16 T H E C U B A R E V I E W 



It should contain a clause providing that sale or resale of raw sugar in the original 

 sack in which placed by the manufacturer thereof shall be exempt from the 1 per cent. 

 Sales Tax, providing said raw sugar is not consumed in the domain of Cuba. 



It should contain a clause to the effect that the sale or resale of refined sugar 

 for consumption in the domain of Cuba shall be subjected to the 1 per cent. Sales Tax, 

 but that all sales or resales of refined sugar exported from Cuba shall be exempt from 

 said Sales Tax. 



CHAPTER III 

 Articles XI, XII, XIII, XIV 



The following comment is made on the proposed taxation levied according to the 

 above stated articles, for the purpose of showing the large increase in this form of 

 taxation and the effect of same upon commerce. 



(A) Taxes on Organization of Corporations 



1. Existing Taxes: Corporations organized under the existing laws of Cuba are 

 required to pay a tax equivalent to one quarter of one per cent, upon the capital paid 

 in, whether in cash or in property. There is no tax upon the issuance of stock nor 

 upon the issuance of bonds as such. 



2. Proposed New Taxes According to Bill in the House of Representatives : Under 

 the Bill as it now stands, Corporations organized under the laws of Cuba will be required 

 to pay on organization one per cent, of the amount of capital paid in, whether in cash 

 or in property; and one per cent, upon all subsequent amounts paid in. (Paragraph L, 

 Article XIV, Chapter III.) This is to quadruple the existing taxes. A like tax of 

 one per cent, is imposed with respect to the modification, extension, dissolution or liquida- 

 tion of such Corporations. 



An entirely new tax of twenty cents per one hundred dollars of face value is 

 proposed upon the issuance of stock and bonds. 



(3) Comments: The increase of the corporate organization tax from one fourth 

 to a full one per cent is considered excessive and especially unwarranted in the present 

 economic situation marked by the necessity for the organization of new entities to take 

 over and improve many valuable properties. Even the rate of one quarter of one per 

 cent, under the existing law is a high tax compared with that existing in other countries 

 which are in general from 1/1 00th to 1/2 0th of the proposed rate of tax. It is therefore 

 apparent that the increase of this tax, from one quarter of one per cent, to a full one 

 per cent, will impose an unjustifiable burden; for example, a company organized to 

 take over a two million dollar property will, while still on the threshold, be required 

 to pay twenty thousand dollars into the public treasury; when it is remembered that 

 this is but one of a succession of heavy taxes which it must pay in launching its enter- 

 prise, its full seriousness can be easily appreciated. 



The provision for the imposition of a like tax at the time of a modification or 

 extension or dissolution or liquidation of a Corporation is, we believe, unusual and difficult 

 of justification. Why ^ould the State, having exacted a fee for the privilege of corporate 

 organization, exact a further fee for the surrender of said privilege? 



The tax on the income of capital stock and bonds, namely twenty cents per one 

 hundred dollars face value (Paragraph 28, Article IV, Chapter II) while appearing 

 justifiable in principle as a form of taxation, is excessive in amount, according to present 

 day standards. The similar tax imposed by the United States Government as a war 

 measure to meet the extraordinary expenditures of an economic crisis, was only five 

 cents per hundred dollars of face value. Referring again to the case cited of the 

 organization of a two million dollar corporation, it will be seen at once that at the 

 second step of its existence it will have to pay four thousand dollars upon the issuance 

 of its capital stock. If its Directors should decide that a bond issue of like amount is 

 necessary, a further four thousand dollars would be exacted. Thus, we would have a 

 total of twenty-four or twenty-eight thousand dollars taken from the Corporation's 

 treasury before the new enterprise had even entered upon its career. 



