and the mainland United States, and between the several islands of the Territory of Hawaii; and Whereas these taxes were imposed as wartime excises to discourage unnecessary transportation of persons and property, which reason is no longer sufficient to justify continuing their levy; and Whereas, due to the geographic makeup of the Territory, virtually all interisland shipments of food and other goods as well as transportation of persons must be accomplished by commercial means and are therefore subject to the payment of these taxes, a condition not true on the mainland with regard to either intrastate or interstate transportation; and Whereas these taxes materially increase the cost of transportation of persons and property both from the mainland to the Territory and within the Territory, thus directly contributing to the high cost of living in the Territory and working great hardship on the people of the Territory who must pay inflated prices for food and other necessities because of these taxes; and Whereas the cost to the carriers of collecting these taxes substantially increases the cost of transportation, which cost is ultimately paid by the users of such transportation facilities and results, therefore, in an additional and unnecessary charge upon the public; and Whereas these taxes put Hawaii in a very unfavorable position in its competition with Europe, South and Central America, the Caribbean area, and other southern trade areas for tourist business, which is Hawaii's third ranking industry and is rapidly increasing in importance, as well as in Hawaii's bid for a place in the import-export business of the world, inasmuch as transportation to and from the aforesaid-mentioned areas are not subject to these taxes; and Whereas these taxes definitely discourage passenger travel and shipping activities via commercial means at a time when transportation systems generally are hard-pressed financially, which is particularly detrimental to the low-income groups in the Territory who cannot afford the resultant higher travel costs in the Territory; and Whereas the Twenty-sixth Legislature of the Territory of Hawaii also requested the Congress of the United States to repeal said taxes: Now, therefore, be it Resolved by the House of Representatives of the Twenty-seventh Legislature of the Territory, the Senate concurring, That the Congress of the United States be, and it is hereby, respectfully requested to repeal the Federal tax on the transportation of persons and the tax on the transportation of property as each applies to travel and shipping within the Territory of Hawaii, and as each applies to travel and shipping between the mainland United States and the Territory of Hawaii; and be it further Resolved, That duly certified copies of this concurrent resolution be transmitted to the President of the United States, to the President of the Senate, and to the Speaker of the House of Representatives of the Congress of the United States, to the Secretary of the Interior, and to the Delegate to Congress from Hawaii. THE HOUSE OF REPRESENTATIVES OF THE TERRITORY OF HAWAII, We hereby certify that the foregoing concurrent resolution was adopted by the House of Representatives of the Territory of Hawaii on March 3, 1953. HIRAM L. FONG, Speaker, House of Representatives. WALTER G. CHUCK, Clerk, House of Representatives. THE SENATE OF THE TERRITORY OF HAWAII, Honolulu, T. H., May 19, 1953. We hereby certify that the foregoing concurrent resolution was adopted by the Senate of the Territory of Hawaii on May 19, 1953. WILFRED C. TSUKIYAMA, President of the Senate. ELLEN D. SMYTHE, Clerk of the Senate. STATEMENT BY HAROLD B. WAHL, GENERAL ATTORNEY, THE PENINSULAR & OCCIDENTAL STEAMSHIP Co., JACKSONVILLE, FLA. The Peninsular & Occidental Steamship Co., commonly called P. & O., is now in its 54th year of rendering service between Florida and Caribbean ports. We are down to our last ship, the steamship Florida, operating between Miami and Habana. One of the principal deterrents and handicaps in continuing this operationwhich is 1 or 2 short American-flag steamship operations on the entire east coast still operating-is the 15-percent Federal transportation tax which applies to our transportation to Cuba and yet does not apply to competing tourist-transportation attractions to South America, Europe, Africa, etc. The 15-percent Federal transportation tax was inaugurated for the purpose of discouraging travel and is continuing to accomplish this purpose, even though the need and desire to discourage travel has long since ceased to exist. Our regular round-trip fare for the overnight trip between Miami and Habana is $49.50, including transportation, room, dinner, and breakfast each way. The 15-percent Federal transportation tax of $7.43 added to this makes a total of $56.93. This difference (in the case of a man and his wife amounts to $14.86) keeps a good many people from making the trip. In addition, the airline fare round trip is $36 (the airline rate does not include room and meals). The transportation tax in the case of the P. & O. applies not only to transportation but also to stateroom and meals and further increases the differential between water and air transportation. To show what we are up against, we resumed operations with the SS Florida in January 1947, when the WSA returned her to us, after we had first put the vessel