Full text of Press Releases of the United States Department of the Treasury : Volume 152

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

U8RARY
t<'r}!)M 5n2~

APR 5 .. 19b3

TREASflRY

nt"o~'n~'ENT

U:-.i ted States SavinGs Denes I~ ::;u.c.d .::.:1d Red.~c:::ed Ti;:-o\.:.~h November 30, 1965
ar..ounts in r...illion::; - ro~,,:cied a.."1c. \.:ill not r.ecessarily add to totals)

(D0:J..;:..r

--------------------------------.-~--~--~-----------T-------------,~~~---..:\.r:".ount
\:
j.":"OUl1t
Amount
!;"Q O'J.t~t.~d1
Issued 1/
Eec.eer.:ad 1/ Cutstand:ir.t'!' 2/\ of t..rr.t.Issl

Series

1:..-1935 - D-19lw. •••••••••••

Se:-ie::; F & G-1941 - 1952 •••••••••
Series J and K - 1952 ••••••••••••

10
79

.20

5,003
29,521
400

4,993
29,442
392

2.00

1,849
8,166
13,147

1,592
'7,059
1l,392
13,160
10,095
4,330

256
1,107
1,755
-2,159
1,921
1,083
1,189
1,323
1,385
1,276
1,108
1,199
1,485

13.8S
13.S6
13.3S
14.09
l5.99
20.01
23.27
25.09·
26.66

1,826
1,832
1,769
1,848
1,758
1,882
2,041
2,058
2,531

36.79
38.48
39.66

.27

~~·!.:\'i''L':GD

Series :2: ;j
1941 ••••••••••••••••••••••
1942 ••••••••••••••••••••••

1943
,,1, ••••••••••••••••••••••
'9
- ........•.......•.....

'15,318

12,016

1945 ••••••••••••••••••••••

5,413

1946 ••••••••••••••••••••••
1947 •••.••••••••.•••••••••
1948 ••••••••••••••••••••••
1949 •••••••••••• ~ •••••••••
1950 ••••••••••••••••••••••
1951 ••••••••••••••••••••••
1952 ••••••••••••••••••••••
1953 ••••••••••••••••••••••

5,llO
5,272

3,921

3,949

5,195

3,810

3,260
2,820
2,914
3,203
3,146
3,137
2,929
2,691
2,473
2,287
2,153
2,014
1,844
1,797
1,584
675
366

4,536
3,928

4,113

4,689
4,770
4,963
4,761

1954 ••••••••••••••••••••••

1955 ••••••••• ~ ••••••••••••
1956 ••••••••••••••••••••••
1957 ••••••••••••••••••••••

4,460

1958 ••••••••••••••••••••••
1959 ••••••••••••••••••••••
1960 •••••••••••••••••••• , •.
1961
••••••••••••••••••••••
t'
J..9u2 •••••• _.•••••••••••••••
~

1963 ••••••••••••••••••••••
1964 •••••••••••••••••••• ~.
1965 ••••••••••••••••••••••
Unclassified. '••••••••••••••••••

4,321
4,044
4,035
4,055
3,902
4,329
4,226
3,059
356

1,625

2,642

2,384
-10

28.13 .
28.21

29.15

31.67 '
34.08

42.77·
43.47

46.64
50.33'
52.74
58.47
62.52
77.93'

Total Series E ••••••••••••••••• 1-14
- 0-,0-3-3--!---9-8-,-60-2--i---41-,-4-3-0--~--2-9-.5-9
Se~ies H (1952
H (Feb.

- Jan. 1957) 2/ .•• I
1957 - 1965) ••••••

?otal Series H•••...•••••••.•••

),b70

1,O::SU

~,04050.lU

7,053
10,723

1,149
2,979

5,904
7,745

83.71
72.?3

101,581

49,175

32.62

2,190

!V1,1..45

34,827
103,770
l..38,598

?otal Series E and H•••••••••••
"

SerieS J Qr.d K (1953 - 1957) •••••

3,334

.... .", ..,., t,
) , 'i'... o,,~
AI.a ureo, ••••••••

34,925
154,090
189,015

All SerieSj Total
Gra~d

~
~

~~~tured ••••••

rotal ••••••••••

;'~

Inclt:.des accrued Ciscount.
O~rent redemption value.

At option of o\~er bonds may be hel~ and
~-r.Lll earn interest for additional periods
ci'te:- origi:1al maturity dates.
Ir.cluces m~tured bonds which have not been
presented for redemption.

50,320
50,416

.21
32.66
26.61

BUREAU OF THE PUBLIC DEm

U:liwd S\"ates S3.V1.ncs noncs I~::;\.lcd z,c. 2e;G(;c;;::ec 7:~:::o\.:.Sh November 30., 1965
(l)011::..r .::..'7'.ou.'1ts :L'1 r..illion::; - rm:.--:o.e,j 2.:1C ::ill ::ot r.ccess.::.rily ad':: "(.0 tot.:.ls)

I Issucc. l[ I
,-

~koouy;t

:'C::~"::'8S

1..-193.5 - D-19L0- •••••••••••
Scr:'cs F Go, G-19h1 - 1952 ........ .
3c.~es J and X - 1952 ••••••••••••
:2·~~'~~G~
~""r':
"'c:o ~.
._~.
~
_!;J~

I
I

I
1941 .••••••.•••••••..•.•••
d":1/

5,003
29,521
400

1964 ••••....•••.•••••••..••
1965 ••.•••••••••••••••••••
Unclussified ••••••••••••••• ~ •••

Total Series E•••.•••••••••••••

140,033

1 C) I, 1,

- , / ~"

.....................

.•............•....... (

1 0\
/~ 5

19~6 ••••.•••••••••••••••••
1947 •...•••..•••.....•••••
1948 ••••••••••••••••••••••
1949 ••.••••••.••••••••••••
1950 ••••••••••••••••••.•••
1951 ••••••••••••••••••••••
1952 ••••••••••••••••••••••
1953 ••••••••••••••••••••••

1954 ••••••••••••••••••••••

~955 ••••••••••••••••••••••
1956 ••••••••••••••••••••••
1957 ••••••••••••••••••••••
1955 •••..•••••••••••••••••
1959 ••••••••••••••••••••••
1960 •••••••••••••••••••• ~.
1961 ••••••••• , ••••••••••••
-:962
.;..
'"
1963 ••••••••••••••••••••••

i
...... ............... I

S0:'"ies P; (;952 - Jcm. 1957) y ...
H (~eb. 1957 - 1965) ••••••
?otal Series H••......•..•..•••

I
I

Series J c:r.dK (1953 - 1957) •••••
)

1fjl.J...al
_Ov~

~avurea

••••••••

All Series] ?ots.1

unrn~tured. ••••••

Qr~~d

Total •...•..•••

,
r>C'
Incluct~~
~cc.~~a
Ciscoun~.
"

10
79
8

4,993
29,U.42

392
1,592
7,059
11,392
13,160
10,095
4,330
3,921

.20
.27
2.00

256
1,107
1,755

~2,159

3,9l~9

I
I

I!
I

3,b70

3,810
·3,260
2,820
2,91.4
3,203
3,146
3,137
2,929
2,691
2,473
2,287
2,153
2,OJ.L
,
1844
1,797
1,584
675
366

1,921
1,083
1,189
1,)23
1,)85
1,276
1,108
1,199
1,485
1,625
1,826
1,8)2
1,769
1,848
1,758
1,882
2,041
2,058
2,531
2,642
2,384

-Ie

3,334

58.La

62.,2
77.93

29.59

1,~30

T,lmU

50 • .L4

1,149
2,979

5,904
7,745

!
I!

34,925
154,090
189,015

50.33
,.,
5~ • 74

41,430

150,756

13.85
13.56
13.35
14.09
15.99
20.01
23.27
25.09
26.66
28.13
28.21
29.15
31.67
34.08
36.79
38.48
39.66
42.77
43.47
46.64

98,602

7,053
10,7 23

70tal Series E and H••...•.••••

; ~ O'..l.t~t~~Ci:.'1S
Cutstancli.r.o:' 2/1 of ;~'T,t.Issuccl.

1,849
8,166
13,J17
15,318
12,016
5,413
5,llO
5,272
5,195
4,536
3,928
4,113
4,689
4,770
4,9 63
4,761
4,460
4,)21
4,044
4,035
4,055
3,90...?
4,329
4,226
3,059
356

15~ ••••••••••••••••••••••
1943 ••••••••••••••••••••••

r:ccec~3d

~------

i-lr..o~v;.t

;-:-:.0 U".;, -l:,

101,581

49,175

)

83.71
72.23

32.62

34.34

.27
32.66
26.67

2,190

1Y'1,J-L.5

34,827
103,770
138,598

96
50,320
50,h16

!
I

~"':l

! O.rrrent red8m~)tion value.
! At option of OHner bonds ::lay be held and
. . ;ill earn interest for addition<ll periods
~te~ original maturity dates.
/ Ir.cluces ~~tured bonds which have not bBan
pre sent6cr1"or -reBsrt11't1OIl •

BUREAU OF THE PUBLIC DZBT

(::-rc',- ........ _."",,':'J.,
-----------------------------------------------~-------------------~----------'-.7'·
I
0'" I
. -~" .. -.;..
: ~
_""w "' ...... -...~.
•···~-,.0'...
7~S~~C~ ....!./
_.
., I "- ... ' •. ?~, 0_..... r.._""':'.~•• -_, ~.~~~O'

_____

,~--

~.:.:..?:;: ~.-::~~

____

~_-:-.

~.:..,

•

.-_ •• \001-.....111

----------------~.~~~-~-~~~~~·~~~~C~C~~~~~~-~l~~~;~~·,,~S~~~~~.~=~~~~.~~-~~-----------

4,993
29,443
811

10
77
54

.20
.26
6.25

1,851
8,170
lS~ •••••••••••••••••••••• '
1943 •••••••••••••••••••••• 13,151
.
'1$,330
19 ' ,1, •••••••••••••••••••••
1945 •••••••••••••••••••••• t 12,026
'9'4 6 •••••••••••••••••••••• ' 5,U8
1947 ••••••••••••••••••••••
5,114
1948 ••••••••••••••••••••••
5,276
19h9 ••••••••••••••••••••••
5,199
1950 ••••••••••••••••••••••
4,540
1951 ••••••••••••••••••••••
;3,932
1952 ••••••••••••••••••••••
4,115
1953 ••••••••••••••••••••••
4,693
1954 ••••••••••••••••••••••
4,774
1955 •••••••••••••••••••••• 4,968
1956 ••••••••• ~ ••••••••••••
u,770
u,u66
1957 •••••••••••••••••••••• I
1958 •••••••••••••••••••••• I 4,327
1959 •••••••••••••••••••••• t 4,050
1960 •••••••••••••••••••• ,. ! u,Ou2
1961 •••••••••••••••••••••• 1 u,062
'9"rJ
I
3,909
~ u~ ••••••••••••••••••••••
4,337
1963 ••••••••••••••••••••••
1964 •••••••••••••••••••• ~. { 4,233
1965 •••••••••••••••••••••• , 3,373
Jnclclssi!ied. ,••••••••••••••••••
349

1,594
'7,065
11,402
13,172
4,336
3,927
3,955
3,816
3,267
2,826
2,921
3,212
3,156
3,153
2,938
2,699
2,481
2,294
2,162
2,025
1,855
1,,815
1,613
780
399

'257
1,105
1,,749
2,158
1,917
1,082
1,187
1,321
1,383
1,273
1,106
1,194
1,481
1,619
1,81$'
1,832
1,768
1,846
1,756
1,880
2,037
2,054
2,523
2,620
2,,593
-50

13.88
13.53
13.30
14.08
15.94
19.97
23.21
25.04
26.60
28.04
28.13
29.02
31.56
33.91
36.53
38.41
39.59
42.• 66
43.36
46.51
50.15
52.55
58.17
61.89
76.88

·Total Series E.................. 140 476

98,971

Ll,504

29.55

986
3,016

5,536
7,744

84.87
71.96

~~ ........: -,,..

..... ~._~.,

5,003
29',521
K - 1953 •••••••••••• I
864

'-'~"':::
_,,),.,

...

~-;9L\'"I
_
................. .

-;.J

G '9 1"

~~~~~~
~.
.....
~ __ vw
•~ ~

Scri~~ J ~d

19~~
~, •••••••••

t~~·::\?~?2~

.. -.

~r_~';~'" '_'.

19~1 .•••••••••••••...••••. I

~-*

Series n (1952 - Jan. 1957)
H (Feb.

Total Series

10,109

2/... i~--':'""4,,-2~38=---t-------!·---~--l----2,,030
2,208
52.10
I

1957 - 1965) ••••••.

H.................

6,523
10,761

I--------~_----------~------------+--------Total Series E ~~d H ••••••••••• 1151,237
101,9R8
49,249
32.56

t======~========~========~=====

Series J Gr.d K

(195L - 1957) ••••• \ 2,871

1,796

1,075

37.44

l======~========~========~=====

) 70t~ mat\:.rad •••••••• i 35,388
~ seJ:~esI7otal ur.•n:.tured .... ,,1154,108
G~~;d Totil •••••••••• 1189,L96

redemption val\:.e.
At option of ovmer bonds ~ay ba he1~ ~~d
~-3ill earn interest for acdition~ periods
efter original r.~turity oates.

35,2u7
103,784
139,031

ill
50,324
50,465

.40
32.66
26.63

O~r~~t

• 'U ~
"'"'::t 1':'\':.1':'
6;lU~
~ • ..o:.
~.~'::'

PUBUC
...

.."·:.~o~. ~

:;-: ).\ ~~

..,/

C'r::'~r.c.'
-

- ' - ' .............. \,..,.

.... ,..-\"":...:I

.....

~- -.,'
... _\",;,.,J

1"
':;' ~
,', ['. -: 9 ~
lQ~""
;",G. • • • • • • • • •
c3
~
d""
"'9
J a.::.
l'.. ... ..I..:> ••••••••••••

I
I

_ - - .....

5,003
29',521
I
864

'.':'::?:::J
........ ...:

-,.....

.. ..-~w

f\...

C'.:....

~ ¥", ~.:

'*AJ

":"">.. -r-,.......
'/

V;.....v>-..Jv'--.~

, - . -;--.
V
_

C:..: :,~-~.:-",:.:.:..-.:
.:
:.-:-,

......

•

-,_I

.s 2:: -C :-~ ~.
___

::-:.::-:::- ,_"\..-.1"'/"/
() ~ ~ - <:-".
9'L,"1
-..-,..... • • • • • • • • • • • I
~~c.s

.-:..C~". :'

19~1 .••••••.••••••••.••••• I
"1 C,;, ')
1
-01." o.-y.-<- • • • • • • • • • • • • • • • • • • • • • •

19~3 ••••••.••••.••••••••••
19~L ••••••••••••••• ~ ..... ..
..... '

I
t

~~~)
~

10
77
54

.20
.26
6.25

1,594
'7,065
11,402
13,172
10,109
4,336
3,927
3,955
3,816
3,267
2,826
2,921
3,212
3,156
3,153
2,938
2,699
2,481
2,294
2,162
2,025
1,855
1,815
1,613
780
399

257
1,105
1,749
2,158
1,917
1,082
1,187
1,321
1,383
1,273
1,106
1,194
1,481
1,619
1,815'
1,832
1,768
1,846
1,756
1,880
2,037
2,054
2,523

13.88
13.53
13.30
14.08
15.94
19.97
23.21
25.04
26.60
28.04
28.13

jl,
-:- /
::!.J

.,
--

4,993
29,443
811

...... \

••••••••••••••• ~ •••••• I
,

5,418

~~~0 ••••••••••••••••••••••
"1 () I, '7
. . - / --... L

••••••••••••••••••••••

:9~S •....•.......•......•.
.. 0.1, ()
~/~7

•••

••••••••••••••••••

19~O ••••••••••••••••••••••

~~~~'"'.-'1

.............•...•.•••

..
C' .-'')
~7~~ • • • • • • • • • • • • • • • • • • • • • •
"' C.-'")

~~~~

}

•••••••••••••••••••••• I

195h •••..••.•••••••••.•••• l
1955a •••••• e •••••••••••••

1956 ••••••••• ~ •••••••••••
1957 .•.••••••••.••••...••.
~95S .•....•.••••••••••••• ~
1959 ••••••••••••••••••••• ~
:960
.........•.......... ,.
..,
....
8

.....

L~OL ••••••••••••••••••••• ~

9:v~0 •••••••••••••••••••••• f
1963 ••••••••••••••••••• ~6~ r
196L •••••••••••••••••••• ~. I
i
~

1965 ...••••.•.•••••••••.•• ~
:;~cl<:..ssii'ied., ••••••••••••••••• _I
MO~-i
Q~~~~s
. . . . . .;0 . . . . . . v ..... ,.,

':;'

......................

;ries n (~952 - ~z;"'1. ~957)

1,851
8,170
13,151
'15,330
12,026
5,114
5,276
5,199
4,540
),932
4,115
4,693
4,774
4,968
4,770
4,466
4,327
4,050
4,042
4,062
3,909
4,337
4,233
3,373
349

2 ,620

2,593
-50

~9.02

31.56
33.91
36.53

38.41

39.59
42.66
43.36
46.51
50.15
52.55
58.17
61.89
76.88

!--------~------------7-------------~----------1140
476
98,971
41,504
29.55

y ... iI--~'--~~------------~--------------------------4,238
2,030
2,208
52.10

H (l'eb. 19;;7 - .1965) .......
?otal Series H.................

6,523
10,761

986
3,016

5,536
7,744

84.87
71.96

I----------:~----------~-------------~-----------

?otal Series E ~'1d H••••••••••• 1151,237
~rics J

r: (195L - 1957) •••• _j

.J...., '1
;::.o~~~
.1 Scl ...cs .l.Ova~
1I C~~~Q
• .:_

32.56

)

2,871
1,796
1,075
37.44
i=====:====:~;:;;==;::;~~==========~==========~
I 3c 388
35 , 21.7
III
1.0
~.::-~::~c..~
I c/'
4
4
.4
u;"', .... vUl"ec. •••••• \1::>4,108
103,184
50,)2h
32.66
70t~ ••••••.••• 1189,L96
139,031
50,465
26.63
'1':'

, .... -

......

I7lc}.\..!.c:cs 2.ccr\.:cc. Cisco'U.":t.
O~::'8:"'.~ rec.Cl7ll)t,ion value.
I .:..
~ 0...
-"
"
.,.. b
~ a.' ~
c
~, y
or.
'" o:? -'-'
",:LO..
o'(l.l.e.
0..
."a

~'Jill

49,249

f====~======~=============

0;:(;.
I n

101,988

'0 a"
\.- e 1~ c.' &:. 0.'

earn interest fo:;:' acdition.u periods
citer original F.~turity dates.

- 3 -

sale or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.

The billa are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt f~
all taxation now or hereafter imposed on the principal or interest thereof by any Stat
~t

or any of the possessions of the United states, or by any local taxing authority.

purposes of taxation the amount of discount at which Treasury bills are originally Bol
by the United States is considered to be interest.

Under Sections 454 (b) and 1221 (~

of the Internal Revenue Code of 1954 the amount of discount at which bills issued

he~

under are sold is not considered to accrue until such bills are sold, redeemed or otm
wise disposed of, and such bills are excluded from consideration as capital assets.
Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent purchase, and the woou
actually received either upon sale or redemption at maturity during the taxable year
for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescrib
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies of

......

- 2 -

~.:~~

a.tr-~:\....

~vTt.

--7

printed forms and forwarded in the special envelopes which will be supplied by Feden
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pro·
vided the names of the customers are set forth in such tenders.

others than

bank1~

institutions will not be per.mitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust companies
and from responsible and recognized dealers in investment securities.

Tenders

rna

others must be accompanied by payment of 2 percent of the face amount of Treasuryb11
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Resen
Banks and Branches, following which public anouncement will be made by the Treasury
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Those submitting tenders

The Secretary of the Treasw

expressly reserves the right to accept or reject any or all tenders, in whole or II
part, and his action in any such respect shall be final.

Subject to these reserva·

tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the Fedenl
Reserve Bank on

December :), 1965

---------~(~B=j~r----------

, in cash or other immediately available fund

or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

December

:3,

1965

Cash

(~)

Cash adjustments will be made for

differences between the par value of maturing bills accepted in exchange and the !aBU
price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale O
other disposition of the bills, does not have any exemption, as such, and 10s8 from t

4
TREASURY DEPAR'lMENT

Washington
December 1, 1965

FOR IMMEDIATE RELEASE,
~ XXXXXX"/J,jCl::x::;co..rXXiCGX\XAjX~---v0

TREASURY'S IJEEh.'LY BIIJ., OFFERIITG

The Treasury Department, by this public notice, 1nvites tenders for tva series
of Treasury bills to the aggregate amount of $ 2,200,000,000 , or thereabouts, for

(I)

cash and in exchange for Treasury bills maturing December 9, 1965

(i)

of $ 2,202,148,000 ,as follows:
(~)

, in the amount

,
91-day bills (to maturity date) to be issued December
1965
--,(""';'J)"'in the amount of $1,200,000,000 , or thereabouts, represent-

r:s

(X)
ing an additional amount of bills dated

September 9, 1965

Or)

and to mature

11arch 10, 1966
, originally issued in the
----y(-:!-g....
) --amount of $1,000,375,000 , the additional and original bills
(jiW
to be freely interchangeable.

