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payment was required. The Government, on the other hand,
committed itself in the final agreement to reach advance
agreement with the company in case it would want to construct any
transportation or communication lines across or into the company's
plantation. For lands located within the boundaries of an
organized municipality and used exclusively by BFG for
construction, of communication, transportation, or other
facilities the rental would be 50 cents per acre per annum though
twenty years after the signing of the concession agreement
Government officials complained that Government did not have any
records or other information that could prove that land, actually
occupied by the company, had been "within the boundaries of an
organized municipality" before (5). Official figures relating to
the acreage occupied and the amount of rentals paid, confirmed by
BFG, show that the company has never paid a rental of 50 cents per
acre despite the fact that it is very unlikely (although
impossible to prove) that the company has never made use of such
lands as described above.
In the draft of March 1954 it had been proposed that the company
would be allowed to amortize all of its development costs,
including a 5 per cent interest on unliquidated balances, during
the first fifteen years of the concession's term (in reality this
would have resulted in an income tax holiday of 15 years). During
the following nine years the company would then be subject to no
tax other than the regular income tax with a fixed maximum rate of
25 per cent (which was the maximum income tax rate at the time of
drafting this concession agreement). However, the income tax would
only apply to 25 per cent of the company's net income during the
first three of these nine years, to 50 per cent of the net income
during the next three years, and to 75 per cent of BFG's net
income during the last three years. Thus calculated, the effective
income tax rate paid by BFG would have been only 6.25? during the
first three years, 12.5? during the following three years, and
18.75? during the last years of this nine-year period, as was
observed by the Financial Advisor to the Government, Karl C.
Olsen. It was the opinion of several others, notably the Vice-
President, the State Secretary, the Under-Secretary of State, the
Interior Secretary, and the Director of the Budget Bureau, that
the fixing of the maximum income tax rate at 25? would affect the
Government's freedom to increase the tax rate and would result in
discrimination of other, but similar enterprises. The Secretary of
the Treasury suggested that after a 15 year tax free period, the
oompa.ny whould be taxed on a fifty-fifty basis in lieu of all
other taxes and duties. The payment of income taxes in lieu of any
other tax or impost, charge or duty was disapproved by only two:
Ellen Mills Scarbrough, the Acting Secretary of Public Instruction,
and L.A. Marvey, the Director of the Budget Bureau. Two other
advisors gave consideration to the importance of establishing a
fair method of determining the rubber price (the Assistent
Secretary of State, George Padmore, and the Financial Advisor,
Karl C. Olsen) as the price of rubber would directly affect, and
to a large extent determine, the income tax receivable by the
Government.