Taxation of distressed crops

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Part of The American Chamber of Commerce Journal

Title: Taxation of distressed crops
Language: English
Source: The American Chamber of Commerce Journal Volume XVIII (No. 8) August 1938
Year: 1938
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Fulltext: August, 1938 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 9 Taxation of Distressed Crops Commonwealth Cash Crops t Exports) Compared at Five-Year Periods COMMONWEALTH CASH CROPS (EXPORTS) COMPARED Period AT FIVE-YEAR PERIODS Compro and Coco Oil SUGAR Manila TOBACCO Pesos Pesos Pesos Pesos 1909 15,345,730 11.216.574 33,792.000 6,640,008 15.960,540 22,119.186 38.389.630 8.355,064 1919 82.558,880 30,415,701 53,703,052 31.390,084 1924 68.325,825 83,736.173 59,900,916 19.725,718 1929 89.501,524 106,488.298 56.841,100 17.579,888 1934 20.799.991 130.909.161 17.323.136 10.387,532 The table above brings out the distressed crops of the Commonwealth, Manila hemp, copra, and tobacco— hemp and copra mainly grown south of Manila and to bacco mainly grown on the Isabela-Cagayan valley far in the northern part of Luzon. From a high value of P89,501,524 in 1929 at the end of the next five years copra (including coconut oil exports) dropped to a total of P20,799,991 or more than 75%. From a high value of P56,841,100 in 1929, with 1924 a little higher, Manila hemp dropped in 1934 to the sum of P17,323,136 only, or nearly 75%. From a high value of P31,390,084 in 1919, fifteen years later, in 1934, tobacco and tobacco manufactures including exported cigars dropped to the total value of only PIO.387,532. The current position of all these cash crops will be noted by the reader in the commodity reviews at the back of this magazine. Always in the instance of sugar, deduct some 35% for proceeds from the crop that re main abroad. The current reviews will show that hemp, copra, and to bacco are still distressed and that they therefore comprise the major marketing problem the Common wealth confronts. But though hemp, for example, is abundant and lowpriced, the Commonwealth’s practical monopoly of its production is envied and nothing is left undone that might tend to destroy it. The United States has for thirty years tried to transplant Manila hemp to the Canal Zone and make it yield commercially in that soil and climate. It was per haps ten years ago that the Dutch got plantations going in Sumatra, where secrecy surrounds the enterprise. A British syndicate now bids for capital to cross Common wealth hemp with wild varieties discovered in a certain fertile region of Jahore, the syndicate alleging: (1) That Japanese produce most of the Commonwealth output, comprising a monopoly; (2) that the Admiralty com plains about the empire substitute fibers it has been ob liged to utilize in. marine cordage and says nothing but Manila hemp will fill requirements; and (3) that Manila hemp is badly prepared in the Commonwealth for use in cordage, and too high priced. The syndicate proposes to grow hemp in Jahore with coolie labor. Then there are the new Borneo plantations, that in our judgment are quite likely to turn the trick and afford both Britain and Holland good sources of Manila hemp outside the Commonwealth at coolie-labor prices in a time comparatively brief. Now there is not a consumer of Manila hemp, outside the small cordage factories here, who is not unceasingly The Commonwealth’s Fiber Inspection Ser vice lists eighteen locales of Manila hemp ill the archipelago. Albuy is credited with 143,344 bales last year. Camarines Snr with GO,429, Camarines Norle with 8.914, Sorsogon with 113,282, Catanduanes with 60,199. This is the total for the Bicol region, southeastern Luzon, 386.178 bales most of which pertained to a sub sistence economy among the pensiints al though there are some large hemp holdings l.ere, Ix-yte grew 218,815 bales Inst year. Samar 71.821, North Mindanao 103,241, Mindoro 7.691, Marinduque 785, Bohol 59. Capiz 3,835, Cebu 2.S90, Iloilo 942. Oriental Negros 6,774. Rombion 203. This Bisay as total is 416,656 bales sistence economy among poor and small holders of land and sharecroppers. Jolo’s production of 23.279 bales falls in the same category. South Mindanao is left, with 461,210 bales chiefly from Davao but increasingly from Cotabato because of new ronds and recent homesteading ns well as the maturity of n f<w plantations with general stores as market centers. Japanese grow the major portion of South Mindanao's hemp, hy no means allperhaps a total of 300,000 bales in a grand total as stated above. concerned to discover new sources for the fiber or to es