18&day bills, for $ 1,000,000,000, or thereabouts, to be dated
(m)
December 9, 1965 , and to mature
June 9(4966
•
(n)
,mw.)
The bills of both series will be issued on a discount basis under competitive

.....,(r":=D~)r--

and noncompetitive bidding as hereinafter provided, and at maturity their face amount
will be payable without interest.

They will·be issued in bearer

fo~

only, and in

denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closwg
hour, one-thirty p.m., Eastern Standard. time, Ilonday, December 6, 1965
• Tenden
(Ii)
will not be received at the Treasury Department, Washington. Each tender must be
for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three decimals,
e. g., 99.925.

Fractions may not be used.

It is urged that tenders be made on the

TREASURY DEPARTMENT

FOR

I~lliDIATE

RELEASE
TREASURY'S WEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$ 2,200,000,000,or thereabouts, for cash and in exchange for
Treasury bills maturing December 9,1965, in the amount of
$ 2,202,148,000, as follows:
91-day bills (to maturity date) to be issued December 9, 1965,
in the amount of $ 1,200,000,000, or thereabouts, representing an
additional amount of bills dated September 9,1965, and to
mature March 10,1966, originally issued in the amount of
$1,000,375,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $1,000,000,000, or thereabouts, to be dated
December 9,1965, and to mature
June 9, 1966.
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the cloSing hour, one-thirty p.m., Eastern Standard
time ,Monday, December 6, 1965.
Tenders will not be
receivea at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-289

- 2 -

Immediatelv after the closing hcu.!::' , tenders will be opened at the
Federal f~E:SE.'l.-ve B;:J.[;ks and Branches, following \vhich public announcement ',\'ill bf:' [Clade hv the Treasurv Department of the amount and price
range 0[ accepted b~ds. Those suh~itting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final.
Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on December 9,1965, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing December 9,1965.
Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
diff2r~nce3 between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The Lncorne derived from Treasurv bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, 2S such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained froo
any Federal Reserve Bank or Branch.

TREASURY DEPARTMENT
WASHINGTON,

FOR IMMEDIATE RELEASE

December 1, 1965

TREASURY DECISION ON PERCHLOREI'HYLENE SOLVENT
UNDER THE ANTIDUMPING A~
The Treasury Department has determined that perchlorethylene solvent from France, manufactured by Solvay & Cie, Paris, France, is not
being, nor likely to be, sold at less than fair value within the meaning of the Antidumping Act, 1921, as amended.

A "Notice of Intent to

Discontinue Investigation and to Make Determination That No Sales Exist
Below Fair Value," was published in the Federal Register on October 5,
1965, stating that price revisions with respect to perchloretbylene
solvent from France, manufactured by Solvay & Cie, Paris, France, were
considered to be evidence that there are not, and are not likely to be,
sales below fair value.
No persuasive evidence or argument to the contrary was presented
within 30 days of the publication of the above-mentioned notice in the
Federal Register.
AppraiSing officers are being instructed to proceed with the appraisement of this merchandise from France, manufactured by Solvay & Cie, Paris,
France, without regard to any question of dumping.
Imports of the involved merchandise received during the period
September 1, 1964, to August 31, 1965, amounted to approximately $450,000.

TREASURY DEPARTMENT

December 1, 1965

FOR IMMEDIATE RELEASE

TREASURY DECISION ON PERCHLORETHYLENE SOLVENT
UNDER THE ANTIDUMPIMi Am!
The Treasury Department has determined that perchlorethylene solvent from France, manufactured by

Solv~ &

Cie, Paris, France, is not

being, nor likely to be, sold at less than fair value within the meaniog of the Antidumping Act, 1921, as amended.

A "Notice of Intent to

Discontinue Investigation and to Make Determination That No Sales Exist
Below Fair Value, II was published in the Federal Register on October 5,
1965, stating that price revisions with respect to perchlorethylene
solvent from France, manufactured by

Solv~

& Cie, Paris, France, were

considered to be evidence that there are not, and are not likely to be,
sales below fair value.
No persuasive evidence or argument to the contrary was presented
within 30 days of the publication of the above-mentioned notice in the
Federal Register.
Appraising officers are being instructed to proceed with the appraisement of this merchandise from France, manufactured by

Solv~

& Cie, Paris,

France, without regard to any question of dumping.
Imports of the involved merchandise received during the period
September 1, 1964, to August 31, 1965, amounted to approximately $450,000.

TREASUI<Y DEPARTMENT
Washington

FOR RELEASE P.M. NEWSPAPERS
THURSDAY, DECEMBER 2, 1965

REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE NATIONAL ASSOCIATION OF MANUFACTURERS'
ANNUAL CONGRESS OF AMERICAN INDUSTRY
AT THE WALDORF-ASTORIA HOTEL, NEW YORK, NEW YORK
THURSDAY, DECEMBER 2, 1965, 12:30 P.M., EST.
For the last 57 months -- for nearly five years -- this
nation has experienced an economic expansion without parallel
in our peacetime history.
That expansion -- which began early in 1961 -- has been
broadly based, and its benefits have been bro&d~y shared.
For the period dating from the month the expansion began, they
include:

-- a 35 percent rise in our national output;
--

a 32 percent rise in consumer spending;

-- a 32 percent rise in personal income;
--

a 39 percent rise in manufac tur ing production;
a 51 percent rise in business investment in plant
and equipment;
and an 84 percent rise in corporate profits after
taxes.

These impressive economic gains -- like the advance that
produced them -- did not simply happen.
Indeed, five years
ago they were far from a foregone conclusion. The decade of
the Sixties -- the "Soaring Sixties" some had predicted -had scarcely begun when we fell into our fourth postwar
recession. We looked back upon the decade of the Fifties
and saw little to fire our hopes for the future.
To look back,
in fact, was only to become painfully aware that each of the
three prior recessions had been followed by shorter and weaker
recoveries, and that the previolls recession had produced the
largest peacetime budget d2ficl: L~ ~~r ~isto:y.
Unemployment

F-29j)

- 2 was intolera'jly high.
Business investment had for years failed
to maintain anything like adequate levels of growth -- and
remained far less than we needed to generate more vigorous
economic growth and a stronger competitive position in world
markets -- including our own home market which was becoming
increasingly open to import competition. At the same time, a
series of balance of payments deficits -- averaging almost
$4 billion a year for three years -- rendered the dollar
vulnerable and threatened the international monetary system
which it supported.
Indeed, the possibilities we faced were dire:
economic
stagnation at home; interruption of the unprecedented postwar
growth of Free World trade and economic development; and the
weakening of the financial base of U. S. political, diplomatic,
and military power.
We were firmly convinced that the only right answer to our
problems on both the domestic and international fronts lay in
reinvigorating the private sector as the prime mover in the
achievement of our economic goals. The private economy simply
could not do its job as long as incentives were dulled and it
continued to labor under excessively high wartime tax rates
rates originally applied to restrain strong inflationary
pressures that accompanied wars and emergencies.
We were convinced, in particular, that we could not sustain
economic growth for any long period of time without maintaining
a high rate of capital formation -- not just in fits and starts,
but steadily over time, in response to expanding markets and
emerging profit opportunities. There was a disturbing tendency
in the 1950's for business fixed investment to decline as a
percentage of total national output. Even worse, that decline
was permitted to occur at a time when many other countries
were rapidly expanding their capital facilities and replacing
obsolescent plant and equipment. As a result, those countries
became increasingly formidable competitors in internaQonal
markets.
We saw, there fore, tha t our firs t step toward strong and
sustained economic growth was to free American enterprise from
policies that had long restricted investment. We believed that
American business ingenuity and drive, freed of artificial brakes
upon expansion and given proper Government encouragement, could

- 3 -

not only meet the challenge of foreign competition but could
also provide the economic growth and jobs that were so badly
needed here at home. We saw no reason to continue with
policies that hindered investment. So we moved quickly to
carry out two major fiscal steps that would provide substantial
and long overdue increases in the incentives for private domestic
investment in new plant and equipment:
First, the Treasury greatly liberalized depreciation for
tax purposes -- resulting in substantially increased cash flow.
That was the first such revision in more than twenty years
although those twenty years had witnessed vast changes in
industrial practice. And earlier this year, as you know,
these rules were further liberalized.
Second, a tax credit of seven percent on new investment
in machinery and equipment was included as a key element in
the Revenue Act of 1962, and was further strengthened in the
Revenue Act of 1964. This measure not only added a further
increase to cash flow but also increased the rate of profitability
in new investment.
We followed these measures with the massive reductions
in corporate and individual income tax rates enacted last
year, and with the enactment earlier this year of a repeal or
reduction of the remaining wartime excise taxes.
All of these measures, at next year's levels of income,
will add up to a net total of over $20 billion worth of annual
tax reduction that would otherwise have burdened the private
sector. And yet, during that same five year period -- from
fiscal 1961 to 1966 -- Federal revenues will have increased
more than $18 billion because of the increased scale of
corporate profits and personal income created by the rapid
growth of the economy. This revenue increase is substantially
greater than the increase for the previous five years, when
there was no tax reduction. Moreover, despite the massive
tax reduction in the Revenue Act of 1964, the administrative
budget deficit was reduced from a projected $11.9 billion in
fiscal 1964 to $8.2 billion and to $3.5 billion in fiscal
1965.
These tax measures have furnished dramatic new incentives
and opportunities for the private individual and business to
play the dynamic role that must be theirs under our free

- 4 enterprise system. They have, for example, combined to raise
the profitability of a typical investment in new equipment
by more than one-third. They have also contributed to a
large and steady rise in the self-generated funds of existing
businesses -- a contribution reflected in the fact that
corporate profits after taxes together with capital consumption
allowances have risen without interruption from $51.6 billion
in 1961 to $71.2 billion in 1964, and to $81.1 billion in the
third quarter of this year.
In fact, one of the most striking characteristics of this
expansion is its balance and durability -- characteristics
demonstrated not only by the growth in cash flow, but also
in the strong, steady rise in corporate profits after taxes
throughout this expansion. We have thus avoided the unhappy
pattern of other expansions when profits after taxes would show
a strong surge early in the recovery and then become caught
in a growing squeeze exerted by increased labor and other costs.
In the third quarter of this year, corporate profits after
taxes stood at an annual rate of $44.4 billion -- thus
assuring the continuation of the trend which has kept profits
rising from $26.7 billion in 1960, to $27.2 billion in 1961,
to $31.2 billion in 1962, to $32.6 billion in 1963, to $37.2
billion in 1964.
This sustained profit rise -- like our other economic
gains -- is no mere accident. It is the result of a mix of
policies designed to attack problems of inadequate growth
and excessive unemployment while at the same time enabling
us to avoid inflation and move toward equilibrium in our
balance of payments.
That mix included the effective coordination of fiscal
policies with the monetary programs of the Federal Reserve
Board -- programs which combined a reasonably expansionary
credit policy and a relative stability of long-term interest
rates to facilitate domestic growth with several increases
in short-term interest rates to diminish outflows of short-term
capital that would harm our efforts to achieve equilibrium in
our balance of payments.
It included also a substantial degree of recognition by the
private sector of the intrinsic economic value of the
principles of the wage-price guideposts of the Council of
Economic Advisers, with their retarding effect on wage rises
in excess of productivity increases, and increases in material
and other costs of manufacturing and distribution.

- 5 -

To all of these measures, the private sector has responded
handsomely -- and we witness the results not only in all the
gains I have cited, including the unbroken rise in profits,
but in the excellent record of wage-price stability which has
been crucial in preventing the appearance of a profit squeeze.
That record is not spotless -- but the fact remains that, for
manufacturing as a whole, wage increases since 1960 have
stayed within the bounds of productivity growth, and today
factory unit labor costs in manufacturing are actually a bit
lower than they were when this expansion began.
I have, therefore, every justification for my conviction
that, at no time in our history, has our national government
pursued with such vigor or such success public policies
designed to promote private economic growth than over the past
five years.
I would also venture to suggest that neither the national
economy as a whole -- nor the business community in
particular -- has fared better than they have over the past
five years.
Our successes over those years have stemmed in great
measure from the willingness of both government and business
to revise old assumptions and to put aside old prejudices -to work as allies rather than as antagonists -- to seek, not
cause for senseless conflict, but common cause in the national
interest. For, over those years both government and business
have corne to recognize some very crucial and inescapable facts
of economic life.
Government, for its part, has come to recognize and to
respect -- in deed as in word -- the primary role that private
initiative and incentive and ingenuity must play if we hope to
realize our economic potential and reach our national goals.
Business, for its part, has come to recognize and to
respect the responsibilities of government in furthering the
economic as well as social and political welfare of the
nation.
I have spoken of this partnership often in recent weeks
and months. I have done so -- and do so now -- because I
believe in it, because President Johnson believes in it, and
because the nation needs it.

- 6 -

President Johnson and his Administration have more than
demonstrated their faith in the American businessman -- of
their belief in the vigor and viability of our private
enterprise system -- and of their recognition of the vital
role that the American businessman can, and must, play in the
promotion of our national welfare.
Today, more than ever, the national welfare demands that
that faith be justified -- for today, more than ever, continued
economic expansion depends upon a growing partnership for
progress between the private and public sectors of our economy.
There will -- there must -- be honest differences, but
let them not be divisive. There will -- there must -- be
mutual criticism when those differences occur, but let it be
constructive, not destructive, criticism.
Let no one mistake the challenge that today confronts
this nation -- a challenge that must call forth from us all
a wholehearted commitment to the national interest.
On July 28 of this year, after securing all the information
available to him and hearing the advice of spokesmen for every
admissible point of view, after exhausting every honorable means
to bring the situation in Vietnam and Southeast Asia to the
negotiating table, and after searching his own mind and heart
for countless hours, President Johnson told the world why he
had been forced to make the decision to send tens of thousands
of our young men into battle in Vietnam to fulfill our
commitment to stand against aggression.
He said:
"I have been in public life for more than
three decades. In each of those thirty-five
years, I have seen good men and wise men work
to bring the blessings of our land to all our
people ....•
"It is what I have wanted all my life.
I do not want to see all those hopes -- the
dreams of so many people for so many years
drowned in the wasteful ravages of war.
"I will do all that I can so that never
happens.

And

- 7 ilBut I also know, as long as there are men
\'.ilO hate and destroy we must have the courage to
resist or see it all -- all that we have built
and all that we hope to build -- dreams, freedom
and all -- all swept away on the flood of conquest.
"So this too shall not happen, we will stand
in Vie tnam."
Since that day, and that statement, every American,
whether in public or in private life, has carried an added
burden of responsibility. This is particularly true in the
economic and financial sphere. Let me tell you why:
In amassing the gains from our expansion we have narrowed
the gap becween demand and supply so that today it is at the
lowest point in our 57-month expansion. Private demand is
increasing at a healthy rate and defense expenditures are
rising because of accelerating action in Vietnam at a time
when the availability of manpower, particularly skilled manpower,
and unused efficient productive capacity, are at their lowest
levels since early 1961.
We now have some new preliminary estimates of the
administrative budget for the fiscal year 1966 which began last
June 30. It is expected that expenditures will fall within
the range of 105 to 107 billion dollars -- some five to seven
billion dollars more than originally estimated last January
when the 1966 budget was originally submitted. The increase
reflects primarily the increased defense expenditures resulting
from Vietnam.
It also reflects some higher expenditures as a
result of interest payments, increased crop output, higher
pension payments, and other uncontrollable items. Controllable
expenditures will actually be below original estimates,
testifying to the discipline that President Johnson has enforced
on the Federal budget.
While budget expenditures are rising, the expected deficit
is rising by a smaller amount as a result of increased revenues
over January estimates. The deficit for fiscal 1966 is now
estimated at seven to eight billion dollars as compared to the
$3.5 billion deficit for fiscal 1965. Thus, while the budget
will be more of a stimulative force in fiscal 1966, the
additional stimulus will be appreciably less than many have
expected.
I believe that the new estimates do not imply any major
inflationary threat stemming from the increased expenditures
and the higher deficit currently projected for the fiscal year
1966 -- ending next June 30 -- although the situation obviously
calls for careful watching.

- 8 I want to stress that these figures for fiscal 1966
are preliminary and that work is still going on to refine
them. As you know, work on the budget for fiscal 1967 is still
far from complete and consequently, we have no very good fix
on expenditures, revenues, or deficit for the coming fiscal
year.
In the price sector, some disturbing signs have appeared.
This year, there is a greater tendency for price increases to
outweigh declines than in any year since 1958. Industrial
wholesale prices have risen by 1.3 percent in the twelve
months ending this October after six years of comparative
flatness. Consumer prices in October were 1.8 percent above
a year ago, as compared with yearly increases averaging about
1.2 percent since 1958.
The situation calls for confidence in our private sector's
capacity to match available supplies of men, materials, and
productive margins with increasing demand, so that excessive
pressures of demand on supply do not give rise to inflation.
And it calls for action to do so. At the same time, we must
recognize, both in the public and the private sector, that
the margin for error is much smaller and the need for
responsible restraint -- particularly restraint on wage and price
increases -- is much greater; certainly until the conflict in
Vietnam moves from the battlefield to the negotiating table and
we no longer face its unpredictable consequences.
Some of the elements of responsible restraint in the period
ahead for both Government and private industry seem clearly
discernible:
Fiscal dividends from our economic growth in the form of
tax cuts are, at least for the present, a casualty of the
increasing requirements for the defense of freedom in Vietnam.
These requirements have first claim on our anticipated revenue
growth.
Responsible restraint in the period ahead also calls for a
fiscal 1967 budget that will enable us to meet both our
domestic objectives and our international commitments without
fostering inflationary pressures. It calls for the kind of
budget that President Johnson has given us in the past and is
going to give us next year -- a budget that reflects both the
most stringent kind of fiscal discipline and the most effective
response to essential national needs.

- 9 A policy of responsible restraint also requires an all-out
effort by Federal and local government and private business
co intensify the attack on structural unemployment and the
upgrad ing of manpower res ourc~es by acce lera t ing job trc3. in lng fm':1
retraining and improving the organization of the labor market.
Despite gratifying improvement, overall unemployment is still
significantly above the levels that represent a :cealistic
noninflationary target for our economy. Moreover, thl~re are
some categories -- particularly nonwhites and teenagers "-where rates of unemployment are clearly excessive by any
standard.
Responsible restraint also calls for joint action by
government and business to utilize and absorb in an orderly
manner that will not disrupt normal market.s the surplus of
materials in government stockpiles which are determined to be
no longer needed for mobilization requirements, particularly
when shortages or intense pressures of demand on supply may be
reasonably anticipated.
The need for responsible restraint in making private price
and wage decisions consistent with the wage-price guideposts
of the Council of Economic Advisers is particularly acute against
the background of smaller margins of unutilized labor and
production capacity and the special responsibility the situatLon
in Vietnam places on every American.
It is not i.n the private
interest and it is contrary to the ~ational interest to gamble
wi th the fu ture for the sake of iaL'ned ia te - ~ and, very pos sib ly ,
temporary -- gain.
One of the most crucial eleme~ts in this entLre expansion
has been the relative stability of costs and prices -= a
stability that has been fostered in no small degree by such
government measures as the wage-price guidepos ts of the COUOi2 l".t
of Economic Advisers, the massive tax actions to encourage
greater productivity through innovation and investrr..ent i~i [,-elv
and more modern facilities, and the whole spectrum of efforts
to reduce structural unemployment and increase {~lr skilled
manpower.
As a result -developments -- the
remains excellent.
within 2 percent of

while we cannot ignore recent di.sturbing
price record of the expanskon as a whole
The wholesale price index today stands
its level at the beginning 0f the expuDsion

- 10while the index of consumer prices has risen at an average
rate of only 1.3 percent a year.
Reflecting m~derate wage
increases and good productivity gains, unit LaLor costs in
manufacturing are today no higher than they W~Y2 a year ago
and lower than five years ago.
This record -- let me emphasize
is reflected also in
the relative stability of those prices that you in manufacturing,
as well as industry generally, must pay for thE nlaterials you
buy.
In October -- the latest month for which we have figures
wholesale prices for all industrials were only 1,6 percent
higher than they were when the expansion began, and wholesale
prices for total manufactures were only 2.1 percent higher.
Nothing, therefore, should be more obvious than the fact
that -- in the private interest as well as in the national
interest, in the interest of labor and of business as well
as of the na t ion as a whole - - it is nOTN' more j mpera t i ve than
ever that both labor and business exercise responsible restraint
in their wage and price decisions.
Today, above all, it is imperative that we not onJ.y
preserve, but improve that working partnership between the
private and public sector that has brought us so far.
For let
us never forget that that partnership is not merely an alliance for
the efficient production of shirts and shoes and highways and
schools and all the other products and by-products of material
wealth and prosperity.
It is also a partnership ~or the
defense of freedom which alone makes prosperity worth having.
It is a partnership that has proved itself time and again in
the past when this nation has been pitted against aggression.
I know it will prove itself again today and in the long
days and months ahead, prove itself more than equal to the
challenges of sus ta ining our domes tic economic exp!:l.ns ion
without inflation, reaching lasting equilibiriurn in our balance
of payments and strengthening the Free World's economic and
monetary system -- challenges that we must face while in
Vietnam the grim struggle grinds on.