in first class condition, freshly renovated throughout. During 1947 we handled 73,376 passengers between Miami and Habana. During 1948 the nurnber fell to 64,028, in 1949 it fell to 61,473, in 1950 to 61,339 and in 1951 it decreased still further to 60,120. The bulk of our business comes from people who are in Florida for the winter, discover that Cuba is only a short distance away, and while here decide to take the trip. There is no particular hurry about the trip and there has been so much talk about repealing the transportation tax that many of these people decide to wait until this tax has been repealed. In addition, when there is a family group, the transportation tax, multiplied by the number in the group, frequently causes the abandonment of the trip or the party to travel by air because of the saving in costs. This is so even though they prefer the overnight boat trip with dancing aboard ship and all of the other attractions included in the trip by sea. The end result is that many people who would prefer the overnight boat trip are forced to travel by air because of the differential, and many others are unable to go at all, either by air or water. We have made a check both among passengers and the travel agencies and are convinced that there is so much resentment against this transportation tax, that it is a primary deterrent in our business. Moreover, most people are totally unable to understand why if they go all the way to South America they pay no transportation tax, whereas, if they merely go to Cuba 15 percent is added to their bill. Recently I had occasion to make a trip to Port of Spain, Trinidad. I found that if I went direct to Trinidad I had to add 15 percent to my fare to cover the transportation tax, but if I went by way of Venezuela, 15 miles further, at a very small additional transportation cost, I would not have to pay the 15 percent transportation tax. Needless to say I went by way of Venezuela. This situation certainly illustrates vividly the inequity of the present tax law. We earnestly hope that this tax will be repealed. The P. & O. is one of the few companies under American registry which is still operating in the coastwise or nearly Caribbean territory, and we are struggling valiantly to keep our heads above water. STATEMENT SUBMITTED BY BILL LANTAFF, MEMBER OF CONGRESS, IN BEHALF OF H. R. 3638-To AMEND SECTION 3469 OF THE INTERNAL REVENUE CODE TO EXEMPT FROM TAX THE TRANSPORTATION OF PERSONS TO AND FROM MEXICO, TO AND FROM CENTRAL AMERICA, and to AND FROM THE WEST INDIES Mr. Chairman and members of the committee, I appreciate the opportunity of submitting my testimony in support of H. R. 3638 which I introduced on March 3 of this year. The purpose of this legislation is to amend section 3469 of the Internal Revenue Code to exempt from tax the transportation of persons to and from Mexico, to and from Central America, and to and from the West Indies. The tax originally in effect, beginning October 10, 1941, to November 1, 1942, was at the rate of 5 percent and applied to domestic and international travel. The rate was increased to 10 percent by the 1952 act. The present rate of 15 percent under code section 1650, has been applicable since April 1, 1944. Subsequent amendments to the original law have excluded from the payment of the tax all countries in South America. Exhibit 1, attached hereto, is illustrative of the situation as it exists today. It can be readily seen how the fiscal policy of the United States is discriminating against the countries of Mexico, Central America, and the West Indies. If I purchase a ticket in the United States for transportation to Soviet Russia or any country behind the Iron Curtain, no tax is collected; however, if I purchase transportation to such friendly countries as Cuba, Nicaragua, the Dominican Republic, or Haiti, I have to pay a 15 percent transportation tax. Another peculiar situation that exists is that I am charged no tax if I purchase a ticket from New York to Caracas, Venezuela; but if I proceed from Miami to Trinidad, a few miles to the east, a 15 percent tax is collected. There is attached hereto as exhibit 2, a letter from Mr. Gelston Judah, a travel agent in California, which illustrates the situation which exists in that State and which points up the inequities inherent in the present law. Exhibit 3, attached hereto, from the Under Secretary of the Treasury, shows that very little revenue is realized from this tax which is so discriminatory to our friends in the Caribbean area. For a great many exporters, the Central America and Caribbean countries and possessions constitute a most desirable marketing area. With relatively few exceptions, their import restrictions are not severe. Moreover, as they are not highly industrialized countries, they import almost every type of manufactured product and all have enough dollar exchange to pay promptly for their overseas purchases. There are no backlogs of deferred commercial debt to plague suppliers of this area. With consistent cultivation, these markets offer substantial immediate business opportunities. They will surely grow in importance as outlets for American products. In turn, they are a most dependable source for many of our most needed imports. For the tourist, they offer many interesting attractions. Recognizing their present and potential value, exporters from Europe and Japan