tablish such sources. This is entirely natural. They utilize Manila hemp together with some softer fiber in ferior in tensile strength, and naturally, they play off one fiber against the other; cheap hemp bears sisal, cheap sisal bears hemp, and so with maguey and henequin. It takes no extensive exposition of the fundamentals in the market, to demonstrate the avidity with which all buyers fasten upon possible new sources of Manila Hemp regard less of the low prices the fiber may actually command. It is an essential raw product in all prime cordage, and therefore is never bought cheap enough to suit the buy ers. But the main point is, it is al ways an effective club over softer fibers—all quite as effective in their turn in the hemp market. With the buyers, legitimately using both Manila hemp and the softer fibers, and even hemp for binding twine in harvesting machines if it is cheap enough, it is always a game of both ends against the middle. Major production of the softer fibers such as sisal centers in Yucatan and neigh boring Central American states, while Manila hemp is here, so the factor of sheer distance is decisive against any possible collusion between sisal and hemp affecting the Ameri can market. Japan relies heavily, ordinarily, on Manila hemp, but she too experiments with softer fibers while Holland and Britain derive supplies from colonial sources. Ersatz keeps Germany from being a very great buyer of Manila hemp while reconstructing her marine and naval power, she goes in for substitutes. But no doubt, she, like Italy, finds the cellulose in Manila hemp handy for powerful explosives (ZOn, current issue, July) ; and both Italy and Germany leading the category of the havenots are interested in cheap hemp, the very cheapest pos sible. We will soon show how the Commonwealth can produce this cheap hemp, after a fashion, but meantime we would take up one more marketing point. The cordage industry is the main customer for Ma nila hemp, more for rope and cables than for binder twines. Britain and the continent like to do a good deal of the processing of the fiber themselves, employ ing a good deal of labor in so doing, so they go in for the lower coarser grades, J-2 and below. Japan, who in re cent years bought nearly half the output, goes in for all grades, even the tow, the bulk of her buying being the American grades above J-2 because her merchants in the industry sell in all markets and have reached the rank of leading Manila exporters. Cordage facto ries buy fiber in large quantities, large shipments at (Please turn to page 15) August, 19 38 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 15 ing distressed crops could be very lightly borne. The better repute this would give sugar with the whole public of the Com monwealth together with the eloquence it would give its case in the United States is all worth careful consideration—aside from the imperative relief the distressed crops require. The theme of this paper is unbiased. It is simply that taxation of exports is econo mically unsound unless the exports in ques tion have an assured and favored market and are easily sold at material profit. In this theme, sugar, in the Commonwealth, is the export that is the exception to the rule. If therefore you can by any means strike a bargain with Congress, make the logical and feasible adjustment of your export levies. Even so, you will be but making up for past indulgence. Taxation of. . . (continued from page 9) a time, according to the market, and there is a great deal of market hedging in the game—a game entirely fascinating for the man whose natural bent it suits. It is the buying in bulk that makes the ad valorem of l-*2% on Manila hemp ex ports a vital factor often standing in the way of sales. Bear in mind that big buyers for cordage interests are in constant tele graphic touch with the big markets, New York, London, and lesser centers such as Mar seilles. A hemp exporter tells us that the ordinary sale comprises 100 to 250 bales, 13 or 13 to 35 tons of 2,240 kilos, the long ton of commerce, in which there are 8 bales. We can see from this whether the ad valorem of l-%% is an appreciable item. It would not necessarily follow, were this item removed, that use of Manila hemp would be upped because sales at lower prices could be made: there is always sisal as well as maguey. Nevertheless, hemp trading position would be better, and it might gen erally be the case that the grower received more for his crop. Let us see what the tax figures: Last year’s Manila hemp sold overseas comprised 165,339.4 tons of 2,240 lbs. each, or 1,322,715.2 bales the invoice value of which shown by