000

- 1:00 -

CONCLUSION
Current developments in our international tax relationships underscore tbe wide range of policy and administrative
issues that are under consideration.

Indeed, the continued

rapid gro\-1t!; in international investment and trade has
brought 1;"i tIl ita rnul ti tnde of varied tax problems that
severely strain and press 0eyond our present framework of
concepts and analysis.

Intensive legal and economic thought

to develop that framework into one aJe,-{uate to the task -- a
framework that embodies a coherent logic capable of expansion
to meet new patterns and relationships.

In one sense this is

a truly formidable task, since each of the countries of the
world can claim a voice in tLe effort.

But the ingenuity and

insight promised by this bost of architects should be viewed
as welcome assets.

The task for the United States is to see

that in this lnternational effort we playa role fitting to
our posi tion.

vIe can do so if all of us with a stake in the

outcome -- the Government and its officials, our taxpayers
with international activities and their advisors, our
universities and research institutions and their scholars
work cooperatively in shapinS our contribution.

- 9@ progressive income tax rates as respects foreigners, it
quickly restored them a year later, in part because some
Americans had given up their citizenship to take advantage
of the change.

But to the extent possible we should not

permit our tax problems with Americans to act as a bar to
rational revisions in our treatment of foreigners.

The

proposed bill meets this objective by keeping American
expatriates still subject to full United States tax on
their United States income and assets, for five years after
loss of citizenship in the case of the income tax and for
ten years in the case of the estate tax, where the loss of
citizenship is motivated by the desire to avoid our taxes.
Where such a result is contrary, however, to a tax treaty,
the treaty would govern.

But since our tax treaties are

largely with countries whose tax systems involve rates at
significant levels, an expatriate who establishes residence
in those countries is not likely to be motivated by a desire
to avoid United States taxes.

- 9~ re~uested

by the United States, in a treaty negotiation for

example, does not modify its taxes to parallel the changes
we are making unilaterally.

This power of the President can

be applied on a selective basis, country by country and tax
provision by tax provision, and need be applied only when
he finds that it is in the public interest to do so in each
case.

Our treaty negotiators will thus be able to point out

to a foreign country that our concessions are reversible, so
that the negotiations can, in effect, proceed on a reciprocal
basis.
Expatriates
The abandonment of the application of the progressive
income tax rates to foreign individuals investing in the
United States, the cut-back of other income tax provisions,
and the reduction of estate tax rates would establish a
distinctly brighter tax picutrc in the United States for
the foreigner.
.....
,..a Y 1.Je

'
emp teo

Indeed, the picture is such that Americans
t
0 'Decome

I Iorel.gners
f·
" f or tax reasons.

1"'36, when the United States had similarly abandoned its

their restrictions reciprocal.

These concessions on our

part have been matched by similar concessions granted by
the treaty country on income our taxpayers derive from that
country.

A unilateral grant of these concessions on our

part, by a statutory revision, might thus seriously affect
our treaty bargaining strength and make it more difficult
for us to secure similar treaty concessions in the future.
At the same time, we desire to remove as quickly as possible
any inappropriate tax barriers to the foreign investor now
contained in our statutory system.

Unilateral action can

be prompt and cover all foreigners, while the treaty process
takes time and operates country by country.
The bill neatly meets these difficulties by, first,
providing prompt action and wide coverage through the unilateral
act of a statutory revision, and, second, by retaining treaty
bargaining power and flexibility through empowering the
President to reinstate the former statutory rules.

The

President can do so, with respect to the residents of a
foreign country, when he finds that the foreign country, if

property located in the United States.

Thus, the bill would

present the foreigner with a United States estate and gift
tax structure vastly different from the present pattern, and
one that should in a meaningful way remove barriers that the
present pattern now imposes.
Relationship to Tax Treaties
The provisions of the bill provide distinct benefits
to foreigners with United States income or assets as
compared to present law through the changes that we would
be making in our statutory provisions.

These changes, at

the same time, represent approaches which we think are
appropriate in the treaty area as well.

Thus, our recent

protocol with Germany, and the tentative draft of the
Netherlands protocol, reflect in a number of instances the
changes in the bill, for example, with respect to the
abandonment of the force of attraction and the cut-back in
capital gains taxation.

And in the past our treaties, in

establishing reduced withholding rates for investment income,
have thereby also abandoned application to that income of
our progressive rates.

But treaties are bilateral and

- 9f-recommended by the Treasury).

The new rate schedule would

thus provide effective rates of 3 percent on a $100,000
estate, 7 percent for $500,000, 10 percent for $1,000,000,
and 18 percent for $5,000,000.
The bill reshapes the definition of United States property
to include bonds of a United States corporation and other debt
obligations of a United States obligor, regardless of the
physical location of the instruments, and also deposits in
United States banks.

It thus rounds out the present defini-

tions into a consistent pattern.
As a consequence, the foreign

investor would see a far

lower scale of United States estate tax rates on his United
States investment, and one that compares favorably with a
number of foreign countries.

Moreover, since many of the

European countries grant their citizens, either by statute
or treaty with the United States, a credit against their
domestic estate tax for the United States tax on the United
States estate, the new rates would be largely or entirely
absorbed through these credits.

As respects our gift tax,

the bill would leave applicable to that tax only tangible

- 9~ -

for $5,000,000, 43 percent.
in the world.

Such rates are among the highest

MOreover, they are far above the rates we

impose on our own citizens, a relatiollship that is just the
reverse of that which generally prevails in other countries,
or under our income tax provisions applicable to foreigners.
It is thus clear why foreigners regard our estate tax as a
real barrier to investment in the United States, and one that
very often bars the investment or channels it into an investment made in foreign corporate form.
The bill recognizes the unreality of this existing rate
structure.

In seeking a lower and more realistic level, the

bill uses as a standard the effective rates applied to our
own citizens (under conditions where the estate of the

United States decedent is eligible for the marital deduction,
which permits property passing to a spouse to be untaxed up
to one-half the total estate).

The bill thus starts with an

exemption of $30,000, in place of the present $2,000, and
applies a 5 percent rate to the first $100,000 of taxable
United States estate, rising to 10 percent thereafter up to
$500,000 and then 15 percent up to $1 million.

The top rate

is 25 percent reached at $2,000,000 (higher than the 15 percent

taxed.

These results are not altered by extensive trading

in stocks or securities, even where the trading is conducted
by a United States broker who has discretion to act for him.
His real estate investments would be taxed on a net income
basis at regular rates if that is preferable, and if his real
estate investments are so active or so conducted as to constitute a trade or business on their own account, and
consequently taxable in any event at regular rates, any other
investments not connected with the real estate would still
remain subject only to the usual withholding rates.

This

simpler, logical pattern would serve to remove income tax
barriers which our present structure now presents to the
foreign investor.
Estate and Gift Taxation
The United States now presents the foreign individual
investor with extremely high rates of estate tax on his United
States investments.

The estate tax starts at the $2,000 level

and the rates climb to 77 percent.

For a $100,000 estate in

the United States this means an effective rate of 17 percent;
for $500,000, 26 percent; for $1,000,000, 29 percent; and

trade or business in the United States.

This provision should

serve to clarify uncertainties in present law which have
confused potential foreign investors.
Finally, as respects the United States capital gains of
foreign individual investors, the present unrealistic and
complicated rules have been restated to tax such gains only
if the foreigner is in the United States for 183 days or
more during the year, and thus has a "presence" here comparable
to that which would make him a "resident" under the tax laws
of many foreign countries.

Also, capital gains effectively

connected with a trade or business are subject to tax.

In the

case of foreign corporations, this is the only situation in
which its United States capital gains are taxable.
This drawing back of United States source jurisdiction
to a more realistic and administratively manageable position
would materially simplify the tax rules which we present to
the foreigner desiring to invest in our stocks and securities
or real property.

As a general rule, his periodic income

would be subject only to withholding taxes, either at 30 percent
or a lower treaty rate, and his capital gains would not be

- 9D tax on the branch profits and the second dividend tax result.
in about the same tax burden that would exist if the foreign
corporation had conducted its United States business through
a United States subsidiary.
The bill in two specific types of investment revises

present law to remove tax clouds over that investment.

to real estate investment, an individual foreigner (or corporation) is permitted to elect to treat the income from the
investment as trade or business income.

He thereby may

receive the benefits of deductions connected with that income
and is taxable on the resulting net income at business rates
if that approach is preferable to taxation on the gross
at withholding rates.

inc~

This provision eliminates many tax

uncertainties that presently attend investment in real property
in the United States.

As to stocks and securities, the bill

provides generally that a foreigner, individual or corporate,
trading in those investments in person or through a resident
agent, who mayor may not have discretion to carry on

inve8~nt

activities, will not thereby be regarded as being engaged in

- fl The bill simplifies this whole area by abandoning the
application of progressive rates and limiting our assertion
of tax, as respects investment income (not "effectively
connected" with a trade or business), to the technique of
withholding and to the level of withholding rates.

The bill,

in keeping with this approach, also exempts from personal
holding company tax liability a foreign corporation whose
stock is owned entirely by foreigners.

Moreover, in the ca8e

of any foreign corporation receiving income from United States
sources, it confines our assertion that dividends distributed
by that corporation to its shareholders are in turn to be
considered by us, in the shareholders' hands, as income from
United States sources, to a situation where 80 percent or
more of the gross income of the I foreign corporation is effectively
connected with the conduct of a trade or business in the
United States.

The tax on that portion of the dividends

of the foreign corporation -- our so-called "second dividend"
tax

is thus confined to a case where the activities of

the foreign corporation largely consist of operating a branch
in the United States, so that the combination of our corporate

8~ -

ownership of United States stocks or securities.

Under

existing rules foreign individual investors in the United
States have been subject to progressive rates of tax on
their United States income, when the total amount of that
income involved a greater tax under the progressive rates
than was collected through our withholding taxes.

The

investors in turn have sought to sidestep those rates through
placing their investments in a foreign corporation and thereby
obtaining either the 30 percent statutory withholding rate or
lower treaty rates on the investment income.

But they have

had to be careful to structure the foreign corporation to
avoid its being a personal holding company with respect to
its United States source income.

And of course some investors

have simply sought to cover their tracks, recognizing the
difficulties any tax administration faces when it moves beyond
withholding taxes in its attempt to reach income going to
foreigners.

The consequence of all this was that the United

States collected very little taxes under the progressive rates,
so that the withholding rates were in practice the effective
rates.

- sf At the same time, by freeing the unrelated investment income
from business tax rates, it leaves that income to be taxed
at the rates we consider appropriate for investment income.
A number of our treaties provide for reduced withholding
rates or exemption on investment income only if the foreign
taxpayer has no permanent establishment in the United States.
The adoption of the "effectively connected" approach, however.
reflects a desire to permit application of those lower rates
or exemption to all investment income which is not connected
with a permanent establishment.

We could achieve this result

by a revis:f.on of each of our treaties to apply the lower rates
or exemption despite the permanent establishment.
this process would take a period of time.

However,

The bill eliminates

this problem by unilaterally stating that these treaties will
be applied to income not "effectively connected" as if the
taxpayer did not have a permanent establishment in the
United States.
Individual Investment
Most foreign individuals with interests in the United
States are involved in investment activities, such as the

investment income to business taxation.

Instead, as long a.

the investment income is not connected with the other activity,
any uncertainty as to the status of the latter would not color
or affect the investment income.
The bill implements the "effectively connected" concept
by:

(1) Making taxable any income so connected even though

its source is not within the United States, such as where a
branch located in the United States imports goods from abroad
and then resells the goods outside the United States, with
title passing outside the United States.

The income from the

sale, untaxed today by the United States and indeed often
untaxed by any country, would be taxable under the bill.

(Any

income not so connected with the trade or business is taxed
only if it is from sources within the United States under the
usual source rules.)

(2) In keeping with the above approach,

providing a foreign tax credit, against the United States tax
on the trade or business income, for foreign taxes paid on
that income, if the foreign tax is levied on the basis of
source jurisdiction by the other country.
In this manner the bill obtains for the United States itl
proper tax on the full income of the trade or business conducted
!:hen~,

and on any investment income

eff/ectiv~lY ~onne~ted

with it·

- 8,(
paralleled the force of attraction concept of the permanent
establishment provision in tax treaties.

The new bill confines

this taxation at regular business income rates to the income
"effectively connected with the conduct of the trade or businesl
within the United States, 'I leaving the other income of the
foreigner from United States sources to be taxed at our
30 percent statutory withholding rate or lower treaty rates.
The bill thus moves our treatment in this area over to the
general approach followed by many other nations.

It also i8

in accord with the OECD Model Income Tax Convention and our
new treaty approach, evidenced in our protocols with Germany
and the Netherlands, and thus has the advantage of conformity
to international practice.

The bill offers guidelines, to be

supplemented by the legislative history, to the application
of the "effectively connected" concept.

A foreigner who is

receiving large amounts of investment income from the
United States, under the approach of the bill would no longer
need be concerned that some other activity in the United
States will suddenly be considered as giving him a trade or
business status in the United States, and thus subjecting the

- rJtonly on a desire to attract foreign investment, rules which
would be but mere tax inducements or tax concessions.

Indeed,

the bill moves to correct certain instances where in the past
our legislation was too favorable to foreigners when compared
with the treatment of our own citizens.
The main provisions of the bill are here summarized:
Corporate Activity
Most foreign corporations that are involved in business
activities in the United States generally operate through
ownership of United States domestic subsidiaries or of
significant stock interests in those corporations.

The

United States tax rules applicable are not complicated, and
generally relate to our withholding taxes.
so as to royalty situations.

This is equally

But where the foreign

co~poratioo

operates here in branch form, the rules become more involved.
The existing statutory rules provide that a foreign
corporation (or an individual) engaged in trade or business
in the United States is taxed on all its income from United
States sources at the regular rates applicable to business
income, including not only the income from trade or business
but also any unrelated investment income.

The result

-~foreigners on the same income arising here.

(5) The rules

should not permit the United States to be turned into a tax
haven country vis-a-vis foreign investors, nor be so framed
as to permit, in combination with the tax rules of another
country, the transformation of that country into a tax haven
that would attract foreigners seeking to invest in the
United States.

(6) The rules should not be structured as to

cause the capital of less developed countries, which are
badly in need of the capital at home, to be drained off for
investment in the United States.

(7) Any benefits granted

unilaterally by the United States should be so structured
as to preserve a proper bargaining position for the
United States in tax treaty negotiations.
The bill that has evolved from the consideration by the
Committee on Ways and Means represents a balanced application
of these principles.

It recognizes that some of the existing

provisions of our Code have become discriminatory and
inequitable to foreign investors and thus a barrier to
investment in the United States.

In correcting this treatment

the bill avoids at the other extreme rules that would represent

entitled the Foreign Investors Tax Act, contains the essential
elements of the predecessor bill, but with certain modifications,
In my Montreal paper I discussed the principles which the
Treasury Department considered applicable to the revision of
this aspect of international tax relationships, and these
may briefly be summarized:

(1) The rules adopted should be

in conformity with acceptable international norms.

The United

States, with its large flows of capital and goods in and out
of the country, has a responsibility to take a major role in
seeing that there is developed a proper international tax frmHwork against which the tax system of any particular country
can be considered.

(2) The rules should permit a fair and

sensible allocation among the various countries of the income
from activities that reach across international borders.
(3) The rules should assist in maintaining as far as possible
the free international market of capital and goods, with taxes
in any country as neutral a factor as possible consistent with
the domestic policies to be served by a tax system.

(4) A

proper balance must be maintained between the taxes paid by
our citizens on their United States income and those paid by

- 81 III.

UNITED STATES STATUTORY TAXATION OF FOREIGNERS

This examin-

ation commenced with the report on April 27, 1964 of the
Committee appointed by President Kennedy on Promoting
Increased Foreign Investment in United States Corporate
Securities and Increased Foreign Financing for United States
Corporations Operating Abroad, which was chaired by the then
Under Secretary, and now Secretary of the Treasury, Henry H.
Fowler.

The Treasury Department study of that Report, and of

the entire statutory treatment of foreigners investing here,
resulted in proposals to Congress embodied in H.R. 5916,
introduced in March, 1965.

The House Committee on Ways and

Means then gave extensive consideration to that bill and in
September, 1965 Chairman Mills, at the instruction of the Comnittl
introduced a modified version of that bill for comment before the
bill is reported to the House in 1966.

The new bill, H.R. 11297,

- 81 :..t ["e C01"porate tax provisions can be achieved if the trans-

action
~e

i~1

questicL involves a foreign corporation.

Here also

are concerned with a provision of wide application necessary

tu Jrevent tax avoidance in the field of foreign income, for
the taxpayer must satisfy the Commissioner that the proposed
transaction -- such as the fonnation or liquidation of a
foreign corporation
its principal purposes.

does not have tax avoidance as one of
It would be helpful to taxpayers--

and administrators -- if detailed guidelines could be formulated
setting forth objective standards to govern the application of
that section.

The Treasury is now engaged in the preparation of

these buidelines al.l.d is hopeful of early action in this regard.

- 80 -

while this formulation of international rules is proceeding,

\'Je

must remember that adj ustments will be made under

existing unilateral rules and many will be acceptable to both
the countries concerned.

However, as these cases tend to

involve a considerable time before agreement is reached on the
adjustment, a taxpayer and the countries concerned may find
that procedural barriers, such as a statute

c,.c

limitations on

refunds, may make it impossible to implement the adjustment
in the country that has overtaxed the income.

To remedy this,

the United States suggests that tax treaties contain provisions
waiving these barriers and thus permitting the adjustment to
be implemented.

We are finding other countries receptive to

this approach, and as observed in the discussion above under
treaties, have already included such a provision in several
treaties.
Section 367
There is another important aspect of our treatment of
foreign income that requires an elaboration of the applicable
3.dministrative rules.

This is Section 367 of our Code, which

in effect requires the Commissioner's consent to be obtained
by

the taxpayer before the benefits available under a number

- 78 assistance to that \Jorkin3 Party, to lay before it our proposed
Section 482 Regulations as they are developed.

It is quite

likely that these Regulation may represent a more structurally
developed and detailed framework of allocation rules than has
been formulated e1se,,,here, and hence may prove helpful as a
starting point and as a way of focusing attention on a wide
range of issues.

We ,,,ou1d, of course, welcome the analysis

and discussion which we expect this would stimulate.

We would

be ready to make modifications in these proposed rules if such
changes are seen to be appropriate as a result of this international discussion.
I may turn out that full international agreement on all the
rules is not possible.

~ve

would then expect that the various

Governments ,,,ou1d consider what steps may be appropriate in dealing with the resulting conflicts and their double taxation
effects.

Various devices, which can be mentioned without an

endorsement, have been suggested, such as arbitration, a
on~2

paym~t

by the taxpayer at the higher of the two rates, or some

formula to divide the burden among the taxpayer and the Governments.

- 77 those of other countries the result will be double taxation,
the tax burden of which willbe borned either by one Government
through the foreign tax credit or by the taxpayer, with the
other Government obtaining an unwarranted benefit.

(Far less

likely, though possible, is undertaxation of the taxpayer.)
Each country, of course, must see both sides of the allocation
coin -- the rules which the United States regards as proper to
allocate income to our parent companies from transactions with
their foreign subsidiaries are the rules we must be willing to
accept when the subsidiary is here and its parent is a foreign
corporation.

This factor should have an effect in tempering

the international assertion of rigid positions, and thus make
it easier to achieve international accommodation.
clear that this must be the ultimate goal,

a~~

For it is

internationally

acceptable set of rational rules to govern the allocation of
international income arising through these transactions.
The United States believes that the OECD Fiscal Committee
is the proper body to undertake the task of establishing the
allocation standards to guide countries in reaching accommodations

~vith

each other.

The OECD Fiscal Committee apPOinted a

,;orking Party for this purpose.

We intend, as a measure of

- 76 -

requiring an allocation between domestic and foreign source
income of expenses not allocable to specific items of gross
income.

lihen such expenses are allocated to gross income from

sources outside the United States, the net amount of that
income is decreased.