have stepped up their activities in all these markets and, on many items, United States suppliers are hard put to meet this competition. All this being so, it is most desirable that we encourage more trade and travel with the Caribbean area. Yet, in effect, Uncle Sam now discriminates against business with Central America and the Caribbean through the 15 percent levy on American passenger travel to and from these countries. This 15 percent impost does not apply to travel to other parts of the South American Continent or to Europe. Not only is this unfair to our own commercial interests, but it also puts an unnecessary burden on tourist travel with a resulting curtailment in dollar income to these nearby countries. I trust that this distinguished committee will give favorable consideration to H. R. 3638 so that this discriminatory tax can be removed in the early days of the next session. Care of Oakland Tribune Tower, Oakland Tribune Tower Building, Oakland, Calif. DEAR SENATOR KNOWLAND: As you know the 15 percent excise tax on transportation tickets has never been repealed. We are sure that you do know that both Canada and Mexico have abolished their transportation taxes. This office is constantly plagued with requests from clients to arrange for the purchase of transportation tickets which originate in Canada and Mexico, usually for use entirely within those countries; or, which start in those countries and then proceed into other countries. Individuals know from long usage that they can cross the border and save the 15 percent tax and purchase such tickets. This means a total loss of dollars left in this country. For instance, at present we can issue a ticket on any air, steamer line from New York to Europe, South America, etc., absolutely tax free due to the wording of the present laws. The point here, is that, the dollars are paid into the agents of the transportation lines on this side of the border and we at least have a few days, weeks and months use of the moneys until the foreign lines call upon us to cover passage. In addition to the dollars jumping the borders, we as agents of all the lines in question cannot even collect a cent or we become a party to a violation of the tax laws; and as an incident to this we do not earn a single cent of commission; much more hold the dollars in the United States. Perhaps you do not realize what a tremendous item of loss this is to all of us concerned. For many months, in fact for over a year the Mexican Air Lines have been operating from Ti Juana to Mexico D. F. Every day as follows: CMA DC-4-66 passengers at $124.50 each_. Total amount of possible dollars to Mexico, per day. Total amount of possible dollars to Mexico, per year--- $8, 217.00 8, 217.00 2, 614.00 2, 583.00 2, 583, 00 2,583.00 26, 797.00 9, 780, 905. 00 CMA operates an additional DC-6 from Los Angeles every night and you can always obtain a seat on this plane even after the above six are sold out. A passenger pays $176.40 (after April 1) plus $26.46 tax; total $202.88. You can see why they drive to the border. American airlines recently discontinued their flight from Los Angeles to Mexico due to lack of business. As this is not an association complaining, but an individual, and one who has been in the transportation business for 37 years-it is my thought that the law should be changed "so that tickets purchased for use in wholly tax-free areas, should be purchasable here in the United States at the national rate going in the foreign areas without imposing a purely United States tax. Only this last month we had two of our clients drive down to Mexico D. F. and they then flew from Mexico D. F. to Guatemala and back. If we had sold these clients tickets on prepaid orders here, we would have had to collect United States excise tax on same. Our clients have to carry travelers checks, or certified checks, or cashiers checks to cover these purchases below the border. Pan American World Airways will not hold seats on planes from Mexico D. F. to any point on their line unless picked up at least 1 day prior to departure-many times clients do not arrive in time. They will not permit an agent of the client (for instance my Mexico D. F. office) to go in ahead of time and pick up these seats. In the interim, for changes in laws take many months, would you be so kind as to ask the proper officials in Washington, D. C. (for local authorities only refer these matters to Washington and no answer ever comes), whether it is proper for this company to issue drafts in pesos (or any foreign exchange) on banks in foreign countries for the amounts to cover the above type of tickets. We are a branch of the foreign exchange department of the American Trust Co. of San Francisco and issue drafts for payments of foreign exchange all over the world on all of their correspondents and under their protection. Considering that our clients at present have to go out of this office where we have arranged their hotels, motors, transfer, meals, as well as transportation, and purchase such a draft or have their checks certified * ** we are anxious to know whether we would be violating the law in providing a service which we already have within our own doors? Of course, I most sincerely wish to see the 15 percent tax on transportation canceled completely; secondly, the law changed as suggested above. Yours sincerely, (Signed) GELSTON JUDAH. |