island, and by his designation, upon the organization of the executive council, as chairman of the committee on finance and appropriations. These circumstances naturally suggested the transfer of the personnel and duties of the commission to the office of the treasurer, and of the organization of a bureau of tax law revision for the specific purpose of preparing a revised revenue system for Porto Rico.

As the basis for a general revision of the revenue laws of Porto Rico, certain fundamental principles were adopted by the bureau, as follows:

(1) The underlying theory of the system of taxation adopted for Porto Rico should be that every citizen ought to contribute, in the form of taxation, to the support of insular and municipal governments according to his economic faculty or ability. The system of taxation in vogue in Porto Rico prior to American occupation, whatever it may have been in principle, was in practice at complete variance with this theory. The insular treasury derived its largest revenues from import duties on common food products; the municipal treasuries were replenished by octrois or consumo taxes on the same commodities. Indirect taxes on the poorer classes, rather than direct taxes on the propertied classes, were thus employed. The new system must break completely from this condition. Not only should its theory be "contribution according to ability," but in actual practice there should be close approximation thereto.

(2) In so far as possible, the introduction of novel or unaccustomed fiscal devices should be avoided. A new spirit should be breathed, to the extent practicable, into old forms. No respect should be paid to an unworthy law simply because of its long existence, nor should any hesitation be felt in introducing a new but desirable measure. On the other hand, where other things are equal, that form of taxation should be selected to which the native mind and local organization are best fitted. Account should always be taken of the friction and inefficiency which will result from the adoption of unfamiliar fiscal measures.

(3) The administration of the tax laws should be absolute and final. No tax should be adopted which can not be enforced; but a law once adopted, neither evasion nor remission should be tolerated. The defect of the old fiscal régime was inefficient administration as much as unwise laws. The lesson should be taught early and impressively that American tax laws are to be enforced as rigidly and precisely as postal or coinage regulations.

(4) In devising measures for the present fiscal needs of Porto Rico, the possibility of gradual betterment and ultimate perfection of a tax system should be borne in mind. At first, the system must be fashioned within the limits imposed by tentative and experimental Congressional legislation. The future will be rich in experience, and, in planning a system for immediate needs, latitude should be afforded

for the modification of the system along lines suggested by its actual working, without the necessity of early radical reconstruction.

(5) The revenue system of Porto Rico must provide for the fiscal necessities of the insular government and of the municipalities. It is desirable, both for uniformity and for control, that definite correlation in fiscal matters exist between these bodies. In so far as direct taxation be required, the same taxable basis should be employed. Municipal autonomy should have scope in fixing the rates, subject to general insular control, rather than in determining the bases of taxation.

(6) The successful working of a tax system is as much a matter of men as measures. Because of the unfavorable conditions hitherto prevailing, it is of the highest importance that this fact be constantly borne in mind in the reorganization of the finances of Porto Rico, and the administrative force should be selected with the greatest care and deliberation. It should be organized at the outset upon a basis of expert qualifications and technical efficiency, and neither prior incumbency nor political prominence should be taken into account.

Upon the basis of these general principles a preliminary memorandum for the revision of the tax system of Porto Rico was then drafted. This memorandum was employed as a tentative basis for field work in verification and in test of the validity of the measures therein proposed. Local conditions were studied, representative persons were interviewed, typical requirements examined, and departmental experience incorporated. In October, 1900, the detailed preparation of a revenue act was begun by the bureau, and a month later a completed draft thereof was submitted, through the treasurer, to the committee on finance and appropriations of the executive council. The detailed circumstances attending the revision of this draft by the committee, its submission as a committee report to the executive council, its passage by that body, its amendment by the house of delegates, its emergence from the conference committee of the two legislative branches, its final passage, and its approval by the governor of Porto Rico on January 31, 1901, as "An act to provide revenue for the people of Porto Rico, and for other purposes," pertain to the legislative rather than to the administrative history of Porto Rico. For the present purpose it is necessary merely to outline the important features of the measure and to describe the effect of its enactment upon the organization of the office of the treasurer.