This allocation of expenses is important

largely for foreign tax credit purposes (the gross income and
expenses are independently already taken into account in computing the taxpayer's domestic taxable income), because the
allocation, by reducing foreign source income, can reduce a
taxpayer's foreign tax credit.

Clearly coordination with

section 482 is necessary -- as a simple example, an expense of
the parent for managerial services rendered to its foreign
subsidiary and compensated for by a fee should be allocated
to that fee and not to a dividend received from the subsidiary.
The Needed International Accommodation
All of the above relates to the proper formulation of our
unilateral rules of allocation with respect to international
transactions.

But since they are international transactions,

a unilateral approach by the United States, or any country, is
not sufficient.

For if our unilateral rules do not mesh with

- 75 products and transfers of intangibles, such as patent licenses.
The problems here faced in seeking appropriate criteria or
guidelines are much more difficult.

The first set of Regula-

tions involved transactions which could be governed either by
cost standards or by establishing an appropriate charge for a
fungible item, money.

But the second set of Regulations

involves the matter of determining a fair profit for assets
that, under the arm's length rule, are regarded as transferred
in a profit-seeking transaction.

Nevertheless, we seek to

establish as helpful a set of rules as is possible in this area.
Ae have, in this context, in TIR 441 issued in 1963,

establish~

guidelines to govern transactions between Puerto Rican affiliates, who typically engage

in manufacturing activities, and

their United States mainland parents, who handle the dfstribution of the goods.

This T:R has been quite helpful in facili-

tating the disposition of a large number of difficult cases.
~bile

it deals with a situation that has some unique aspects,

it still provides us with some experience in approaching the
proposed Regulations.
Finally, we are preparing Regulations to coordinate our
section 482 Regulations with section 862 of the Code, a section

- 74 -

Arm's-Length Test -- The above rules are cast within the
general framework of an arm's-length test, and
do not turn on following the transactions
through the books of the subsidiary to see
whether it used in a profitable way the money
lent, the assets made available, or the services
rendered.

The fact that the subsidiary is losing

money does not therefore prevent these allocations.
This is the essence of the arm's-length approach,
and is in keeping with the fact that these are
international transactions under which the United
State is entitled to a fair reflection of the
moneys, goods and services that are being transferred.

It is also in keeping with the general

deferral rules that are consequent upon treatment
of the foreign subsidiary as a separate legal
entity.

It also is consistent with a proper

approach to consolidated return accounting.
The second set of proposed Regulations, now in preparation,
will contain the rules applicable to inter-company sales of

- 73 -

services, since the subsidiary could itself
have employed the persons performing the
service.

While cost includes both direct and

indirect costs and they are to be reflected
on a full cost and not a marginal cost basis,
the indirect costs may be allocated under any
reasonable, consistent method in keeping with
sound accounting practices.
Machinery and Tangible Assets -- Machinery and other
tangible assets made available to a foreign
subsidiary can be reimbursed on a cost basis,
covering out-of-pocket costs, depreciation and
a small profit representing an allowance for a
return on the parent's investment.

This cost

allocation approach rather than that of establishing a rental figure is a method of reflecting on the income side what would otherwise
generally be the required disallowance of deductions to the parent.

It also eliminates the

disputes that would arise under an approach seeking to establish a fair rental value based on market
rates.

- 72 -

intended to furnish a maximum of flexibility, and of course
do not prevent the use by the taxpayer of other defensible
approaches.

For the most part they are based on the costs

incurred by the parent and an allocation of those costs to
the subsidiary in a manner that follows accepted accounting
precedents.

The following offer general illustrations.

While

the guidelines cover domestic as well as foreign transactions,
their discussion here, and their main area of application,
relate to the foreign area.
Loans -- Interest must be charged on a loan to a foreign
affiliate:

a 4 percent rate is acceptable; a

lesser rate must be justified, and if it cannot
be justified, the Service will apply a 5 percent
rate.
~nagerial

and Other Services -- Managerial and other

services rendered by the parent to benefit a
foreign subsidiary must be compensated for,
thtough a profit need not be charged by the
parent.

The amount of the compensation gener-

ally may be the cost to the parent of those

- 71 and to meet the requirements of outside interests.

The vast

majority of industrial companies in the United States make
some allocation of general and administrative expenses to their
various operations as a normal business practice.

The require-

ments of government procurement contracting and of public
utility regulation have necessitated allocations of expenses
between the government contract work and the other operations
and between the regulated and the non-regulated sectors.

And,

indeed, even in the tax field taxpayers have made allocations
to their foreign branches to determine the foreign taxes they
consider to be properly payable.
The first set of proposed Regulations, building in large
part on this experience, was issued in April, 1965.

In general,

it covers the allocations required where assets or services of
the parent are made available to the foreign subsidiary
~.".here

money is lent, where management or other services are

rendered or made available, where machinery and other tangible
assets are made available.

Essentially the approach is to

provide guidelines which, if the taxpayer follows them, offer
a safe-conduct pass through section 482.

The guidelines are

- 70 -

taxpayer to accept the adjustment without increasing the transfer of income from subsidiary to parent more than it considers
desirable.

Again, as did Revenue Procedure 64-54, its flexi-

bility makes possible -- and likewise demands -- a responsible
approach to the guidelines governing the substantive reach of
section 482.
Section 482 Substantive Guidelines
The above procedural steps have set the stage for the
development of appropriate guidelines for the substantive
application of section 482.

The Treasury is approaching this

part of the task through the issuance of detailed proposed
Regulations under section 482, to replace the present Regulation.
which for the most part simply establish the standard of arm'.
length dealing.

The assignment is a formidable one, but we

must remember that the development of the guidelines does not
start from an accounting vacuum.

The tax minded, and especially

the lawyers, tend to overlook the fact that their new tax problems have very often been faced for some time in contexts outside
the tax field.

Thus, accounting practices and conventions

respecting allocations of income have had to be developed before
this in non-tax fields, both for internal accounting purposes

- 69 of course, foreign taxes associated with the dividend are
not allowed as credits.

A taxpayer that did not receive

a dividend in the year to which the adjustment relates (or
did not elect to recast a dividend of that year) may, within
90 days after the adjustment is made, transfer an amount
from the foreign subsidiary and have the transfer treated
as the required payment and not as a dividend.

Necessarily,

the broad flexibility thus provided the taxpayer must be
protected against abuse, or else section 482 would be
deprived of any self-policing content.

Hence the Revenue

Procedure states that for years after 1963 this flexibility
will not be available to taxpayers who cast their transactions in a manner which had avoidance of United States
tax as a principal purpose.
This Revenue Procedure is thus an important step in
permitting the section 482 adjustment to be fitted into a
proper position within the flow of funds from the foreign
subsidiary, a position that both removes impediments to the
orderly repatriation of funds and makes it possible for a

- 68 considerations added an extra urgency to the questions.
Taxpayers wishing to respond to the Government's stress on
the desirability of repatriating foreign earnings were
concerned about distributing dividends from their foreign
subsidiaries if they also were to be faced by section 482
adjustments in the parent's income.

They saw in the

combination the possibility of having more income being
taxed in the United States than they desired or was required
by law.
To meet these questions, the Treasury in March, 1965
announced rules later embodied in Revenue Procedure 65-17.
establishing an appropriate relationship between repatriation.
of income and section 482 adjustments.

Under this Revenue

Procedure a taxpayer will be permitted to recast dividend
payments, for the year to which a section 482 adjustment
relates, into the type of payment required to reflect the
section 482 adjustment

the dividend may thus become a

payment to the parent for goods or services, thereby avoiding
the enlargement of the parent's income that would occur if
dividend and adjustment were kept separate.

In this case,

- 67 -

Hence, the import of Revenue Procedure 64-54 for the
future is to underscore the

importanc~

of the formulation

of rational internal guidelines under section 482.
Repatriation of Income and Section 482 Adjustments
Revenue Procedure 65-17
A section 482 adjustment in the foreign area usually
means that a United States taxpayer has understated its
United States income and overstated its foreign income -goods have been sold by a United States parent at too low
a price to its foreign subsidiary, services have been
rendered by that parent at an inadequate fee, and so on.
What are the rules that should govern the attempt to recast
the accounts between the subsidiary and the parent:

Suppose

the subsidiary desires now to transfer the income that is
said to be the parent's income -- will the transfer be a
taxable dividend or handled instead as a payment on account
of the section 482 adjustment?

Suppo~e

a dividend was

included in the parent's income for the year to which the
adjustment relates -- can the dividend be recast as a payment
on account of the adjustment?

These questions of course

required answers so that the transactions could be fitted
into their proper tax niche.

But balance of payments

- 66 -

recoGnizes that

country cannot continue to administer such

a section in this self-denying manner.

For the continued

allowance of the foreign tax offset would simply mean that
the United States would be yielding control over its allocation
problems to the allocation rules of foreign countries and
the decisions of their administrators.

Double taxation

would be averted -- but the cost would be borne by the
United States Treasury.

While our foreign tax credit system

recognizes that to prevent double taxation we are willing
to yield first claim to the country of source, the integrity
of that system depends on a rational framework of international allocation rules.

The United States is thus entitled

to insist on appropriate recognition of the rules it believes
proper, and is not required to surrender its part in the
construction of that framework.
belongs to any other country.

The same privilege of course
The claims of the various

countries may conflict and their failure to resolve them
will lead to double taxation and increased burdens for the
international taxpayer.

But that is but another facet of

the problem, to be discussed later, rather than a signal
for us unilaterally to yield the field.

- 65 -

foreign subsidiaries, or the allocation of general and
amninistrative expenses.
The effect of this step has been quite salutary.
Through its achievement of an orderly treatment of the
pre-l963 years and the consequent very marked reduction in
number and dollar amount of deficiencies under the section
for those years, it has permitted the needed technical
development of the section to proceed in an atmosphere
free of acrimonious disputes that would otherwise have
existed.

It has thereby enabled -- and indeed requires

taxpayers and the Government to consider objectively and
responsibly the shape of that technical development.
The confinement to pre-1963 years of the ability under
the Revenue Procedure to offset foreign taxes against a
United States adjustment is of basic importance.

From the

standpoint of internal fairness, this limitation mirrows
the fact that taxpayers by the end of 1962 had generally
become aware both of the possible reach of section 482 and
of the Service's decision to apply the section in keeping
with that reach.

But, of more importance, the limitation

- 64 doubtful, at least in their view, that they could recoup
the foreign taxes paid on the income involved in the
adjustment -- as where on audit income was for section 482
purposes shifted from a foreign subsidiary to a United States
parent.

The double taxation that could result would thus

generally make it imperative for the United States taxpayer
to resist strongly any claimed adjustment, and the lines
were being formed for prolonged and widespread controversy.
To prevent this, the Treasury, in December, 1964,
issued Revenue Procedure 64-54, which allows taxpayers
in the case of adjustments for years prior to 1963 to
offset against any increase in United States taxes, occasioned by the adjustment, the foreign taxes paid on the
income involved and thus to avoid double taxation.

addition) the Revenue Procedure states that the Revenue
Service would not, except in certain limited instances,
pursue for those years adjustments based on applications
of section 482 that were not clearly required by its previouS
technical development, such as the requirement of interest
inter-company loans or royalties on patents licensed to

- 63 section had overstrained the level of technical development
that had been achieved in its domestic application.

The

situation thus called for a many-faceted implementation
of the section so that it may carry the new burden placed
upon it.

The following discussion catalogues the steps

being taken to achieve that implementation.
Orderly Treatment of the Pre-1963 Years -- Revenue Procedure

ij1

The first major step needed was an orderly treatment
of the controversies that had arisen for the years prior
to 1963.

The recognition by the Internal Revenue Service in

the late 1950's that section 482 had to be applied on a much
wider basis in the foreign field brought a sudden surge of
audits and controversies, since many taxpayers in their
inter-company arrangements may not have fully considered the
range or lmplications of that section.

While some aspects

of the section -- such as the requirement of an "arm's length
price" on sales of products between related enterprise
were recognized, other requirements had not been explicitly
developed.

As a consequence, many taxpayers for these year.

were faced with Internal Revenue Service adjustments increasi~
their Unit2G Stat~s inc~ne under circumstances which made it

- 62 -

orderly administration of United States tax rules affecting
foreign income.

These Regulations provide the guidance needed

to translate foreign income statements into the "earnings
and profits" of our tax laws.
Allocation of Income - Section 482
With this done, the Treasury has regarded as the next
order of business the establishment of a satisfactory framework for the administration of the rules governing transactioo8
between the domestic and the foreign units of our business
concerns with foreign activities.

In our tax parlance, this

centers on the application of section 482 of our Code,
authorizing the Commissioner to allocate income and credits
between related units of an enterprise so as to prevent
evasion or clearly reflect the income of the various units.
While this section, whose presence and application are clearly
necessary to a sound income tax system, had its original
technical development in connection with transactions between
domestic units of a United States enterprise, its recent
importance is almost entirely in terms of its application to
the foreign income field.

The very variety and number of tr.~·

actions in this field that lie within the reach of the

- 61 it holds for a growing network of tax treaties represent a major

step in our political and economic relationships with these
countries.
II.

ADMINISTRATION OF UNITED STATES STATUTORY
TAXATION OF FOREIGN INCOME

In the Montreal paper I stressed the importance of develop- .
ing a sound administration of the United States statutory tantion of foreign income.

This task is a formidable one:

The

field is relatively new as tax matters go, and the needed experience, analysis of detail, and synthesis of concepts are still
in a formative stage; the international business activities to
which the rules relate are rapidly expanding in importance and
number, and the variety of transactions and business relationships involved thus steadily increases; the tax rules moreover
are constantly being buffeted by the shifting exigencies of
balance of payments problems.

But all of this merely underscores

the challenge of the task, and the Treasury is seeking to

re8po~

in a fitting manner.
As I stated in my Montreal paper, some matters have

alr~dy

been accomplished. The Regulations for the 1962 Revenue Act pro·
visions regarding foreign income have been issued.

Further,

these Regulations provides the tax accounting concepts essentU1

- 60 -

The Subcommittee of the Senate Committee on Foreign Relations has performed a useful public service in holding last
August full hearings on the Thailand treaty.

The published

Hearings contain a complete technical explanation of these
United States provisions, as well as a detailed analysis of
the entire treaty and a description of factors affecting negotiations with less developed countries.

They also contain the

views of organizations representing United States concerns tMt
invest abroad, and the views are favorable to these investment
provisions and to the treaty itself.

The only matter referred

to as needing further consideration by the Treasury is that men·
tioned earlier in connection with the definition of permanent
establishment.
Necessarily as experience is gained the present pattern
described above that has so far evolved in our negotiations
the less developed countries can be improved.

~th

The progress of

these negotiations is encouraging, for it indicates that the
United States and these countries can reach a treaty arrangement
that each regards as fair and conducive to improved investment.
trade, and cultural relationships.

This attitude and the pro~

- 59 -

the United States transferor.
tax would apply.

Below this level of control Our

Moreover, there is frequently a tax in the

other country as well, even in the case of 80 percent control.
The treaty provision deferring these taxes until the stock is
sold removes an impediment to the transaction, and is of minor
effect on the United States revenues, since a foreign tax that
would be incurred in the absence of the provision would generally be creditable against the United States tax.
Finally, as a step in simplifying the process of contributions to charitable organizations in these countries, a

provisio~

may be inserted, as in the Philippine and Thailand treaties but
not Israel, to permit a deduction against United States tax of
contributions made directly to such organizations.

Under our

statute the deduction could be obtained if made indirectly
through a United States organization. The treaty provision
requires that the foreign organization must meet the standards
established in each country for a charitable organization.

may be observed that our Internal Revenue Service has experience
in passing on the charitable character of foreign

organizatio~

as a result of its administration of the rule under our statutor.
lal-] that a foreign organization which meets our test of "charitable': is not subject to any tax on income it receives from the
United States.

- 58 -

The treaty process also permits complementary modifications where appropriate in the tax laws of the other country
which are conducive to improved international trade.

Where

the other country is not yet ready to make certain modifications, or is more concerned with continuing a somewhat
restrictive approach to foreign investors, then the investment
credit need not be extended.

While it may well be that in

most of these cases a treaty may presently not be negotiable,
this need not always be the result, as the Philippine treaty
indicates.

That treaty does not contain an extension of the

investment credit.
The investment credit applies to investments of cash and
tangible property.

The Israel and Thailand treaties, and the

Indian draft, also contain a complementary provision that seeks
to offer encouragement for the investment of technical assistance.

Here the approach is that of a deferral of both our

and that of the less developed country on any gain that would
otherwise be recognized when intangible assets, such as patents,
processes or know-how, are exchanged by a United States investor
for stock in a corporation of the less developed country.
Under our statutory law this deferral would, where "property"
is involved, be poss ible if 80 percent control is obtained by

• 57 -

The United States in these negotiations is quite clear on
its view that extension of the investment credit is appropriate
only where the other country is receptive to our investment
and where its tax system, taken as a whole, does not involve
measures that can be regarded as significantly working at
cross purposes with this investment.

In many cases the exist-

ing tax systems of less developed countries do not meet this
standard.

But the treaty process itself permits the foreign

country to modify its tax system through the treaty and thus
deal with the provisions of its tax law which act as disincentives to investment from the United States.

For example, the

existence of a complex of corporate taxes and withholding taxes
on dividends in a less developed country, which brings the
effective rate of tax on profits earned there above the general
level of the United States corporate tax, creates a tax barrier
to our investment in such countries.

It would generally be

difficult to justify a tax credit for United States investment
in such a country unless that country is prepared to reduce itl
taxes to the level prevailing in the United States.

This

oft~

can be done by a treaty but not otherwise, since that country
may not be prepared to reduce its taxes on its own nationals or

those of third countries.

- 56 -

assumpations as to the time pattern of distributions, discount
rates, and the like.

And many countries recognize the advan-

tages enumerated above, both to the investor and the less
developed country, of the credit approach over the tax sparing
approach.
In this light the extension of the 7 percent credit by
treaty is the negotiating tool which permits the United States
to achieve tax treaties with less developed countries which
both we and they can regard as fair and balanced.

The impor-

tance of this provision thus basically lies not in the benefits
it extends to investors, but rather in what it thereby obtains
for the United States -- a sound treaty system with the les8
developed countries with all the advantages such a system
provides -- for both parties to the treaty -- for improved
investment, trade, and cultural relationships between the
United States and these countries.
As a consequence, the provision is

~ncorporated

in the

Thailand and Israel treaties and in the India draft.

Its

technical provisions,as expressed in the Israel draft, are of
course subject to improvement as experience is gained.

More-

over, the ?rovision can be terminated after five years without
a termination of the entire treaty.

- 55 -

on the receipt of income in the United States from the

forei~

investment, as do tax sparing and tax exemption, it does not
encourage quick repatriation of profits.

Since the credit

does not turn on foreign tax concessions, as does tax sparing,
it does not have the capriciousness of that device and its
capacity to encourage "concession competition" among less
developed countries, nor does it transfer from the United States
to a foreign country the decision as to whether a tax benefit
is to be conferred and, if so, the extent of such benefit.
Since the extension of the investment credit to less developed
countries would but follow the treatment accorded domestic
investment, it does not involve the treaty process in favoring
the foreign investor as against the domestic investor in a
matter closely linked to the rates of tax, as did tax sparing.
The less developed countries so far have responded
favorably to our suggestion that extension of the 7 percent
investment credit is a recognition of their desire for an
encouragement of capital inflows.

We have been able to demon-

strate, moreover, that the monetary benefits to the investor
from this credit are generally equivalent in amount to what it
would receive from a tax sparing approach, given reasonable

- 54 respect to the encouragement of capital inflows.

I would, so

tar as the United States is concerned, remove an impediment
to investment in less developed countries and thereby in this
respect establish a general parity of treatment between
domestic investment and investment in the. less developed country
In establishing this parity and thus assisting investment in
these countries, we \vollid also be pursuing a policy reflected in
other tax legislation recently adopted by Congress.

Thus, the

Revenue Act of 1962, which was directed to "tax-haven" or
"base companies" abroad, contains a number of provisions favorable to investment in less developed countries as compared with
industrialized nations.

Moreover, under the interest equaliza-

tion tax, loans made to enterprises in less developed countries
and investments therein are treated in the same way as domestic
loans and investments and thus are exempt from the tax.
~reover,

t~1e

investment credit approach is far more appro-

priately suited to less developed countries than the tax

spari~

approach or the exempt ion of income approach, from the standpoint
of equity, efficiency, and administration.

Since the investment

credit operates on the act of investment, it eases the risk of
investment at the very outset.

Since the credit does not turn

- 53 -

economic activities.

A tax sparing credit would equally be

undesirable since it would operate capriciously, providing
the largest tax benefits to our investors in less developed
countries having the highest nominal tax rates and without
any necessary relationship to the fundamental economic needs
of a country or to such policies as the "Alliance for Progress."
Moreover, such a credit would stimulate the rapid repatriation
of profits from less developed countries rather than the
reinvestment of profits in those countries.
Clearly we need some provision comparable in purpose if
IS

the United States are to obtain treaties with less developed
countrie&.

