The_Open_Door_deel1

j -91-
i have taxed the portion of net profits received by the North
5 American shareholders at the then prevailing tax rate of 45?, it
: :1 would have had 54.25? of these profits yearly. Instead, now it
;>! became entitled to only 36? of the company's profits which was
|| even less than it would have obtained if applying the then maximum
II corporate income tax rate. The Government's real motivation for
II this sales transaction remains vague. The threatening financial
II situation of those days, when the Government had to find a way out
II of a financial crisis, may have influenced the ultimate decision
|| to have short-term considerations of a financial nature, i.e. to
1 Increase immediate cash-income, dominate over longer-term
3 prospects of a larger share of the company's net profits.
| The Tax Agreement also provided for_an allowance for amortisation
I calculated in accordance with generally accepted accounting
' principles. In no event was it to extend over a period in excess
: of the unexpired period of the agreement with respect to the
I unamortized amount of investment in coffee, cocoa, and rubber
j plantings and preliminary operations thereof as of December 31,
| 1961 while the writing off of losses on preliminary investments
j made prior to the reorganization in 1950 became allowed too. This
i was a very liberal attitude on the part of the Government and
j extremely beneficial to the company. By 1949, when the Liberian
j Development Corporation bought the Stettinius Associates-Liberia,
j Inc., the Liberian Government had already granted the former a
| favour of $ 1 million by allowing a yearly amortization on
j "goodwill" of $25,000 during the 1949 - 1989 period (the so-called
j "franchise agreement"), now again the company could benefit from
! the Government's liberal policy. When the company started its
! operations in 1950 it bought second hand machinery and equipment
j which was left by the U.S. Army and the company continued to write
; off on these assets in the 196O's and even in the 1970's. It would
•'! be very difficult for the Liberian Government to evaluate the
I company's claims with respect to losses prior to 1950 or the
I unamortized amount of investment in coffee, cocoa, or rubber as
j with the- granting of a tax-holiday and in the absence of an income
! tax system prior to 1951 both the company's management and the
I Government of Liberia believed that in view of these
i circumstances the company would not have to submit financial
statements etc., whereas the Government was not to ask for any.
This is the main reason why so little information exists over this
period. The same applies to other foreign firms with similar
' tax-privileges,
! Under the same Tax Agreement of 1962 the company was granted
•i deferred amortization and loss carry forward privileges, partly
in connection with the abandonment of the coffee cultivation in
1956 and the poor prospects of-its remaining main crop, cocoa (see
\ below). After the growing and production of cocoa was terminated
j in 1966, The Liberia Company and the Government entered into a new
! agreement, in December 1967, whereby the period during which the
j latter was obligated to lease lands to the company was extended by
i a period of 40 years, at the rental provided in the 1951 Revised
i Statement•of Understanding (six cents per acre per year), provided
is:; that by not later than December 31, 1987 The Liberia Company would
I have under cultivation not less than 7,500 acres of agricultural