REVENUE ACT OF JANUARY 31, 1901.

The act of the legislative assembly of Porto Rico, approved January 31, 1901, and entitled "An act to provide revenues for the people of Porto Rico, and for other purposes," imposes a property tax, a series of excise taxes, an inheritance tax, and effects certain important administrative changes in the revenue system of the island.

The property tax goes into effect on July 1, 1901, and replaces the existing territorial tax and industrial and commercial tax. The rate of the new tax for the fiscal year 1901–1902, and thereafter until otherwise provided by the legislature of Porto Rico, is fixed by the statute at one-half of 1 per cent for insular purposes, and provision is made that the rate to be levied for local purposes shall be upon the insular assessment and shall in no case exceed an additional one-half per cent. The maximum direct tax upon property in Porto Rico is thus 1 per cent-less, probably, than exists in any similarly circumstanced community in the United States, or, indeed, in any European country.

The tax itself is different from the more advanced forms of property tax as known in the United States only to the extent required by peculiar local conditions. Real and personal property not specifically exempted is nominally assessed at its actual market value. The list of exemptions includes all persons whose property is valued at less than $100; the buildings, appurtenances, and land, not exceeding 5 cuerdas in extent, set apart for educational, charitable purposes, or exclusively for religious worship; household furniture; wearing apparel, and private libraries.

Every effort consistent with safety and equity is made to reduce the burden of taxation upon owners of encumbered property, as well as upon the agricultural and debtor classes in general. In accordance with this policy, not only are the working tools, the crops and products of farmers and of planters exempted, but provision is made for the exemption of indebtedness to the amount and extent of the assessment credits. Mortgages are treated as an interest in the property, so that the mortgagee will be charged with, and the mortgagor exempt from, the taxes on the value of the property represented by the mortgage except where the latter contains an unequivocal covenant making the taxes payable by the mortgagor.

A notable reform effected by the new revenue act is the machinery of assessment. Hitherto the assessment of property and incomes in Porto Rico has been made by nearly 200 separate boards appointed by the councils of the 66 municipal districts. There was in consequence no central control, no unity of administration and no uniformity of valuation. Under the new law the entire assessment is placed in charge of a supervisor of assessment appointed by the governor, with the consent of the executive council. The supervisor of assessment appoints division assessors, with the approval of the treasurer, and the division assessors nominate, and the treasurer appoints, enough district assessors to complete the assessment within a convenient period of time. Tax appeals are heard in the first instance by selected groups of division and district assessors sitting as boards of review; and in the last instance by the executive council sitting as a board of equalization and appeal. The treasurer is authorized to institute an annual revision and correction of the original assessment

of property between the 1st day of January and the 30th day of June of each year, in so far as may be practicable, in accordance with the provisions for revision and correction of the assessment provided in the original act.

Ordinary corporations are treated substantially as unincorporated persons and associations, being taxed upon the actual market value of their capital invested in Porto Rico. Surety, insurance, or building and loan companies pay, in addition to a special stamp tax upon policies, an annual tax of 3 per cent upon the gross amount of all premiums or dues collected in Porto Rico.

For the collection of the property tax the treasurer is empowered to divide the island into suitable districts and to appoint not more than 9 collectors and 23 deputy collectors, all of whom are to be bonded and salaried. The severity of the Spanish procedure for the collection of delinquent taxes ("apremio"), whereby the property of the taxpayer is forthwith attached and sold, is modified by the adoption of a period of grace and of a term of redemption thereafter, during which property so sold may be redeemed, and by the noteworthy provision that in no event may property be sold for delinquent taxes without the written consent of the treasurer obtained prior thereto.