As a consequence the United States has offered to

extend by treaty to these countries the 7 percent credit that
now exists in the Internal Re'V'enue Code for investment in the
United States.

Since in the Code this credit does not extend

to investment abroad, its adoption established in effect a
preference for domestic investment as compared with foreign
investment.

Consequently, the extension of the 7 percent invest·

ment credit by treaty to these countries offers itself as a
fitting approach to the recognition those countries seek with

- S2 -

exemption by the industrialized country of various forms of
income received by its taxpayers from activities in the les8
developed country.
sparing credit".

Another approach is the so-called "tax
In treaties incorporating such a provision,

the capital exporting country agrees to allow a credit against
its tax, not only for the taxes actually paid to the less
developed country, but also for the taxes that would have been
paid to the less developed country if that country had not
reduced its income taxes under some special tax concession
scheme.

There appear to be some 20 "tax sparing" treaties in

force between industrialized countries and the less developed
countries.
In our view these approaches are undesirable.

Thus, tax

exemption of income derived from investment in less developed
countries would be viewed as a highly inequitable provision
by American taxpayers engaged in business in the United States
and would have a highly erratic effect on the relative tax
burden of foreign producers as compared with those engaged in
domestic production.

It would be baSically inconsistent with

the principle of the foreign tax credit which seeks to maintain
neutrality in tax burdens as between domestic and foreign

- 51 business and cultural visitors, and ships and aircraft are
overwhelmingly from developed countries to less developed
countries.

Perhaps the only exception is that of students

and trainees.

This does not mean that the treaty provisions

are wrong or unfair in concept, but simply reflects the
economic relationships on which these international tax standards are being superimposed.

Yet all of this understandably

presents problems to the less developed countries -- problem
of revenue loss, of negotiation, and of justification to their
peoples.
Under these circumstances these countries have sought
some concession from the developed countries.

This search,

in the light of their desire for additional investment from
abroad, has centered around treaty provisions that they regard
as offering encouragement to this foreign investment.
As a consequence, the other industrialized countries entering into tax treaties with less developed countries -- and
there appear to be over 30 of these treaties -- have found
it necessary to incorporate a provision which the less developed countries consider a stimulus to capital inflows in order
to obtain a treaty with them.

One approach followed involves

.. 50 -

Other 3ubstantive Provisions
These treaties ~enerally contain the other standard substantive provisions, such as those affecting teachers, students
and trainees (but with more emphasis on their part on this
aspect and perhaps ivith more liberal exemptions at source being
sought), government personnel, and pensions and annuities.
Procedural Provisions
These treaties also contain the customary procedural provisions, such as consultation, exchanges of taxpayer
and legal information, and taxpayer claims.

informatio~

The Israel treaty

and the Indian draft include the removal of procedural barriers
to the effectuation of agreements on the allocation of profits
and the source of items of income.
Provisions on the United States Side -- Investment Credit,
Technical Assistance and Charitable Contributions
Tne treaty pattern described above represents significant
accommodations by the less developed countries to the interMtional standards that have evolved in treaties between developed
countries, but do not in turn represent any real concessions onl
the part of the developed countries.

The flows of investment

income -- dividends, interest, royalties -- and of export trade

- 49 -

In all of these situations -- dividends, interest, and
royalties -- these countries are not basically concerned about
our 30 percent withholding rate since they do not receive
investment flows from the United States.

As a matter of

treaty reciprocity, however, they ask for provisions that
match their concessions.
Ships and Aircraft
These countries, paralleling developed country treaties,
consent to reciprocal exemption for air and ship transportation, though sometimes the latter will receive only a reductioo
to 50 percent of the otherwise applicable tax rather than
complete exemption.
Temporary Visitors
These countries, here also paralleling to a considerable
extent developed country treaties, consent to exempt temporary
business visitors from their taxes.

The standards will differ

somewhat, hut usually involve a limited period of time, such
as 183 days, and a limitation on the amount earned, sometimes
applied on a daily basis in the case of entertainers and other
performers.

48 not in the case of the Philippines in part because its effective rate exceeded 48 percent.
It should be recognized that in their treaties with other
developed countries, the above countries adopt largely similar
app~oaches

as respects their withholding rates.

Interest
These countries appear even more hesitant about reducing
withholding rates on interest.

They are willing to do so if

the lender on our side is a Government agency, where exemption
is granted, and in the case of Israel if it is a bank, where
a 15 percent rate is used.

But otherwise they appear so far

to put revenue maintenance ahead of even possible reduction in
interest costs to their debtors where the foreign lender is
passing on the withholding tax to the borrowers.
Royalties
The royalty area presents a mixed approach.

Some countriel

as Israel and Thailand, reduced their withholding rates to 15
percent.

Others are not desirous of taking this step J but are

willing to permit royalties (and rents) to be taxed electively
on a net income basis.

- 47 tax and a 30 percent withholding tax for an effective rate of
Sl percent on dividends going abroad (in the absence of a
domestic incentive provision).

When all profits net of corpo-

rate tax are distributed this produces an excess credit of
8.4 percent.

Thailand reduced its withholding rate from a

maximum of 2S percent to 20 percent, with a corporate tax
rate of 2S percent (in the absence of an incentive provision),
giving an effective rate of 40 percent -- the prior rate was

43-3/4 percent, which resulted in an excess credit of about
1 percent for a corporate shareholder.
2S percent withholding rate.

Israel retained its

Israel imposes a corporate profits

tax of 28 percent plus a tax of 25 percent on corporate net
income after profits tax less any dividends distributed (in the
absence of an incentive provision).

Dividends distributed are

thus subject to the corporate profits tax of 28 percent and a
withholding tax of 2S percent, leaving an effective rate of 46
percent, below our 48 prcent rate but resulting in an excess
credi t in the absence of gross up of about 3.6 percent.

As will

be discussed below, the United States applied certain investmmt
provisions on its part, such as extension of our 7 percent
investment credit in the Thailand, Israel and Indian cases, but

- 46 -

exclusively or almost exclusively for the foreign taxpayer.
Aspects of this approach are a cause of concern to some
United States taxpayers who have been securing orders for
their goods through a subsidiary formed in the other country.
As a consequence, we will carefully explore with thes8
countries ways of meeting this situation which do not upset
these parent-subsidiary exporting arrangements or other appropriate arrangements.
Dividends
Some of these countries are hesitant to reduce their withholding rates on dividends, fearing a loss of revenue.

Where

relevant they point out that extensive incentive provisions of
their laws often eliminate or materially lessen the corporate
tax rate, so that the effective rate of total tax is well
below 48 percent. The United States, where relevant, calli
attention to the desirability of reducing over-all effective
rates to 48 percent, and even lower where not grossing-up the
foreign dividend produces an excess foreign tax credit.
foreign reaction differs.

The

The Philippines were not ready to

make any reduction in withholding rates on investment income,
leaving that country with a 30 percent internal corporation

- 45 -

meeting the problem caused by the absence of, or incomplete,
source rules in the statutory provisions of these countries.
Non-Discrimination
The OECD Convention respecting non-discrimination of
foreign nationals residing in the country, permanent establishments, and domestic corporations owned by nationals is
being follmved.
Permanent Establishment and Industrial Profits
The OECD approach is generally followed in the definition
of permanent establishment and on the treatment of industrial
and commercial profits, with a few exceptions.

One is that

the force of attraction approach is still being applied, as
perhaps simpler of administration, though the desirability of
continuing to use this approach is an open question.

Another

is that some countries (not Israel) desire specifically to
treat as a permanent establishment an agent who regularly
secures orders in the country for the foreign taxpayer or
maintains a stock of goods from which delivery is regularly
made.

If such an agent is an independent agent, however, he

Hill not constitute a permanent establishment.

These countries

may desire to specify that an agent is not independent who acts

- 44 The three recent treaties, with the Philippines, Thailand, and
Israel, largely exhibit that pattern, with the Israel treaty
evidencing the arrangement and, in general, the technical
drafting which we regard as desirable.
The following is a summary of the developing pattern:
Arrangement and Drafting
These treaties, while influenced by the DECO Draft, are
not likely to be as closely tied to that draft in wording or
arrangement.

The treaty with Israel, for example, follows an

entirely different arrangement of the treaty provisions, and
one which we believe is more manageable.
Relief from Double Taxation
The countries so far have followed a credit approach to
relieve double taxation, as does the United States.

We may

not see therefore as much resort to the exemption approach,
or the combined exemption-credit approach, that we see on the
part of our treaty partners in our developed country treaties.
Source of Income
The treaties generally contain a description of source
rules for various items of income, following international
standards.

In some cases this treaty approach is a way of

- 43 -

Indeed, we are likely to overlook the fact that this process
of treaty extension has given us a set of treaties with a
number of less developed countries which have achieved independence.
Vie

1.1

also have treaties with Honduras and Pakistan --

well as the three pending in the Senate -- to complete the
present list of our treaties with independent less developed
countries.
These treaties in one sense are in an evolutionary period,
especially since for many of the countries involved the very
negotiation of tax treaties involves a new activity.

Moreover,

many of these countries are negotiating against a background of
evolving internal laws, as their tax policies change and as
technical improvements are made under the pressure of modern
commercial relationships and transactions.

Nevertheless, a

certain pattern is being achieved in these treaties, which we
are seeking to ut i1ize as we extend the range of our negotiation.

Cyprus, Jamaica, Malawi, Nigeria, Sierra Leone, Trinidad and
Tobago, and Zambia (United Kingdom treaty extensiory, Burundi,
Congo (Dem. Rep. of), and Ruanda (Belgium treaty extension);
also Netherland Antilles (Netherlands treaty extension).

- 42 -

in the same goal.

\~e

are not alone in recognizing these

values, for many of the other developed countries are engaged
in considerable efforts to achieve a network of treaties with
the less developed countries, and indeed are succeeding.
This in turn behooves us to keep to the task, lest we lose the
advantage which others find in this very useful device for
ordering some of the relationships between the developed and
less developed worlds.
Fortunately, our efforts to achieve a proper set of treaties
are succeeding.

we have negotiated treaties with the Philippines

Thailand, and Israel, in that order, and these are before the
Sena te.

vIe

have agreed on a draft with India, and are engaged

in completing negotiations commenced earlier with Taiwan.

are informally discussing with several Latin American countries
the appropriateness of negotiations.

Also, existing treaties

are being revised; thus we are considering with Honduras, whose
treaty was the first we negotiated with a less developed country,
appropriate modifications of that treaty.

As another illustra-

tion, "ve are engaged in negotiations with Trinidad and Tobago to
explore revisions in a treaty which has its origin in the ext~·
sion of our United Kingdom treaty to that country on its indep~-

- 41 Uniformity and clarity never stand as impassable barriers to
compromise solutions.
of no treaties.

If they did, we would have the unifondty

Nor should uniformity with the past block

improvements that are now seen to be desirable.
All of this is not said to disparage the goal of

unifond~

and the United States seeks to achieve it as far as possible.
But in practice we know we will fall short.
step is to clarify the disuniformity

An offsetting

to state through Regula-

tions or in other ways when and to what extent different worda,
different phrases and different approaches in various treatiea,
or even the same treaty, really embody differences in end
result and are so intended.

Despite delays that have occurred,

we therefore are working on Regulations that would maintain
order among the variations.

Whether this can be done within

the framework of a master set of treaty Regulations or whether
some other device is more useful remains to be seen, but the
end we seek seems clearly necessary.
Less Developed Countries
In my Montreal paper I described at length the interest.
of the United States in achieving treaty relationships with
less developed countries, and the interests of those countrie.

- 40 -

Other countries appear to agree with this view, and
clauses to this effect are being incorporated in our treatie,.
as in the German and the Netherlands protocols and the Israel
treaty.

It has also been agreed with Belgium that the languap

of our existing Belgian treaty has a similar effect.

We relln

this result as a significant step toward the goal of achieving
a proper framework to meet the problems of international allocation.
Drafting and Interpretation
Those who read and apply treaties -- as well

all per.ou

with orderly minds and habits -- earnestly urge uniformity in
the drafting of tax treaties.
fully agree in principle.

And all treaty negotiator. will

However, each negotiator usually M.

his mind set on his own pattern of a uniform and orderly treaty,
And there is no negotiator who will place uniformity above
agreement when the hour is late and a seemingly intractable
problem yields to a welcome solution that departs "just a bit"
from the words in other treaties and may "possibly" have some
ambiguities which the negotiators feel any reasonable men will
later be able to resolve if the cases actually arise -- jUlt al
the negotiators have so successfully resolved their problem!

- 39 It is recognized that it will take time to evolve agreed
upon standards.

But the United States believes that through

treaties we should now ensure that any agreements that are
reached between governments and taxpayers in particular e •••• ,
under present standards or those that will be formulated,
should be capable of being implemented in full.

Aa matter.

now stand, however, procedural and other barriers may prevent
this.

Thus, since disputes of this nature often take consider-

able time to resolve in particular cases, an agreement may be
reached calling for a reduction in the tax previously p.id to
one of the countries only for the parties to find that the
statute of limitations has run on the filing of a refund elai.
or the payment of the refund.

Such a procedural barrier would

result in international double taxation. To avoid impediment.
of this nature, the United States believes that treaties should
provide that an agreement once reached shall be fully implemented, and a refund allowed in accordance with the agreement,
despite such procedural or other barriers.

Such agreements

could relate either to the allocation of profits or to the
source of an item of income.

In the latter case the impl.-m-

tat ion should extend to the consequent effect of the agreed
source on a foreign tax credit.

- 38 -

the exhortation to the Contracting Parties to resolve any such
situation if well founded; and the desirability of consultation between the Contracting Parties to settle interpretative
and other questions.

In addition, any excess of "interest" or

"royalty" payments over a fair and reasonable consideration 11
not regarded as covered by the interest and royalty articl •• ,
but the excess instead is taxed in a manner appropriate to the
situation, which presumably will usually be as a dividend.
The United States seeks to follow these provisions in it.
treaties, since they represent a necessary technical framework.
But we feel that the day-to-day problems of international
allocation cut deeper and will require further substantive
if a proper international framework is to be achieved.

nUll

Th.

main need, simply stated but very difficult in execution, i. to
achieve standards and criteria furnishing guidance on what are
appropriate allocations in the great variety of cases that
arise -- the payment of interest on inter-company loana, the
payment of royalties on inter-company licenses, the fixing of
prices on inter-company sales, the reimbursement of expen.e.
incurred for inter-company services, and so on.

This matter

is discussed further in connection with our statutory rule••

- 37 for I:ne ",\.;ithheld taxI[, \Vill discriminate against the shareholder investors from abroad if the benefits of that credit
are not extended to the latter.

The non-discrimination clause

in the OECD Draft can be regarded as implying that the task of
avoiding discrimination in this context falls on the country
of source.

The possible methods of achieving this result

would of course have to be explored.

And the effect of any

such step on the investment relationships in the other country,
i. e., the relationship between its taxpayers who invest at

home and those who invest abroad (and thus become the "shareholder investors from abroad!: in the first context) must be
kept in mind.

These also are matters not fully discussed in

the OECD Convention and thus require further attention.
Allocations of Income
TIle DECD Convention continues the conventional clauses
regarding allocation of income:

the allowance of appropriate

deductions to a permanent establishment of all expenses connected with it vlherever incurred; the arm's length standard of
allocation between related persons, such as a parent-8ubsidu~
relationship; the entitlement of a taxpayer to present to his
:Jovenlment a ·::ase of alleged action contrary to the treaty and

- 36 -

Non-Discrimination
Another facet of international neutrality lies in the
comparison of the treatment between domestic taxpayers and
the taxpayer from abroad.

The older version of tax treaties

zenerally sought non-discrimination between the domestic taxpayer and the foreign national residing in the country, and
sometimes extended the coverage to a permanent establishment.
The DEeD Convention, in the interests of a wider neutrality,
further extends this non-discrimination to domestic corporations
of a country owned by nationals of the other country.

The

United States believes the OECD approach is desirable, and kis
contained for example in the Netherlands protocol.

Generally,

it would appear t:1a ~ the inclusion or application of this clause
shouJd not involve serious policy differences, and neutrality
of this type should be achievable.
The effect of the varying corporate-shareholder tax

patte~

described above on neutrality between domestic investors and
investors from abroad may, however, be in need of further
analysis.

For example,

corporate tax system under which part

or all of the corporate tax is regarded as a withholding tax on
the shareholders, so that the shareholders are allowed a credit

- 35 One other matter requiring further exploration is
that of the so-called "round trip dividend".

If a parent

in country A receives a dividend from its subsidiary in
country B, there will usually be a withholding tax paid
to country B on that dividend.

If residents of country B

own stock in the parent, then on payment of a dividend to
them by the parent, there will be a withholding tax by
country A.

One can ask whether, as a consequence, this

"round trip" is too heavily taxed.

Of course the parent's

dividends to country B are not dollar for dollar traceable
to the dividends it received from its subsidiary in that
country.

But still some amounts have taken a "round trip".

Further, there are at present very few corporate parents
in the world where such flows from and to a country would
be of a size
/XxxxxxxxXxxxxx,xxxXxxx~ in which the amounts of both
flows were significant
pitfalls of

possible

And the technical patterns and the
solutio~

are not readily apparent.

Still, since the "round trips" are likely to increase in
number and significance, the problem should commend itself
to the tax experts for study.

- 34 -

tax structure.

There may be reasons, such as those

a8sociat~

with a balance of payments posture, to depart temporarily

fr~

time to time either to favor investment at home in the cal. of
a deficit country, or to encourage investment abroad in the
case of a surplus country.

But even here the temporary swings

could be made more appropriately through devices -- such as the
interest equalization tax in the United States or foreign
exchange measures abroad -- not associated with the basic inca.
tax structure lest they become embedded in that structure and
resistant to change when the temporary need has passed.

The

presence of investment incentives, such as investment credit.
or allowances or rapid depreciation, may also impart an unneu·
trality through being limited to domestic investment.

As far

as possible, however, the achievement of neutrality between

ment at home and investment abroad should be a part of the balie
structural design of a

C Ol.m.

try , s tax system.

But it also would

seem appropriate to use the treaty medium to achieve the alteration in unilateral statutory treatment necessary to reach this
neutrality.

Since the OECD Convention does not really deal

with this aspect, it is an area where further exploration i8
needed.

- 33 -

to occur where a country adopts a corporate-shareholder tax
relationship under which a credit is given to domestic shar.holders for part or all of the corporate tax on domestic
corporations.

If a comparable credit is not extended by the

country to its domestic shareholders who invest in foreign
corporations, then the tax system will embody an unneutrality
favoring investment at home.

The United Kingdom, when it us.d

an integrated corporate tax with a grossed-up shareholder
credit, avoided this unneutrality by allowing its sharehold.rs
by treaty a credit for a foreign underlying corporate tax.

It.

treaty partners sometimes reciprocated, as in the case of the
United States - United Kingdom treaty where the United State.
gave its shareholders in United Kingdom corporations a credit
for underlying United Kingdom corporate tax.

But such reci-

procity would not appear to be a necessary ingredient, ainc. it
in turn may inject an unneutrality between the reciprocatinl
country's investors at home and its investors abroad.
It would seem that an appropriate goal in international ta
relationships is the achievement as far as possible of a basie
neutrality in tax effect between investment at home and iDYI.tment abroad.

This neutrality should be a long-range aim of •

- 32 rate to 25 percent in such a situation.

The Belgian protocol

achieves reciprocal rates of 15 percent on registered share.,
thus reducing the otherwise applicable Belgian 18.2 percent
effective rate, while allowing a period of time to explore
the administrative problems of applying the 15 percent rate
to bearer shares and taking recognition of the fact that in
actual practice the rate on the bearer shares typically held
by American investors rarely exceeds 15 percent.
The concepts enumerated above will meet

satisfactorily.~

of the varying situations presented under the influences ear1i.
mentioned.

But it is quite possible that further concepts are

needed to achieve a freer flow of international investment and
proper international tax treatment.

Some corporate tax struc·

tures result in an unneutral tax effect between those of a
country's taxpayers who invest abroad and those who invest at
home.

This unneutrality may not always be initially intended

in the structural design, but rather may represent the way the
pieces fitted together in the end.

MOre often it will be a

consequence of a structural design chosen for internal rea.md
but a consequence that becomes a policy of steps are not tak.
to prevent the unneutrality from persisting.

This is

mQ8tli~

- 31 -

.:e prefer a definition of the parent-subsidiary relationship that uses a 25 percent stock ownership test, but which
would permit that degree of ovmership to be met either by a
single parent company or by several corporate shareholders in
combination.

Also, adequate attention must be paid to prevent

the reduced dividend rates, as well as reduced rates on interest
and royalties, from flowing to nonresidents of a treaty

count~,

since He do not desire to encourage the tax-haven fonn for the
holding of interests in the United States.