the customs report was P43,279,373. (As a whole, the year was unusually good for hemp, contrasting with the unusually bad year current). The crop last year reported by the Fiber Inspection Service that okays the baling and classify ing was 1,304,483 .bales; exports somewhat exceeded the year’s crop, and it is seen that domestic consumption is negligible and without effect on prices. The ad valorem tax of l-’/£% on last year’s exports of Ma nila hemp summed approximately P200,000 more than the 1% ad valorem on sugar exports and was a total of P649.191. In a commodity such as Manila hemp selling in bulk lots, a cost item of P3.93 per ton is a substantial quite large enough to make or break sales hinging on a close margin. On a shipment of 100 bales or 12-y2 tons, no large one, it is P48.13; on a shipment of 31-’,< tons or 250 bales, still mere everyday trading, being 250 bales, it is P122.81, leaving no doubt that Manila hemp could be traded with more facility were this tax not charged. Very glaringly, too, here is a substantial charge, turning up every day in export invoices, that the fiber world can see adds to the cost of Common wealth hemp; and this, of course, is the worst sort of advertising. But this is not the whole tax paid by Manila hemp sold overseas. When export ers at Davao buy hemp at the auctions, sales are by the growers and no tax applies in the transactions. But even in Davao, sub stantial lots go to dealers, and from them at. last to exporters, and to dealers’ sales to exporters the tax of l-*4% applies. In other regions there are no auctions, dealers paying l-%% on sales handle the whole output. The table boxed on the first page of this article helps the reader make his own deductions, but ours is that a minimum tax of 2-14% can be estimated to be paid by all Manila hemp exported, as an aver age, and that last year this summed Pl,081,984 in invoices summing the grand total of P43,279,373. It is ?6.5^ per ton. Here is considerable slack that, presum ably, the Commonwealth could take up at any time in behalf of hemp. The sugges tion rises that the market should be studied carefully, and that the tax ought to be sup pressed in favor of some better one if it be found burdensome to sales or discourag ing to the industry. If data already exist at Washington, these should be studied. Should be Brookings Institute find interest in the problem, it should be encouraged to ascertain the facts and bring them out. We now know merely that exported hemp is heavily taxed, and the prima facie evidence is that this should not be the case. Such a tax adds materially to costs, and will certainly tend to drive plantation hemp production into Borneo. A related matter is the levy made on exnorted cordage, rope and cables, a further illustration of how ready the country has been during the past to tax enterprise and pile up intermediate charges annoying to the curt transaction of business. Here is an actual— Shipment Ex ss “Empress of Japan’’ May 23 450 packages Manila Rope, 19 772 Kilos to Messrs. (Blank) Honolulu. Amount of Invoice ............... P 8,422.11 Charges— Freight ................... Insurance ............... Lighterage ............. Wharfage ............... Customs stamps ... Bank exchange .... Sales Tax ............... Pl ,293.99 25.26 49.43 39.54 3.30 42.11 105.27 1,558.90 P 6,863.54 (Please turn to next page) Here’s how to get Manila’s! Genuine Manila Long Filler Cigars in cellophane are obtain able in your city or nearby I C. A. Bond Philippine Tobucco List of D i s trib u t o r s furnished upon re quest to— 220 W. 42nd St., New York City Collector of Internal Revenue Manila, I*. I. MANILAS made under sanitary conditions will satisfy your taste! (Health Bulletin No. 28) Rides and Regulations for the Sanitary Control of the Factories of Tobacco Products. "Section 15. Insanitary Acts.—No person engaged in the handling, pre paration, processing, manufacture, or packing of tobacco products or super vising such employment, shall per form, cause, permit, or suffer to be permitted, any insanitary act during such employment, nor shall any such persons touch or contaminate any to bacco products with filthy hands or permit the same to be brought into contact with the tongue or l:ps, or use saliva, impure water, or other un wholesome substances as. a moisten ing agent;. . .”. IN RESPONDING TO ADVERTISEMENTS PLEASE MENTION THE AMERICAN CHAMBER OF COMMERCE JOURNAL 16 THE AMERICAN CHAMBER OF COMMERCE JOURNAL August, 1938 P 39.54 3.30 105.27 21.16 P169.27 Direct Taxes Above: Wharfage .................................... Customs stamps ......................... Sales Tax .................................... Indirect ........................................ Total .................................... Indirect Government Tax: Freight ..................... Pl ,293.99 Insurance ................. 25.25 Lighterage ................ 49.43 Bank Exchange .... 42.11 l-%% on ................. Pl,410.79 or P21.16 This too makes an interesting study to all who may be concerned for the welfare of overseas commerce, since it is probable that a sales tax of P105.27 on rope valued otherwise at P6,758.27 is an actual handicap to sales. Please remark the freight rate, summing P65.60 approximately per metric ton; in no comparison with the rate away from United States ports on rope, we have observed in an earlier number that such a rate has the practical effect of nullifying, to a considerable degree, an act of Congress admitting duty free into the American market six million pounds of Common wealth cordage a year. Rope is a good cargo with which to trim a ship, and in practice is scattered about and so used, yet here is a freight charge of nearly 20% or 1/5 of its f. o. b. value, no doubt an agreed conference rate. Here is a condition to be rectified in favor of the basic commodity, Manila hemp; but rectification would entail negotiations, while the tax on exports is a matter merely for the legislature’s attention. A govern ment indifferent to its own levies on basic exports will hardly be at all times well treated by freighters: if it sets the rule of all the traffic will bear, freighters will follow it gladly. We have always taken it for granted that in any market and for at least some profit, our hemp would always sell, but with the new potentialities of Bor neo this may not remain a sound assump tion ; and as a matter of honest fact, it never was—there never was a time in our studied experience when levies on hemp and cord age exports should.have been imposed. Now let us see how, with no more large plantations, Manila hemp will manage in future (say after ten years) with or with out the export levies imposed. Hemp will remain a cash crop, a cash crop of many poor squatters and home steaders on the public domain, notably in Mindanao where new roads and interlock ing highways will make the wilderness accessible to pioneers. There will probably be little money one year with another in growing it, yet it will be grown for much the same reason that a desperate levee worker joins a dice game, because baby needs a new pair of shoes. An illustration of this type of economy is well remembered among a settlement of Dunkards—they go unshaven, and wash each other’s feet—in the Cherokee Strip during the first winter or two after the opening. Ragged, indeed almost naked, and unable to grain their teams or even provide more than the scantiest fodder, these faithful pioneers hauled stovewood more than forty miles to market at Enid for the price of a sack of flour and a few potatoes and a little salt for them and their livestock. It took the better part of the week; we know this because they often made camp at our place near Enid, where there was a well and where they could muster one of their be loved religious meetings. (They would bring along a branch of oak, or something to throw off for us, in payment of courtesies extended them). Now they couldn’t afford these long trips, for never more than a dollar—yet they couldn’t afford not to afford them, for it was either make the trips or starve. A good deal of just this sort of economy may be relied upon in the Commonwealth, we imagine, from now on out; and certainly it may be anticipated of hemp, a crop for which it is already the general rule except on the large plantations. Remarks on to bacco will be reserved to a later time, since it is a northern crop, but most of all that (Please turn to page 37) PAYNE & COMPANY (Philippines) Compradores de AZUCAR CENTRIFUGADO PARA EXPORTACION Corresponsales de MENZI &CO. en la venta de 30 OFICLNA CENTRAL DE FILIPINAS 9 Plaza Moraga Tels: 2-79-18 & 2-75-75 MANILA Sucursal en Bacolod Negros Occidental Calle Araneta—Telefono 210 Co-Gerentes: G. W. Greene-Angel S. Gamboa Dewars White Label Sole Agents THE MANILA WINE MERCHANTS, INC. The Largest Wholesale and Detail Liquor Dealers in tlie Philippines Head Office: Branch Office: 174 Juan Luna 37-39 Alhambra Tels • J 4-90-5 ' Tel. 2-17-61 ” 14-90-58 IN RESPONDING TO ADVERTISEMENTS PLEASE MENTION THE AMERICAN CHAMBER OF COMMERCE .JOURNAL August, 1938 THE AMERICAN CHAMBER OF COMMERCE JOURNAL V7 ingly and endangers the commerce. Buyers will set the requirements in every case, and 'to add something to forestry charges in behalf of official grading would be merely to provide