The_Open_Door_deel1

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Government of Liberia agreed with this procedure in accordance
with the 1926 Planting Agreement.
It was agreed upon in this Lease Agreement of 1949, called the
Assignment Agreement, that under the agreement with the Government
of Liberia the Firestone Plantations Company would pay to its
parent company and the effective Lessee a rental of $ 700,000 per
annum though in the event the rubber and latex produced on the
plantations in Liberia would exceed 70 million lbs. per year,the
rental for each lease year would be calculated at the rate of one
cent per pound for all rubber and latex produced (38),
While the U.S. company was allowed to deduct i.a. the depreciation
of its assets in Liberia from its gross income from business
operations before arriving at its profit - which of course
affected its tax liability in the U.S.A. - and as the Liberian
subsidiary was exempted from all taxes in Liberia this arrangement
will have been beneficial for the American corporation provided
that the amount of yearly depreciation exceeded the annual rental
paid by the Firestone Plantations Company. A clear insight in and
understanding of this issue, however, is prevented by the lack of
data though it seems justified to think that profit will have been
the driving force behind this legal and financial and fiscal
construction. The complex structure of depreciation calculated by
the parent company overseas, the - production-based - rental
payment by the operating subsidiary to its parent, the start in
this period of a system of retained earnings by the subsidiary
which permitted the self financing of the Liberian operations
impeded the work of American and, as from 1951, Liberian income
tax assessors.
At first sight the introduction of a system of income tax in
Liberia (in 1951) makes it even more difficult to understand
Firestone's real motivations. Firestone, however, was aware of the
Government's plans in this respect as there still was an American
Financial Advisor, appointed under the 1926 Loan, whereas at that
time the company's lawyer in the country was the Speaker of the
House of Representatives, Richard A. Henries. Only two months
after the approval of the Assignment Agreement by the President of
Liberia and the Liberian Legislature, an agreement was reached by
the Government of Liberia and the Firestone company stating that
in the event the Government would levy an Income Tax of General
Application the rubber company agreed to pay such Income Tax on
the Net Income derived from its plantation operations in the
Republic of Liberia at a rate of 12$ in the years 1950 and 1951,
14$ in the years 1952 and 1953, 16? in the years 1954 and 1955,
18$ in the years 1956 and 1957, and 20$ in the years 1958 and
1959. It was further agreed that this Income Tax would replace the
Y% Export Tax (only) if this would result in a higher amount paid
to the Liberian Treasury. The rentals paid by the Firestone
Plantations Company became tax deductable (39).
In 1951 a corporate income tax system was introduced with tax
rates of 25% on all taxable net incomes over $ 50,000, but under
the terms of its contract with the Government of Liberia Firestone
had been in no way obliged to accept a tax on its profits as it