(Our treaty with

Luxembourg and the Netherlands Antilles protocol reflect this
approach.
TIle recent protocols concluded with Belgium, Germany and
the Netherlands are in keeping with these concepts.

The first

two adopt a 15 percent rate, reflecting the desire of those
countries that the withholding rate be 15 percent for both
portfolio and parent-subsidiary investment; the Netherlands
protocol nas the OEeD rates of 15 percent and 5 percent.

The

':';erman protocol provides the protection needed by a country
using a lo;ver rate for distributed profits against a dividend
Jistribution followed by immediate reinvestment, where the
latter route is advantageous tax wise, by raising the German

- 30 -

The United States' basic position regarding the dividend
provision is, to a considerable degree, reflected in its
recent treaty activities.

We stand ready to offer any

count~

the OECD recommended rates of 15 percent on portfolio investment and 5 percent on parent-subsidiary investment.

Some othl1

countries chose, however, for a variety of reasons, not to
adopt the 5 percent rate on parent-subsidiary investment so

as a consequence some of our treaties will, as a reflection of
treaty negotiations, contain rates of 10 percent or 15 percent
for that investment.

But, since the United States offers the

OECD rate of 5 percent to all, the variations in our treaties
this reflect the unwillingness of other countries to adopt tMt
5 percent rate.

We believe, however, that countries should

8ft

to present a uniform approach to all their treaty partners,

thus as far as possible fix on a set of rates that they will
offer to all comers rather than seek to differentiate one
country from another.

In addition, the rates of withholdingU

that are adopted should be reciprocal, in that a country should
not be able to claim higher treaty rates than the rates it
desires us to adopt in the treaty.

The other country is free

of course to prefer rates lower than those which it seeks of~

- 29 ll~y

vary:

it may be of the gross-up variety, and therefore

accurately reflecting the part of the corporate tax treated
as withholding tax (the former United Kingdom tax, the Belgian
tax, and the new French tax); it mayor may not involve refunds
to taxpayers who otherwise cannot use the full credit; it may
or may not extend to foreigners; it may not involve a

gross-~

credit but only be a flat percentage of dividends received
(the Canadian tax).

And a country which treats part of its

corporate tax as a withholding tax may also have as a collection
device a supplementary withholding tax on dividends similar to
its other internal withholding taxes.

In addition, in some

countries bearer instruments may predominate and thus restrict
to some extent the degree to which certain tax approaches can
be effectively implemented.
These differences in revenue significance, in corporateshareholder tax structure, in the differing policy goals and
attitudes respecting the encouragement of private savings and
investment that they reflect, and in the prevalence of the
bearer or registered share form of corporate shareholdings all
combine to shape a country's approach to the treaty provision
governing dividends.

Given all this, one cannot expect unUo~1

- 28 -

I,. parent- subs idiary relationship requires a stock ownership by

t':e parent of 25 percent of the stock of the subsidiary.

But

the treatment of dividends is one of the treaty provisions,
perhaps the principal one, that is generally the subject of
real differences of opinion and hard bargaining between treaty
countries.

Since dividends usually represent the main item in

the income flows between countries, the revenue importance of
the withholding taxes on dividends is usually significant,
certainly more so than for the other items.

Also, one

count~

may find that its portfolio investment abroad is more significant that its direct investment, whereas the opposite could be
the case for the other treaty country.

Moreover, the rates of

the underlying corporate tax will vary from country to country.
Further, the form of the underlying corporate tax also will
vary;

some countries may have a straight corporate tax (the

United States and the new United Kingdom taxes); others a tax
that provides a lO¥,Ter rate to the corporation for distributed
profits (the German tax); others a tax all or part of which i8
regarded as a withholding tax on the shareholders so that the
latter receive a corresponding credit against their indivi~l
income tax on their dividends.

The form of this credit in

twm

- 27 -

approach is based on the desirability of a free movement of
capital and the difficulties of effectively taxing capital
gains in the source country in an orderly way.

Consequently,

the German and Netherland protocols provide generally for the
exemption at source of capital gains.

The German protocol

excepts from exemption short-term gains, on assets held for
six months or less, where the taxpayer has resided in the
source country for 183 days or more.

This exception in the

case of a taxpayer with an extended presence, i.e., 183 days,
in the source country is likely to appear in our various
treaties.

A stay of that length seems to warrant a tax lia-

bility to the source country, especially where the gains are
speculative in nature as in the case of assets held for a short
period of time.

Moreover, in many, country, . such a stay will

make a taxpayer a "resident", and hence subject to tax on
capital gains.

This "183 day" exception may take variant forms I

as our experience develops and the attitudes of other countrie.
are formed.
Treatment of Dividends
The OECD Draft recommends, as appropriate international
withholding rates on dividends, 5 percent on parent-subsidia~

oi vidends

and 15 t-,ercent on dividends on portfolio investment,

- 26 -

investment activities in a separate subsidiary solely designed
for this purpose.

For these reasons the approach has been

adopted by the United States in the German and Netherlands
protocols.

Of course any new concept and its terminology carry

their interpretative problems at the edges of the concept, and
this will be true of such phrases as "effectively connected"
and "attributable to", just as it has been true of other phrasel
and concepts in the treaties.

Nor can we here expect full

uniformity of treaty terminology, as the combination of

emergi~

experience and negotiating preferences will produce some varu·
t ions.

\Je

hope through Regula t ions, however, to offer guidance

as the questions emerge and to place any language variations in
their proper perspective.
Capital Gains
The OECD Draft Convention, largely following European prac·
tice, restricts the taxation of capital gains to the country of
residence, except as to gains on real property and assets
effectively connected with a permanent establishment.

While

this approach is at variance with some of our prior treaties,
it often has been followed by us in the past.

Moreover, the

- 25 -

permanent establishment, and taxed at the rates and in the
manner applicable to business enterprises.

This meant, for

example, that investment income which would otherwise have
been taxed under the treaty at relatively low withholding
rates or fully exempt, remained subject to tax at regular
rates.

The OECD draft abandons this force of attraction

approach and therefore leaves the investment income of a taxpayer having a permanent establishment to be separately

treat~

except where the asset giving rise to that income is "effectivel
connected" with the permanent establishment.

Also, only the

industrial or conmercial profits "attributable to" a permanent
establishment are to be subject to tax, and any industrial or
commercial profits not so attributable are, lacking the relationship to a permanent establishment, exempt from tax under
this approach.
This approach has much to commend it, since the

separ.t~

it permits between trading or other business activity and

ment activity makes for a freer movement of capital and goods
between countries.

The approach also makes unnecessary the

steps taxpayers have taken, recognizing the utility of that
separation, to achieve it through isolating the business or

- 24 -

permanent establishments, or branch operations, are relatively
quite few in number, or are generally confined to certain
lines of activity, such as insurance, banking, and natural
resource activities.

Thus, as respects the permanent estab-

lishments of foreigners in the United States, there were less
than sao foreign corporations actively engaged in business in
the United States in 1962, of which almost half reported a
loss on their United States business operations.

The total

amount of income reported by the profit-making branches was
less than $100,000,000, of which over 75 percent was attributable to 53 insurance companies and 14 investment companies,
If the deficit companies are taken into account and the insurance companies excluded from the calculations, the total taxable
income of the 375 other branches is less than $7 million.

~is

figure, however, reflects allowance of the 85 percent dividends
received deduction, without which it might be considerably
higher.
Force of Attraction
Our previous treaty pattern, once a permanent

establish~t

existed in a country, was to provide that all income of the
caxpayer arising in that country was "attracted" to that

- 23 specifical~rto

rnent.

a "place of management" as a permanent eatablbh·

Though this concept was not separately delineated before,

it was in effect recognized as a factor under some prior
treaties) as in the case of the German treaty.

But since it

may be a relatively unfamiliar term in our tax lexicon, the
United States is taking appropriate steps, through

memoran~

understanding, exchanges of letters and the like, together with
its own Regulations, to emphasize that the term refers to
"management" in a substantive and meaningful sense and not to
minor, representational or sporadic activities.

MOre care is

also being given in the treaties to the definition of "industria
and commercial profits" (the kind of income for which the
presence of a permanent establishment is requisite to its

t~·

tion), with the result of greater particularity in the enumeration of types of income not covered by the phrase.
Given, on the one hand, the scope of operations thus
afforded to a business activity before it is regarded as consti'
tuting a permanent establishment and, on the other, the
non-tax factors that point to the use of a foreign

tax~d

subsid1a~

as operations become still more extensive, it seems likely that,

- 22 pattern embodied in it is appropriate for the United
States.
It therefore may be helpful to turn to the more significant aspects of that pattern.

As will be seen later

in the discussion of our unilateral treatment of foreigners
this pattern is also important in the shaping of our statutory rules.
Definition of Perwanent Establishment
Tne definition of permanent establishment set forth
in the OEeD Draft is clearly becoming the model for the
various treaties.

The member countries have recognized

that, while subject to some technical
ambiguities,

th~

deficien~ies

definition is satisfactory over-all.

They therefore have adopted it, improving on it as the
definitional problems emerge.

The provision set forth

in the German protocol is the form the United States is
currently using. This provision is more particularized
than the previous form, and somewhat more permissive in
the operations that can be conducted by a business activity
before it \vill be regarded as having a permanent establishment.

It may be observed that this definition refers

- 21 issues that confront treaty negotiators.

But new issues

constantly emerge, and old issues take different shapes,
so that in some areas the guidance offered by the Convention
seems inadequate.

Perhaps the principal areas in this respect

relate first, to the rates of dividend withholding appropriate
to the varying forms of domestic corporate income taxation
that are being adopted by the member countries, and second,
to the policy and technical problems that are emerging with
respect to the allocation of profits between the components
of international business enterprises.
As for the United States, the recent protocol with Germany
and that to be signed soon with the Netherlands illustrate

significant part of the pattenl which the revision of our
treaties is taking.

The German protocol was recently ratified

by the Senate, and this action, together with the nature of the

testimony at the hearing held on it, indicates that the

- 20 -

Income Tax Convention.

The United States recently con-

cluded protocols with Belgium and Germany, and will
shortly sign a protocol with the Netherlands.

It is cur-

rently engaged in negotiations with France looking to a
revision of the existing treaty, which goes back to
1939

/1- - r -l - \./.::L-

.L.~

and with the United Kingdom to meet the

problems created by the extensive changes enacted this
year in the

Un~~ed

Kingdom tax law.

The effect of the OECD Model Convention on these treaty
negotiations is significant.

While there are differences

in degree among the various member countries in the extent
of their adherence to the language of that Convention, and
indeed these differences vary from provision to provision,
that Convention is always kept in mind by treaty negotiators.

This is, of course, understandable, since the

representation in the OECD Fiscal Committee which drafted
the Convention is composed of the officials chargEd with
the responsibility to negotiate tax treaties for their
respective countries. And indeed for many purposes, that
Convention meets satisfactorily the policy and technical

- 19 10

I~COME

TAX TREATIES

The United States is continuing to maintain an active
schedule of treaty negotiations, along with its participation in the deliberations of the OECD Fiscal Committee.
The treaty negotiations cover a variety of issues, and
extend both to developed and less developed countries.
Developed Countries
The United States now has a full complement of income
tax treaties with the European Common Market countries,
and indeed with most of the developed countries.

Spain

and Portugal remain as the principal exceptions, and
arrangements for negotiations with these countries are
underway.
But the treaty process in the tax field is an ever
changing one, so that we and our treaty partners of the
developed world find ourselves engaged in a wide-ranging
revision of the existing arrangements.

The principal

factors behind this re-examination have been the recent
changes in the corporate tax systems of the European
countries and the adoption in 1963 by the OECD of a Model

- 18 -

it a multitude of varied tax problems that press beyond our
present frame\vork of concepts and analysis.

Intensive legal

and economic thought is required to develop that framework
into one adequate to the task -- a framework that embodies a
coherent logic capable of expansion to meet new patterns and
relationships.

In one sense this is a truly formidable task,

since each of the countries of the world can claim a voice in
the effort.

But the ingenuity and insight promised by this

host of architects should be viewed as welcome assets.

The

task for the United States is to see that in this internatioMl
effort we play a role fitting to our position.

We can do

if all of us with a stake in the outcome -- the Government
and its officials, our taxpayers with international activities
and their advisors, our universities and research institutioM
and their scholars -- ';-lork cooperatively in shaping our contribution.

- 17 The approach of the bill closely parallels the patern now
f'

taken in our tax treaty negotiations.

The bill t however t would

extend these steps to all foreigners promptly and on a unilateral basis.

But to preserve the bargaining power and

flexibility our negotiators need to obtain through treaties
reciprocal concessions from other countries on income our taxpayers derive from abroad, the bill empowers the President to
reinstate the former statutory rules.

The President can do

with respect to residents of a foreign country when he finds
that the foreign country, if requested by the United States,
does not modify its taxes to parallel the changes we are making
unilaterally.

This power of the President can be applied on a

selective basis, country by country and tax provision by tax
provision, and need be applied only when he finds that it 1s in
the public interest to do so in each case.
Conclusion
Current developments in our international tax relationships
underscore the wide range of policy and administrative issues
that are under consideration.

Indeed, the continued rapid

growth in international investment and trade has brought with

- 16 $100,000 United States estate, 7 percent for $500,000,
10 percent for $1,000,000, and 18 percent for $5,000,000.
The corporate investor -- or an individual -- with a business
activity in the United States would find itself taxed at replar rates on any business income and any investment income
"effectively connected" with that activity, whether the source
of the income is within or without the United States.

The

United States would thus obtain its proper tax on this type
of income.

But any unrelated investment income would be freed

from business tax rates and taxed, where its souce is in the
United States, only at the withholding rates we consider
priate for investment income.

app~·

A foreign corporation who ••• toct

is owned entirely for foreigners would no longer be subject to
personal holding company tax liability.

And our "second divi-

dend'tax would only apply to a foreign corporation whose
activity is almost solely confined to operating a branch in the
United States.

These simpler and more logical rules, appliH

to individual and corporate foreign investors, should in a
meaningful way remove tax barriers which our present structure
now presents.

- 15 -

The bill would, in effect, draw back United States source
jurisdiction, both under the income tax and the estate and
gift taxes, to a more realistic and administratively manageable
position.

It would also simplify the tax

the foreigner desiring to invest here.

~Jles

we present to

As a consequence, in

general the individual foreigner investing in our stocks and
securities or real property would find his periodic income from
the investment subj ect only to tax at withholding rates, either
at 30 percent or a lower treaty rate, and not to progressive
rates.

His capital gains would not be taxed.

These results

would not be altered by extensive trading in these stocks or
securities, even where the trading is conducted by a United
States broker who has discretion to act for him.

His real

estate investments would be taxed on a net income basis at
regular rates if that is preferable.

The foreign investor woul(

also see a far lower scale of United States estate tax rates
his United States investments.

The exemption would start at

$30,000 instead of $2,000 as at present, and the top rate would
be 25 percent instead of 77 percent.

The effective rates would

thus be drastically reduced, and would only be 3 percent on a

- 14 and clauses for this purpose are being incorporated in our
treaties, as in the German protocol.

We regard this result

as a significant step toward the goal of achieving a proper
framework to meet the problems of international allocation.
United States Statutory Taxation of Foreigners
The steady attention focused by the United States in
recent years on its balance of payments position has resulted
in an extensive examination of the United States tax
of foreigners who invest in the United States.

treat~t

Against the

background of the "Fowler Task Force" Report to the President
and Treasury recommendations, the House Committee on Way. and
Means has developed a bill, H. R. 11297, now available for
comment before being reported to the House in 1966.

The bill

recognizes that some of the existing provisions of our Code
have become discriminatory and inequitable to foreign investor.
and thus involve a barrier to investment in the United States.
In correcting this treatment the bill avoids at the other
extreme rules that would represent only a desire to attract
foreign investment, rules which would be but mere tax inducements or tax concessions.

- 13 -

the task of establishing the allocation standards to guide
countries in reaching accomodations with each other, and we
are fully assisting the Working Party which that Committee
appointed for this purpose.
Another aspect of the problem is to enSure that any agree·
ments reached between Governments in particular cases, under
present standards or those to be formulated, should be capable
of being implemented in full.

However, as these cases gener-

ally involve a considerable time before agreement is reached
on the adjustment, a taxpayer and the countries concerned ay
find that procedural barriers, such as a statute of limitations
on refunds, may make it impossible to implement the adjustment
in the country that has overtaxed the income.

To avoid this

result, the United States believes that treaties should provide
that a refund be allowed in accordance with the agreement,
despite procedural or other barriers.

Such agreements could

relate either to the allocation of profits or to the source of
an item of income, and in the latter case the implementation
should extend to the effect of the agreed source on a forei~
tax credit.

Other countries appear to agree with this view,

- 12 -

of intangibles, such as patent licenses.

These rules will

involve the determination of a fair profit for an endless
variety of assets that, under the arm's length concept of
section 482, are regarded as transferred in a profit-seeking
transaction.

Both these Regulations must then be coordinated

with the rules of section 862, requiring an allocation between
domestic and foreign source income of expenses not allocable
to specific items of gross income.
These Regulations relate to the proper forrrrulation of our
unilateral rules of allocation with respect to international
transactions.

But since these are international transactions

a unilateral approach by the United States, or any country, is
not sufficient.

The rules of one country must mesh with those

of other countries to avoid double taxation.

Also, each

country must see both sides of the problem

the rules we

regard as proper to allocate income to our parent companies
from transactions with their foreign subsidiaries are the rules
lye must be \. . illing to accept when the subsidiary is here and
its parent is a foreign corporation.

The United States believe.

that the OEeD Fiscal Connnittee is the proper body to undertake

- 11 -

position within the flow of funds from the foreign
and its dividend pattern.

sub8id1a~

This removes impediments to the

orderly repatriation of funds from the subsidiary and make.
it possible for the taxpayer to accept the adjustment without
increasing the transfer of income from subsidiary to parent
more than it considers desirable.
These procedural steps set the stage for the developamt
of appropriate guidelines for the substantive application of
section 482.

To this end the Treasury has already issued

detailed proposed Regulations covering transactions where
assets. or services of a United States parent are made available to its foreign subsidiary -- where money is lent, where
management or other services are rendered, where machinery
and other tangible assets are made available.

Essentially tM

approach is to offer taxpayers a safe conduct pass througb
section 482 through guidelines, based on the costs incurred
the parent and an allocation of those costs to the

sub.idia~

in a manner that follows accepted accounting precedents out.iM
the tax field.

The second set of proposed Regulations. nowb

preparation and far more difficult to develop, will containU.
rules applicable to inter-company sales of products and tr.-~

- 10 -

allocating additional income to the United States unit of the
enterprise -- the foreign taxes paid on the income involved
and thus to avoid double taxation.

In addition, the Revenue

Procedure stated that the Internal Revenue Service would not
pursue for those years adjustments based on applications of
section 482 not clearly required by its previous technical
development.

Through its achievement of an orderly

treat~t

of the pre-1963 years and the consequent very marked reduction
in number and dollar amount of deficiencies under the section
for those years, this Revenue Procedure has permitted the
needed technical development of the section to proceed in an
atmosphere free of acrimonious disputes that would otherwise
have existed.
The second step, in Revenue Procedure 65-17, provide.
rules governing the transfer of income between foreign subsidiary and United States parent intended to reflect an
adjustment correcting an understatement of the parent's

inc~,

as where it charged too low a price for goods sold to the
subsidiary or rendered services to it for an inadquate fee.
The principal impact of these rules is to permit broad flexibility in fitting the section 482 adjustment into a proper

- 9 The Treasury regards as the matter presently having
major priority the establishment of a satisfactory framework
for the administration of the rules governing transactions
between the domestic and foreign units of our business
companies.

In our tax parlance, this centers on the applica-

tion of section 482 of our Code, authorizing the Commissioner
to allocate income, deductions and credits between related
units of an enterprise so as to prevent evasion or clearly
reflect the income of the various units.

The variety and

number of transactions in the foreign area that lie within the
reach of the section have overstrained the level of technical
development that had been achieved in the earlier domestic
application of the section.

The situation thus calls for a

many-faceted implementation of the section so that it may
carry the ne\. . burden placed on it.
Several steps have already been taken.

The first, in

Revenue Procedure 64-54, achieved an orderly treatment of
controversies that had arisen for years prior to 1963 by permitting taxpayers to offset -- against any increase in United
States taxes occasioned by an adjustment under this section

- 8 -

that the United States and these countries can reach a treaty
arrangement that each regards as fair and conducive to improved
investment, trade, and cultural relationships.