more public employ ment and saddle every unit of logs and lum ber with a higher total cost in order to do it. Buyers would still lay down their par ticular requirements, and pay accordingly, and come back on mills and loggers as they do now with complaints against everything not to their liking. The industry says of ficial grading would be superflouous. This seems fully evident. There comes up the sales tax on lumber consignments abroad. Last year it must have summed below P7(),000 or l-’j'. of a total of some P4,200.000. It is not much, but it is a tax on an export enjoying no favored market. We make it about Pl. 15 on every 1000 board feet, logs of course ex cluded. We think the industry should be consulted, and if this tax is sometimes a barrier in closing sales at a net profit, or is otherwise objectionable, it amounts to almost nothing by way revenue and there fore should be crossed off, the tax on do mestic sales continuing as it is. This would be in line with the practice of charging lumber exports no wharfage. We believe the industry would tell the government frankly whether the l-’s'J ad valorem on its export invoices is a factor of any im portance in quoting for sales. Were we tiie government, we would abide by what the industry said. It is an industry that right along has been ready to lay its cards on the table. Of late we have seen the term Philippine mahogany flashing out as casual allusions in periodical literature, as in Notes & Comment in the .Vcic Yorker a week or two ago, as casual as a mention of Brooklyn, the Garden, or Hester Street would be. We take this as most encourag ing on the main point; in a lit le while it should be worth the half-million it has cost the industry, because then it will be in truding regularly into building specifica tions and will be the guaranteed trade term that the lumber behind it deserves. Taxation of. .. (continued from page 16) has been said about hemp applies as well to coconuts, and copra, the other distressed crop in the south that is the subject of this month’s researches. Both productions will come to be more the means of the poorest subsistance of many small farmers and to a much lesser extent the occupation of capi tal on large estates. We discuss in another paper the inadvisability of the export levies on copra. Quiapo . . San Miguel Intramuros Sta. Mesa . Pandacan 132,648 18,000 15,000 5,398 Pl,454,413 REAL ESTATE By P. I). Carman BOULEVARD HEIGHTS July real estate tran sfers greatly exceeded any similar month on record (with the one exception of July 1935) the total being swelled heavily by one very large transfer in Sampaloc to the Gov ernment and sales ex ceeding P 50,000 in the following districts; •o in San Miguel and one in 1926, 1931 and 1935. Sta. Cruz Sampaloc Tondo Binondo San Nicolas E'rmita Malate Paco Sta. Ana Sales City of Manila 1938 June July 585,657 P 141,529 155,367 1,633,840 105,932 104,897 25,000 538,011 29,000 132,467 570 12,538 239,128 268,835 76,978 85,807 65,735 27,284 39,690 236,987 61,656 16,601 2,537 P3,302,679 MANILA HEMP By H. P. STRICKLER Manila Cordage Company The short-lived period of foreign demand experienced the latter part of June re sulted in a dull and weak market for the first eighteen days of July. At this point both London and New York buyers became interested and prices advanced with a fair volume of sales being reported. The mar ket remained strong until July 22, when New York showed signs of weakening and London followed the trend on the next day. The market remained quiet and dull for the balance of the month with closing prices of Manila grade up slightly over the opening, while Davao grades closed at fifty centavos under the opening price. sfer to the Government, the total would exceed that of any July since 1918 except Nominal Prices of Loose. Fiber in Manila in Malate. Even without the large tran Per Picul July 1st. July 31st F............ I .. . . P12.00 8.00 F............ I............. . P12.75 8.50 JI............ 6.75 JI............ 7.00 G............. 6.75 G............ 6.50 H............ 6.50 H............ 6.50 K............ 6.25 K............ 6.25 Nominal F'rices of Loose Fiber in Davao Per Picul F.............. P10.00 I............... 8.00 JI.............. 7.00 G............... 6.75 F.............. P 9.50 I............... 7.50 JI.............. 6.50 G............... 6.25 PURE PREPARED Whether your paint ing job is an in terior or exterior one, FULLER & CO. have a superior paint pro duct to suit your re quirements. FULLER PAINTS NORTON & HARRISON CO. 13TH STREET, PORT AREA MANILA, P. I. IN RESPONDING TO ADVERTISEMENTS PLEASE MENTION THE AMERICAN CHAMBER OF COMMERCE JOURNAL