Title II of the revenue act (excise taxes) consists of three schedules. Schedule A imposes excise taxes on all distilled spirits, beers and wines, cigars, cigarettes, and manufactured tobacco, playing cards, proprietary medicinal preparations, perfumery, cosmetics and toilet articles, oleomargarine, arms and ammunition, and matches, whether manufactured in Porto Rico or imported into Porto Rico from the United States or other countries. The rates imposed on distilled spirits, cigars, and cigarettes manufactured in Porto Rico or imported from the United States are but little over one-half of the internalrevenue rates imposed in the United States, being but 60 cents per gallon on rum, 80 cents per gallon on other distilled spirits, $1.80 per 1,000 on cigars, $1 per 1,000 on cigarettes, and 5 cents per pound on other manufactures of tobacco. The domestic manufacture of all these articles is protected against Cuba, Jamaica, and other competing countries by a rate of $1 per gallon on rum, $3.60 per 1,000 on cigars, $2 per 1,000 on cigarettes, and 10 cents per pound on manufactured tobacco imported into Porto Rico from countries other than the United States.

There are four match factories in Porto Rico, and this industry is also protected by a differential, 15 cents per gross being imposed on all matches manufactured in Porto Rico or imported from the United States, while matches imported from countries other than the United States are taxed 30 cents per gross. Champagne is taxed $1 per gallon and other wines and beers 15 cents per gallon. Playing cards pay 2 cents per pack, and oleomargarine 10 cents per pound. The only ad valorem taxes imposed are on articles on which it would be diffi

cult to assess a specific tax. Proprietary medicinal preparations, toilet articles, perfumery, and cosmetics pay 5 per cent, and arms and ammunition 25 per cent of the invoiced value.

Schedule B imposes license taxes on dealers engaged in the wholesale and retail sale of distilled spirits, cigars, cigarettes, and manufacturers of tobacco, wines, and beers, and on arms and ammunition. Wholesale liquor dealers are taxed $80 per annum; wholesalers of wine and beer, $40; of cigars, cigarettes, and tobacco products, $40; wholesale and retail dealers in arms and ammunition, $24. The retail dealers' licenses are divided into three classes. Those dealing in liquors, wines, and beers, pay an annual tax of $20, $12, or $6, according to the importance of the business. Retail dealers in cigars, cigarettes, and manufactures of tobacco pay either $12, $8, or $4.

Schedule C imposes a limited number of documentary taxes.

of lading for goods exported to the United States or to other countries pay 10 cents on each copy; custom-house entries of goods imported from the United States pay 50 cents, and from other countries $1; instruments attested by a notary or recorded by a registrar of property pay $1 on the original document, 50 cents on each copy, and 50 cents on the record thereof.

All taxes under Title II are made payable by the affixture and cancellation of internal-revenue stamps in such amount and form as may be designated by the treasurer. Manufacturers and importers are required to furnish bond, conditioned on the faithful compliance with the law, which shall in no case exceed in amount 50 per cent of the annual value of their manufactures or importations; and failure to provide such a bond is made punishable by a fine of from $100 to $1,000, or to imprisonment from one month to one year.

Provision is made for the appointment of a corps of internal-revenue agents, who are authorized to take oaths and to certify to declarations, and who are vested with all the powers conferred by the statutes of the United States on internal-revenue agents of the Treasury Department of the United States, for the purpose of investigating stocks of goods subject to excise taxation and to examine books and accounts current relating thereto. Manufacturers and importers who fail to affix and cancel stamps as required by law are liable to a fine of from $100 to $1,000, or to be imprisoned from one month to one year; and merchandise on which taxes have not been thus paid is confiscated. Persons found guilty of the offense of forging or counterfeiting internal-revenue stamps, or of erasing the marks of cancellation on stamps which have been used, or who sell, buy, or use such counterfeit stamps or stamps from which the cancellation marks have been removed, or who are found in possession of such counterfeit stamps or stamps from which the cancellation marks have been removed, are liable to a fine not to exceed $1,000, or imprisonment for a term not to exceed five years; and, in addition, all articles for the payment of