This attitude

and the promise it holds for a growing network of tax

treat~s

represent a maj or step in our political and economic relationships with these countries.
Administration of United States Statutory Taxation of
Foreign Income
Allocation of Income and Section 482
The importance of developing a sound administration of the
United States statutory taxation of foreign income is matched
by the formidable nature of the task:

The field is relatively

new as tax matters go, and the needed experience, analysis of
detail, and synthesis of concepts are still in a formative
stage; the international business activities to which the rules
relate are rapidly expanding in importance and number, and
thus the variety of transactions and business relationships
involved steadily increases; the tax rules moreover are constantly being buffeted by the shifting exigencies of balance
of payments problems.

But all of this merely underscores the

challenge of the task, and the Treasury is seeking to respond
in a fitting

n~nner.

- 7 -

encouragement to the investment of technical assistance,
through deferring tax in both countries where intangible
assets, such as patents, processes or know-how, are exchanged
by a United States investor for stock in a corporation in the
less developed country.

iJe believe that extension of the

investment credit is appropriate only where the other country
is receptive to our investment and where its tax system, taken
as a whole and in the light of any modifications made in the
treaty, does not involve measures that can be regarded as
::;ignificantly 'vorking at cross purposes with this investment.
This negotiating approach on our part has met with an affinMtive response by the less developed countries.
The Subcorrnnittee of the Senate Committee on Foreign Relations has performed a useful public service in holding full
hearings on one of these new treaties, the Thailand treaty.
The published Hearings contain a complete technical explanation
of the treaty and a description of factors affecting negotist ions \vith less developed countries.

Necessarily, as experience

is gained, the present pattern that has so far evolved in our
negotiations with less developed countries can be improved. The
progress of these negotiations is encouraging, for it

indicst~

- 6 -

royalties in these treaties do not always match those in the
developed country treaties.

There also is pressure to widen

the definition of permanent establishment and thus contract
the area of trading activities free from tax in these countries,
In addition, since the restrictions on taxation by the source
country that do emerge in these treaties bear in a revenue
sense more heavily on the less developed countries, such
countries seek some provisions on the part of the developed
countries that can be regarded as an encouragement to investment in them.
The European nations have responded through provisions
reducing the burden of their taxes on income flowing back

fr~

these investments, either through an exemption or adoption of
tax-sparing credits.

The United States, emphasizing instead

the encouragement to the investment itself at the time that it
is being considered by the United States taxpayer, is responding through extending to investment in less developed treaty
countries the 7 percent credit now in our law for investment
at home.

This 7 percent treaty credit extends to investments

of cash and tangible property.

A complementary provision offer.

- 5 -

from substantive differences.

There is therefore clearly a

need to clarify the disuniformity -- to state through Regulations or otherwise when and to what extent different phrases
and different approaches in various treaties, or even the sa.
treaty, really embody differences in end result and are so
intended.

The United States intends to improve its Regulation.

in response to this need.
The United States is also engaged in an extensive
of negotiations to obtain a network of treaties with
developed countries.

pro~am

!!!!

We believe that such treaties signifi-

cantly improve the trade, investment and cultural relationships
between the United States and these countries.

Many of the

European nations are also engaged in similar efforts.
these

ne~v

While

less developed country treaties in many provisions

follow those with developed countries, there are quite significant differences arising from the fact that the investment and
trade flows from the United States to these countries is g.ner·
ally much large~ than the reverse flows.

As a consequence, a~

also in the light of the revenue problems of these countries,
the reductions in withholding rates on investment income and

- 4 These concepts cover ground that has been considerably
explored in recent years.

But the new corporate tax

present problems less fully mapped.

syste~

Some of these systems

involve integration of the corporate tax with the individual
shareholders' taxes on distributed dividends, through credits
to these shareholders for the corporate tax.

Their structure,

by limiting those credits to domestic shareholders in domestic
corporations, discriminates against both their domestic shareholders who invest abroad and the shareholders from abroad who
invest in their domestic corporations.

The OECD Convention

does not fully meet these problems, and therefore an analytic
framework for their solution is needed.

Such a framework

should be rested, as far as possible, on two basiCconcepts:
first, the concept of long-range neutrality in a country's tax
system between those of its investors who invest at home and
those who invest abroad; and second, the concept of

non-di8cr~

nation in a country's tax system between its investors at

and investors from abroad.
These treaties, under the pressure of negotiating probl'and inevitable differences among countries and negotiators J will
not ahlays exhibit uniformity in phrasing and arrangement, apart

- 3 -

United States and Europe.

The scope of export activities in

a treaty country can now be enlarged, for instance, by displays and warehouses for the storage or delivery of goods,
without subjecting the exporter to a tax in that country.
Also, in cases where a firm maintains considerable commercial
or industrial activity in a treaty country and therefore is
taxable there on that activity at regular corporate rates, it
can at the same time make investments in that country, or
establish licensing relationships, that will remain subject to
the lower rates of tax which treaties provide for investment
and royalty income.

Investors, moreover, will generally be

free from tax on capital gains arising in a treaty country.
In the important matter of withholding rates on dividends paid
to parent companies in one treaty country by their subsidiaries
in another treaty country, the United States is in favor of the
low OEeD Model rate of 5 percent, and likewise favors the 15
percent rate on portfolio investment.

It also favors the prine

ciples that the withholding rates should be

non-discriminato~·

in that a country should be willing to offer the same rates to

all its treaty partners -- and reciprocal

in that a

count~

should not claim higher treaty rates than the rates it desires
'-25

in tlie treaty.

- 2 -

A consideration of these current developments is now
appropriate.

I shall divide this consideration into three

parts -- income tax treaties, both with developed and less
developed countries, the administration of

Unit~d

States

statutory or unilateral treatment of foreign income, and
United States statutory or unilateral treatment of foreignera.
Because of the length of this paper

I have prepared a

SUDM~,

which precedes the paper.
SUMMARY

Income Tax Treaties
The United States is engaged in an extensive revision of
its income tax treaties with deve10eed countries, prompted by
the recent changes in the corporate tax systems of the Europua
countries and the adoption in 1963 by the OECD of a Model Inc.
Tax Convention.

The protocol with Germany ratified

recently~

the Senate and the tentative protocol with the Netherlands
shortly to be signed illustrate much of the pattern that this
revision is taking.

This pattern provides a widened flexibilitJ

to international trade and investment activities between the

REJ.'"'1ARKS gy TaE BONORA13LE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
AT THE TAX INSTITUTE OF AMERICA SYMPOSIUM
THE NKlol YORK HILTON HOTEL
THURSDAY, DECEMBER 2, 1965, 7:30 P.M.
TI{E UNITED STATES TAX SYSTEM AND INTERNATIONAL
RELATIONSHIPS - CURRENT DEVELOPMENTS, 1965-6
About a year ego in a paper presented at Montreal before
the Tax Executives Institute, I discussed the United States
Tax System and International Tax Relationships.

Since then

two income tax protocols, with Belgium and Germany, were

si~~

and have been ratified by the Senate; three treaties with less
developed countries, the Philippines, Thailand and Israel, have
been signed and are pending in the Senate; tentative agreements
have been reached with the Netherlands and India; and negoti~
tions are actively being pursued with a number of countries,
including the United Kingdom, France, Portugal, Honduras,
Trinidad and Tobago, and Taiwan.
Since then important Regulations and rulings affecting the
international allocation of income have been issued and more
are in p~·eparation.

A comprehensive bill revising our statutory

income tax treatment of foreigners is moving through the Congre~

TREASURY DEPARTMENT
Washington
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, DECEMBER 3, 1965
REMARKS BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
AT THE TAX INSTITUTE OF AMERICA SYMPOSIUM
THE NEW YORK HILTON HOTEL, NEW YORK, NEW YORK
THURSDAY, DECEMBER 2, 1965, 7:30 P.M., EST

THE UNITED STATES TAX SYSTEM AND INTERNATIONAL
RELATIONSHIPS - CURRENT DEVELOPMENTS, 1965-6
About a year ago in a paper presented at Montreal before
the Tax Executives Institute, I discussed the United States
Tax System and International Tax Relationships. Since then
two income tax protocols, with Belgium and Germany, were signed
and have been ratified by the Senate; three treaties with less
developed countries, the Philippines, Thailand and Israel, have
been signed and are pending in the Senate; tentative agreements
have been reached with the Netherlands and India; and negotiations
are actively being pursued with a number of countries, including
the United Kingdom, France, Portugal, Honduras, Trinidad and
Tobago, and Taiwan.
Since then important Regulations and rulings affecting the
international allocation of income have been issued and more
are in preparation. A comprehensive bill revising our statutory
income tax treatment of foreigners is moving through the Congress.
A consideration of these current developments is now
appropriate. I shall divide this consideration into three
parts -- income tax treaties, both with developed and less
developed countries, the administration of United States
statutory or unilateral treatment of foreign income, and
United States statutory or unilateral treatment of foreigners.
Because of the length of this paper, I have prepared a summary
which precedes the paper.

F-291

- 2 -

SUMMARY
Income Tax Treaties
The United States is engaged in an extensive revision of
its income tax treaties with developed countries, prompted by
the recent changes in the corporate tax systems of the Europe~
countries and the adoption in 1963 by the OEeD of a Model Inc~e
Tax Convention. The protocol with Germany ratified recently by
the Senate and the tentative protocol with the Netherlands
shortly to be signed illustrate much of the pattern that this
revision is taking. This pattern provides a widened flexibili~
to international trade and investment activities between the
United States and Europe. The scope of export activities in
a treaty country can now be enlarged, for instance, by displays
and warehouses for the storage or delivery of goods, without
subjecting the exporter to a tax in that country. Also,
in cases where a firm maintains considerable commercial or
industrial activity in a treaty country and therefore is
taxable there on that activity at regular corporate rates, it
can at the same time make investments in that country, or
establish licensing relationships, that will remain subject to
the lower races of tax which treaties provide for investment
and royalty income. Investors, moreover, will generally be
free from tax on capital gains arising in a treaty country.
In the important matter of withholding rates on dividends paid
to parent companies in one treaty country by their subsidiaries
in another treaty country, the United States is in favor of the
low OECD Model rate of 5 percent, and likewise favors the
15 percent rate on portfolio investment. It also favors the
principles that the withholding rates should be non-discriminatol'J
in that a country should be willing to offer the same rates to
all its treaty partners -- and reciprocal -- in that a country
should not claim higher treaty rates than the rates it desires
us to adopt in the treaty.
These concepts cover ground that has been considerably
explored in recent years. But the new corporate tax systems
present problems less fully mapped. Some of these systems
involve integration of the corporate tax with the individual
shareholders' taxes on distributed dividends, through credits
to these shareholders for the corporate tax. Their structure,
by limiting those credits to domestic shareholders in domestic
corporations, discriminates against both their domestic shareholders who invest abroad and the shareholders from abroad

- 3 -

who invest in their domestic corporations. The OECD Convention
does not fully meet these problems, and therefore an analytic
framework for their solution is needed. Such a framework
should be rested, as far as possible, on two basic concepts:
first, the co~pt of long-range neutrality in a country's tax
system between those of its investors who invest at home and
those who invest abroad; and second, the concept of nondiscrimination in a country's tax system between its investors
at home and investors from abroad.
These treaties, under the pressure of negotiating problems
and inevitable differences among countries and negotiators, will
not always exhibit uniformity in phrasing and arrangement, apart
from substantive differences. There is therefore clearly a
need to clarify the disuniformity -- to state through Regulations
or otherwise when and to what extent different phrases and
different approaches in various treaties, or even the same
treaty, really embody differences in end result and are so
intended. The United States intends to improve its Regulations
in response to this need.
The United States is also engaged in an extensive program
of negotiations to obtain a network of treaties with less
developed countries. We believe that such treaties significantly
improve the trade, investment and cultural relationships
between the United States and these countries. Many of the
European nations are also engaged in similar efforts. While
these new le~s developed country treaties in many provisions
follow those with developed countries, there are quite significant
differences arising from the fact that the investment and
trade flows from the United States to these countries is
generally much larger than the reverse flows. As a consequence,
and also in the light of the revenue problems of these countries,
the reductions in withholding rates on investment income and
royalties in these treaties do not always match those in the
devel~ped country treaties.
There also is pressure to widen
the definition of permanent establishment and thus contract
the area of trading activities free from tax in these countries.
In addition, since the restrictions on taxation by the source
country that do emerge in these treaties bear in a revenue sense
more heavily on the less developed countries, such countries
seek some provisions on the part of the developed countries that
can be regarded as an encouragement to investment in them.

- 4 The European nations have responded through prov~s~ons
reduc ing the burden of the ir taxes on income fl owing back from
these investments, either through an exemption or adoption of
tax-sparing credits. The United States, emphasizing instead
the encouragement to the investment itself at the time that it
is being considered by the United States taxpayer, is responding
through extending to investment in less developed treaty
countries the 7 percent credit now in our law for investment
at home. This 7 percent treaty credit extends to investments
of cash and tangible property. A complementary provision of~n
encouragement to the investment of technical assistance,
through deferring tax in both countries where intangible
assets, such as patents, processes or know-how, are exchanged
by a United States investor for stock in a corporation in the
less developed country. We believe that extension of the
investment credit is appropriate only where the other country
is receptive to our investment and where its tax system, taken
as a whole and in the light of any modifications made in the
treaty, does not involve measures that can be regarded as
significantly working at cross purposes with this investment.
This negotiating approach on our part has met with an affirmative response by the less developed countries.
The Subcommittee of the Senate Committee on Foreign Relations
has performed a useful public service in holding full hearings
on one of these new treaties, the Thailand treaty. The
published Hearings contain a complete technical explanation
of the treaty and a description of factors affecting negotiatioru
with less developed countries. Necessarily, as experience
is gained, the present pattern that has so far evolved in our
negotiations with less developed countries can be improved. The
progress of these negotiations is encouraging, for it indicates
that the United States and these countries can reach a treaty
arrangement that each regards as fair and conducive to improved
investment, trade, and cultural relationships. This attitude
and the promise it holds for a growing network of tax treaties
represent a major step in our poltical and economic relationships with these countries.
Administration of United States Statutory Taxation of
Foreign Income
Allocation of Income and Section 482
The importance of developing a sound administration of the
United States statutory taxation of foreign income is matched

- 5 -

the formidable nature of the task: The field is relatively
w as tax matters go, and the needed experience, analysis of
tail, and synthesis of concepts are still in a formative
age; the international business activities to which the rules
late are rapidly expanding in importance and number, and
us the variety of transactions and business relationships
volved steadily increases; the tax rules moreover are
nstantly being buffeted by the shifting exigencies of balance
payments problems. But all of this merely underscores the
allenge of the task, and the Treasury is seeking to respond
a fitting manner.
The Treasury regards as the matter presently having
jor priority the establishment of a satisfactory framework
r the administration of the rules governing transactions
tween the domestic and foreign units of our business
mpanies. In our tax parlance, this centers on the
plication of section 482 of our Code, authorizing the
mmissioner to allocate income, deductions and credits between
lated units of an enterprise so as to prevent evasion or clearly
fleet the income of the various units. The variety and
nber of transactions in the foreign area that lie within the
ach of the section have overstrained the level of technical
~elopment that had been achieved in the earlier domestic
plication of the section. The situation thus calls for a
1y-faceted implementation of the section so that it may carry
~ new burden placed on it.
Several steps have already been taken. The first, in
'enue Procedure 64-54, achieved an orderly treatment of
troversies that had arisen for years prior to 1963 by
'mitting taxpayers to offset -- against any increase in
ted States taxes occasioned by an adjustment under this section
ocating additional income to the United States unit of the
erprise -- the foreign taxes paid on the income involved
thus to avoid double taxation. In addition, the Revenue
cedure stated that the Internal Revenue Service would not
sue for those years adjustments based on applicationsof
tion 482 not clearly required by its previous technical
elopment. Through its achievement of an orderly treatment
the pre-1963 years and the consequent very marked reduction
number and dollar amount of deficiencies under the section
those years, this Revenue Procedure has permitted the
ded technical development of the section to proceed in an
osphere free of acrimonious disputes that would otherwise
.;! ex is ted.

- 6 The second step, in Revenue Procedure 65-17, provides
rules governing the transfer of income between foreign
subsidiary and United States parent intended to reflect an
adjustment correcting an understatement of the parent's income,
as where it charged too low a price for goods sold to the
subsidiary or rendered services to it for an inadequate fee.
The principal impact of these rules is to permit broad
flexibility in fitting the section 482 adjustment into a proper
position within the flow of funds from the foreign subsidiary
and its dividend pattern. This removes impediments to the
orderly repatriation of funds from the subsidiary and makes
it possible for the taxpayer to accept the adjustment without
increasing the transfer of income from subsidiary to parent
more than it considers desirable.
These procedural steps set the stage for the development
of appropriate guidelines for the substantive application of
section 482. To this end the Treasury has already issued
detailed proposed Regulations covering transactions where
assets or services of a United States parent are made
available torrs foreign subsidiary -- where money is lent,
where management or other services are rendered, where machinery
and other tangible assets are made available. Essentially the
approach is to offer taxpayers a safe conduct pass through
section 482 through guidelines, based on the costs incurred by
the parent and an allocation of those costs to the subsidiary
in a manner that follows accepted accounting precedents outside
the tax field. The second set of proposed Regulations, now in
preparation and far more difficult to develop, will contain the
rules applicable to inter-company sales of products and
transfers of intangibles, such as patent licenses. These
rules will involve the determination of a fair profit for
an endless variety of assets that, under the arm's length
concept of section 482, are regarded as transferred in a
profit-seeking transaction. Both these Regulations must then
be coordinated with the rules of section 862, requiring an
allocation between domesti:: and foreign source income of
expenses not allocable to specific items of gross income.

- 7 -

These Regulations relate to the proper formulation of our
nilateral rules of allocation with respect to international
ransactions. But since these are international transactions
unilateral approach by the United States, or any country, is
ot sufficient. The rules of one country must mesh with those
f other countries to avoid double taxation. Also, each
ountry must see both sides of the problem -- the rules we
egard as proper to allocate income to our parent companies
rom transactions with their foreign subsidiaries are the rules
e must be willing to accept when the subsidiary is here and its
arent is a foreign corporation. The United States believes that
he DECD Fiscal Committee is the proper body to undertake the task
f establishing the allocation standards to guide countries in
eaching accomodationswith each other, and we are fully assisting
he Working Party which that Committee appointed for this purpose.
Another aspect of the problem is to ensure that any agreements
eached between Governments in particular cases, under present
tandards or those to be formulated, should be capable of being
nplemented in full. However, as these cases generally involve a
)nsiderable time before agreement is reached on the adjustment, a
ixpayer and the countries concerned may find that procedural barriers,
lch as a statute of limitations on refunds, may make it impossible
, implement the adjustment in the country that has overtaxed the
lcome. To avoid this result, the United States believes that
~eaties should provide that a refund be allowed in accordance
th the agreement, despite procedural or other parriers. Such
;reements could relate either to the allocation of profits or to
le source of an item of income, and in the latter case the
~lementation should extend to the effect of the agreed source
a foreign tax credit. Other countries appear to agree with this
ew, and clauses for this purpose are being incorporated in our
eaties, as in the German protocol. We regard this result as a
gnificant step toward the goal of achieving a proper framework
meet the problems of international allocation.
ited States Statutory Taxation of Foreigners
The steady attention focused by the United States in recent
lrs on its balance of payments position has resulted in an
~ensive examination of the United States tax treatment of
~eigners who invest in the United States.
Against the background
the "Fowler Task Force" Report to the President and Treasury
:ommendations, the House Committee on Ways and Means has developed
,ill, H. R. 11297, now available for comment before being reported
the House in 1966. The bill recognizes that some of the

- 8 -

existing provisions of our Code have become discriminatory and
inequitable to foreign investors and thus involve a barrier to
investment in the United States. In correcting this treatment t~
bill avoids at the other extreme rules that would represent only
a desire to attract foreign investment, rules which would be but
mere tax inducements to tax concessions.
The bill would, in effect, draw back United States source
jurisdiction, both under the income tax and the estate and gift
taxes, to a more realistic and administratively manageable position.
It would also simplify the tax rules we present to the foreigner
desiring to invest here. As a consequence, in general the ind~~~
foreigner investing in our stocks and securities or real property
would find his periodic income from the investment subject only
to tax at withholding rates, either at 30 percent or a lower treaty
rate, and not to progressive rates. His capital gains would not
be taxed. These results would not be altered by extensive tradi~
in these stocks or securities, even where the trading is conducted
by a United States broker who has discretion to act for him. His
real estate investments would be taxed on a net income basis at
regular rates if that is preferable. The foreign investor would
also see a far lower scale of United States estate tax rates on
his United States investments. The exemption would start at
$30,000 instead of $2,000 as at present, and the top rate would
be 25 percent instead of 77 percent. The effective rates would
thus be drastically reduced, and would only be 3 percent on a
$100,000 United States estate, 7 percent for $500,000, 10 percent
for $1,000,000, and 18 percent for $5,000,DOO. The corporate
investor -- or an individual -- with a business activity in the
United States would find itself taxed at regular rates on any
business income and any investment income "effectively connected ll
with that activity, whether the source of the income is within
or without the United States. The United States would thus
obtain its proper tax on this type of income. But any unrelated
investment income would be freed from business tax rates and taxed!
where its source is in the United States, only at the withholding
rates we consider appropriate for investment income. A foreign
corporation whose stock is owned entirely for foreigners would
no longer be subject to personal holding company tax liability.
And our "second dividend" tax would only apply to a foreign
corporation whose activity is almost solely confined to operating'
branch in the United States.
These simpler and more logical rules
applied to individual and corporate foreign investors should Wi
meaningful way remove tax barriers which our present ~tructuren~
presents.

- 9 The approach of the bill closely parallels the pattern nnw
taken in our tax treaty negotiations. The bill, however, would
extend these steps to all foreigners promptly and on a unilateral
basis. But to preserve the bargaining power and flexibility our
negotiators need to obtain through treaties reciprocal conces~ l(ln'.:;
from other countries on income our taxpayers derive from abroad,
the bill empowers the President to reinstate the former statutory
rules. The President can do so with respect to residents of a
foreign country when he finds that the foreign country, if requc8tcd
by the United States, does not modify its taxes to parallel the
changes we are making unilaterally. This power of the President can
be applied on a selective basis, country by country and tax r,,)vi i \In
by tax provision, and need be applied only when he finds that it
is in the public interest to do so in each case.
<:'

:onclusion
Current developments in our international tax relationships
lnderscore the wide range of policy and administrative issues that
lre under consideration.
Indeed, the continued rapid growth jn
Lnternational investment and trade has brought with it a multitude
)f varied tax problems that press beyond our present framework of
~oncepts and analysis.
Intensive legal and economic thought is
:-equired to develop that framework into one adequate to the task
framework that embodies a coherent logic capable of expansion
o meet new patterns and relationships.
In one sense this is a
ruly formidable task, since each of the countries of the world can
laim a voice in the effort. But the ingenuity and insight
romised by this host of architects should be viewed as welcome
ssets. The task for the United States is to see that in this
nternational effort we playa role fitting to our position. We can
o so if all of us with a stake in the outcome -- the Government
nd its officials, our taxpayers with international activities and
heir advisors, our universities and research institutions and
heir scholars -- work cooperatively in shaping our contribution.
I.

INCOME TAX TREATIES

The United States is continuing to maintain an active schedule
f treaty negotiations, along with its participation in the
eliberations of the OECD Fiscal Committee. The treaty negotiations
Jver a variety of issues, and extend both to developed and less
eveloped countries.
Developed Countries
The United States now has a full complement of income tax
:-eaties with the European Common Market countries, and indeed
Lth most of Efiedeveloped C'Quntries.
Spain and Portugal remain

- 10 ~~

the principal exceptions, and arrangements for negotiations
. i t~.- tt iese countries are underway.

But the treaty process in the tax field is an ever changing
HIe, so that r,ve and our treaty partners of the developed world find
uur~elves engaged in a wide-ranging revision of the existing
arrangements. The principal factors behind this re-examination ~~
~een the recent changes in the corporate tax systems of the
European countries and the adoption in 1963 by the OECD of a Model
Income Tax Convention. The United States recently concluded
protocols with Belgium and Germany, and will shortly sign a
protocol with the Netherlands. It is currently engaged in negotbt~
with France looking to a revision of the existing treaty, which
soes back to 1939, and with the United Kingdom to meet the problems
created by the extensive changes enacted this year in the United
Kingdom tax law.
The effect of the OECD Model Convention on these treaty
negotiations is significant. While there are differences in deg~e,
among the various member countries in the extent of their adheren~ i
to the language of that Convention, and indeed these differences
vary from provision to provision, that Convention is always kept
in mind by treaty negotiators. This is, of course, understandable,
since the representation in the OECD Fiscal Corrnnittee which drafted
the Convention is composed of the officials charged with the responsibility to negotiate tax treaties for their respective countries.
And indeed for many purposes, that Convention meets satisfactorily
the policy and technical issues that confront treaty negotiators.
But new issues constantly emerge, and old issues take different
shapes, so that in some areas the guidance offered by the Convention
seems inadequate. Perhaps the principal areas in this respect
relate first, to the rates of dividend withholding appropriate to
the varying forms of domestic corporate income taxation that are
being adopted by the member countries, and second, to the policy
and technical problems that are emerging with respect to the
allocation of profits between the components of international
business enterprises.
As for the United States, the recent protocol with Germany

and that to be signed soon with the Netherlands illustrate a
si~nificant part of the pattern which the revision of our treaties
is taking. The German protocol was recently ratified by the
Senate, and this action, together with the nature of the testimooy
at the hearing held on it, indicates that the pattern embodied in
~t is appropriate for the United States.

- 11 It therefore may be helpful to turn to the more significant
aspects of that pattern. As will be seen later in the discussion
of our unilateral treatment of foreigners, this pattern is also
important in the shaping of our statutory rules.
Definition of Permanent Establishment
The definition of permanent establishment set forth in the
OEeD Draft is clearly becoming the model for the various treaties.
The member countries have recognized that, while subject to some
technical deficiencies or ambiguities, the definition is satisfactory
over-all. They therefore have adopted it, improving on it as the
definitional problems emerge. The provision set forth in the
German protocol is the form the United States is currently using.
This provision is more particularized than the previous form, and
somewhat more permissive in the operations that can be conducted
oy a business activity before it will be regarded as having a
permanent establishment. It may be observed that this definition
refers specifically to a "place of management" as a permanent
establishment. Though this concept was not separately delineated
:)efore, it was in effect recognized as a factor under some prior
treaties, as in the case of the German treaty.
But since it may be
~ relatively unfamiliar term in our tax lexicon, the United States
is taking appropriate steps, through memoranda of understanding,
exchanges of letters and the like, together with its own Regulations,
to emphasize that the term refers to "management" in a substantive
~nd meaningful sense and not to minor, representational or sporadic
activities. More care is also being given in the treaties to the
definition of "industrial and corrunercial profits" (the kind of income
for which the presence of a permanent establishment is requisite
to its taxation), with the result of greater particularity in the
enumeration of types of income not covered by the phrase.
Given, on the one hand, the scope of operations thus afforded
to a business activity before it is regarded as constituting a
~ermanent establishment and, on the other, the tax and non-tax
factors that point to the use of a foreign subsidiary as operations
Jecome still more extensive, it seems likely that permanent
:=stablishments, or branch operations, are relatively quite few in
lumber, or are generally confined to certain lines of activity, such
1S insurance, banking, and natural resource activities.
Thus, as
~espects the permanent establishments of foreigners in the
Tnited States, there were less than 500 foreign corporations actively
!ngaged in business in the United States in 1962, of which almost
talf reported a loss on their United States business operations.
'he total amount of income reported by the profit-making branches
'as less than $100,000,000, of which over 75 percent was attributable
a 58 insurance companies and 14 investment companies.
If the

- 12 deficit companies are taken into account and the insurance companies
excluded from the calculations, the total taxable income of the
375 other branches is less than $7 million. This figure, however,
reflects allowance of the 85 percent dividends received deduction,
without which it might be considerably higher.
Force of Attraction
Our previous treacy pattern, once a permanent establishment
existed in a country, was to provide that all income of the taxpayer
arising in that country was "attracted" to that permanent
establishment, and taxed at the rates and in the manner applicable
to business enterprises. This meant, for example, that investment
income which would otherwise have been taxed under the treaty at
relatively low withholding rates or fully exempt, remained subject
to tax at regular rates. The OEeD draft abandons this force of
attraction approach and therefore leaves the investment income of
a taxpayer having a permanent establishment to be separately
treated, except where the asset giving rise to that income is
"effectively connected" with the permanent establishment. Also, only
the industrial or commercial profits "attributable to" a permanent
establishment are to be subject to tax, and any industrial or
commercial profits not so attributable are, lacking the relationship
to a permanent establishment, exempt from tax under this approach.
This approach has much to commend it, since the separation it
permits between trading or other business activity and investment
activity makes for a freer movement of capital and goods between
countries. The approach also makes unnecessary the steps taxpayers
have taken, recognizing the utility of that separation, to achieve
it through isolating the business or investment activities in a
separate subsidiary solely designed for this purpose. For these
reasons the approach has been adopted by the United States in the
German·and Netherlands protocols. Of course any new concept and
its terminology carry their interpretative problems at the edges
of the concept, and this will be true of such phrases as "effectively
connected" and "attributable to," just as it has been true of
othey phrases and concepts in the treaties. Nor can we here
expect full uniformity of treaty terminology, as the combination
of emerging experience and negotiating preferences will produce
some variations. We hope through Regulations however to offer
~uidan~e as the questions emerge and to place'any lang~age variati~S
In thelr proper perspective.
Capital Gains
The OECD Draft Convention, largely following European practice,
restricts the taxation of capital gains to tre countrv of residence,

- 13 except as to gains on real property and assets effectively connected
with a permanent establishment. While this approach is at
variance with some of our prior treaties, it often has been followed
by us in the past. Moreover, the approach is based on the
desirability of a free movement of capital and the difficulties of
effectively taxing captial gains in the source country in an orderly
way. Consequently, the German and Netherland protocols provide
generally for the exemption at source of capital gains. The German
protocol excepts from exemption short-term gains, on assets held
for six months or less, where the taxpayer has resided in the source
country for 183 days or more.
This exception in the case of 3
taxpayer with an extended presence, i.e., 183 days, in the SOllrcp
country is likely to appear in our various treaties. A stay of
that length seems to warrant a tax liability to the source country,
especially where the gains are speculative in nature as in the case
of assets held for a short period of time. Moreover, in many
countries, such a stay will make a taxpayer a "resident," and hence
subject to tax on capital gains. This "183 day" exception may take
variant forms, as our experience develops and the attitudes of other
countries are formed.
Treatment of Dividends
The OECD Draft recommends, as appropriate international
Nithholding rates on dividends,S percent on parent-subsidiary
dividends and 15 percent on dividends on portfolio investment.
~ parent-subsidiary relationship requires a stock ownership by the
Jarent of 25 percent of the stock of the subsidiary.
But the
treatment of dividends is one of the treaty provisions, perhaps the
)rincipal one, that is generally the subject of real differences of
)pinion and hard bargaining between treaty countries. Since
iividends usually represent the main item in the income flows
)etween countries, the revenue importance of the withholding taxes
)n dividends is u~ually significant, and certainly more so than
:or the other items. Also, one country may find that its portfolio
.nvestment abroad is more significant than its direct investment,
rhereas the opposite could be the case for the other treaty
ountrl. Moreover, the rates of the underlying corporate tax
rill vary from country to country.
Further, the form of the
nderlying corporate tax also will vary:
some countries may have
straight corporate tax (the United States and the new United
ingdom taxes); others a tax that provides a lower rate to the
orporation for distributed profits (the German tax); oth~ a
ax all or part of which is regarded as a withholding tax on the
hareholders so that the latter receive a corresponding credit

- 14 -

against their individual income tax on their dividends. The fom
of this credit in turn may vary: it may be of the gross-up
variety, and therefore accurately.reflecting the part o~ the.
corporate tax treated as withholdlng tax (the former Unlted Klngd~
tax, the Belgian tax, and new French tax); it mayor may not
involve refunds to taxpayers who otherwise cannot use the full
c red it· it mayor may not extend to fore igners; it may not involve
a gros~-up cLedit but only be a flat percentage of dividends
re~eived (the Canadian tax).
And a country which treats part of
its corporate tax as a withholding tax may also have as a collection
device a supplementary withholding tax on dividends similar to
its other internal withholding taxes. In addition, in some countries
bearer instruments may predominate and thus restrict to some
extent the degree to which certain tax approaches can be effectively
implemented.
These differences in revenue significance, in corporateshareholder tax structure, in the differing policy goals and
attitudes respecting the encouragement of private savings and
investment that they reflect, and in the prevalence of the bearer
or registered share form of corporate shareholdings all combine
to shape a country's approach to the treaty provision governing
dividends. Given all this, one cannot expect uniformity in this area.
The United Stated basic position regarding the dividend
provision is to a considerable degree, reflected in its recent
treaty activities. We stand ready to offer any country the DEeD
recommenJed rates of 15 percent on portfolio investment and 5 percent
on parent-subsidiary investment .• Some other countries chose,
however, for a variety of reasons, not to adopt the 5 percent
rate on parent-subsidiary investment so that as a consequence
some of our treaties will, as a reflection of treaty negotiations,
contain rates of 10 percent or 15 percent for that investment.
But, since che United States offers the OEeD rate of 5 percent
to all) the variations in our treaties thus reflect the unwillingness
of other countries to adopt that 5 percent rate. We believe,
hC\\fEver, thac countries should seek to present a uniform approach
to all their lreaty partners, and thus as far as possible fix
on a set of rates that they will offer to all comers rather than
seek to aiffererltiate one country from another. In addition,
the rates of vJithholding tax that are adopted should be reciprocal,
in that a country should not be able to claim higher treaty rates
than the l~tes it desires us to adopt in the treaty. The other
country is free of course to prefer rates lower than those
which it seek~ of us.

- 15 We prefer a definition of the parent-subsidiary relationship that uses a 25 percent stock ownership test, but which
Nou1d permit that degree of ownership to be met either by a
single parent company or by several corporate shareholders in
~ombination.
Also, adequate attention must be paid to prevent
the reduced dividend rates, as well as reduced rates on
interest and royaltie$, from flowing to nonresidents of a treaty
:ountry, since we do not desire to encourage the tax-haven form
for the holding of interests in the United States.
Our treaty
Nith Luxembourg and the Netherlands Antilles protocol reflect
this approach.
The recent protocols concluded with Belgium, Germany and
the Netherlands are in keeping with these concepts. The first
~wo adopt a 15 percent rate, reflecting the desire of those
:ountries that the withholding rate be 15 percent for both
)ortfo1io and parent-subsidiary investment; the Netherlands
)rtocol has the OEeD rates of 15 percent and 5 percent. The
;erman protocol provides the protection needed by a country
Ising a lower rate for distributed profits against a dividend
listribution followed by immediate reinvestment, where the
Latter route is advantageous tax wise, by raising the German
~ate to 25 percent in such a situation.
The Belgian protocol
lchieves reciprocal rates of 15 percent on registered shares,
:hus reducing the otherwise applicable Belgian 18.2 percent
~ffective rate, while allowing a period of time to explore
:he administrative problems of applying the 15 percent rate
:0 bearer shares and taking recognition of the fact that in
ctua1 practice the rate on the bearer shares typically held
'y American investors rarely exceeds 15 percent.
The concepts enumerated above will meet satisfactorily
.any of the varying situations presented under the influences
ar1ier mentioned. But it is quite possible that further
oncepts are needed to achieve a freer flow of international
nvestment and proper international tax treatment. Some
orporate tax structures result in an unneutral tax effect
etween those of a country's taxpayers who invest abroad and
hose who invest at home. This unneutra1ity may not always
e initially intended in the structural design, but rather may
epresent the way the pieces fitted together in the end. More
ften it will be a consequence of a structural design chosen
Jr internal reasons, but a consequence that becomes a policy
f steps are not taken to prevent the unneutrality from
=rsisting. This is most likely to occur where a country

- 16 adopts a corporate-shareholder tax relationship under which
a credit is given to domestic shareholders fur part or all
of the corporate tax on domestic corporations. If a
comparable credit is not extended by the country to its
domestic shareholders who invest in foreign corporations, then
the tax system will embody an unneutrality favoring investment
at home. The United Kingdom, when it used an integrated
corporate tax with a grossed-up shareholder credit, avoided
this unneutrality by allowing its shareholders by treaty a
credit for a foreign underlying corporate tax. Its treaty
partners sometimes reciprocated, as in the case of the United
States - United Kingdom treaty where the United States gav~
its shareholders in United Kingdom corporations a credit
for underlying United Kingdom corporate tax. But such reciprocity
would not appear to be a necessary ingredient, since it in
turn may inject an unneutrality between the reciprocating
country's investors at home and its investors abroad.
It would seem that an appropriate goal in international
tax relationships is the achievement as far as possible of a
basic neutrality in tax effect between investment at home and
investment abroad. This neutrality should be a long-range aim
of a tax structure. There may be reasons, such as those associated
with a balance of payments posture, to depart temporarily from
time to time either to favor investment at home in the case of
a deficit country, or to encourage investment abroad in the
case of a surplus country. But even here the temporary swings
could be made more appropriately through devices -- such as
the interest equalization tax in the United States or foreign
exchange measures abroad -- not associated with the basic
income tax structure lest they become embedded in that structure
and resistant to change when the temporary need has passed.
The presence of investment incentives, such as investment credits
or allowances or rapid depreciation, may also impart an
unneutrality through being limited to domestic investment. As
far as possible, however, the achievement of neutrality between
investment at home and investment abroad should be a part of the
basic structural design of a country's tax system. But it also
would seem appropriate to use the treaty medium to achieve the
alteration in unilateral statutory treatment necessary to
reach this neutrality. Since the OECD Convention does not
really deal with this aspect, it is an area where further
exploration is needed.

- 17 One other matter requiring further exploration is that of
the so-called "round trip dividend". If a parent in country A
receives a dividend from its subsidiary in country B, there will
usually be a withholding tax paid to country B on that dividend.
If residents of country B own stock in the parent, then on
payment of a dividend to them by the parent, there will be a
withholding tax by country A. One can ask whether, as a
consequence, this "round trip" is too heavily taxed. Of course
the parent's dividends to country B are not dollar for dollar
traceable to the dividends it received from its subsidiary in
that country. But still some amounts have taken a "round trip".
~urther, there are at present very few corporate parents in the
vorld where such flows from and to a country would be of a size
Ln which the amounts of both flows were significant. And the
~echnical patterns and the pitfalls of possible solutions are not
:-eadilyapparent. Still, since the "round trips" are likely to
Lncrease in number and significance, the problem should commend
Ltself to the tax experts for study.
Jon-Discrimina t ion
Another facet of international neutrality lies in the
omparison of the treatment between domestic taxpayers and
he taxpayer from abroad. The older version of tax treaties
enerally sought non-discrimination between the domestic
axpayer and the foreign national residing in the country, and
ometimes extended the coverage to a permanent establishment.
he OECD Convention, in the interests of a wider neutrality,
urther extends this non-discrimination to domestic corporations
f a country owned by nationals of the other country. The
nited States believes the OEeD approach is desirable, and it is
ontained for example in the Netherlands protocol. Generally,
t would appear that the inclusion or application of this clause
hould not involve serious policy differences, and neutrality
f this type should be achievable.
The effect of the varying corporate-shareholder tax
described above on neutrality between domestic
1vestors and investors from abroad may, however, be in need
f further analysis.
For example, a corporate tax system under
lich part or all of the corporate tax is regarded as a
Lthholding tax on the shareholders, so that the shareholders are
Llowed a credit for the "withheld tax", will discriminate
~ainst the shareholder investors from abroad if the benefits
: that credit are not extended to the latter. The non.scrimination clause in the OEeD Draft can be regarded as
~tterns

- 18 -

implying that the task of avoiding discrimination in this
context falls on the country of source. The possible
methods of achieving this result would of course have to be
explored. And the effect of any such step on the investment
relationships in the other country, i.e., the relationship
between its taxpayers who invest at home and those who invest
abroad (and thus become the shareholder inves tors from
abroad" in the first context) must be kep:: in mind. These also
are matters not fully discussed in the OECD Convention and thus
require further attention.
II

Allocations of Income
The OECD Convention continues the conventional clauses
regarding allocation of income: the allowance of appropriate
deductions to a permanent establishment of all expenses connected
with it wherever incurred; the arm's length standard of
allocation between related persons, such as a parent-subsidiary
relation; the entitlement of a taxpayer to present to his
Government a case of alleged action contrary to the treaty and
the exhortation to the Contracting Parties to resolve any
such situation if well founded; and the desirability of
consultation between the Contracting Parties to settle
interpretative and other questions. In addition, any excess
of "interest" or "royalty" payments over a fair and reasonable
consideration is not regarded as covered by the interest
and royalty articles, but the excess instead is taxed in a
manner appropriate to the situation, which presumably will
usually be as a dividend.
The United States seeks to follow these provisions
in its treaties, since they represent a necessary technical
framework. But we feel that the day-to-day problems of
international allocation cut deeper and will require further
substantive rules if a proper international framework is to
be achieved. The main need, simply stated but very difficult
in execution, is to achieve standards and criteria furnishing
guidance on what are appropriate allocations in the great
variety of cases that arise -- the payment of interest on
inter-company loans, the payment of royalties on inter-company
licenses, the fixing of prices on inter-company sales, the
reimbursement of expenses incurred for inter-company services,
and so on. This matter is discussed further in connection
with our statutory rules.

- 19 It is recognized that it will take time to evolve agreed
upon standards. But the United States believes that through
treaties we should now ensure than any agreements that are
reached between governments and taxpayers in particular cases,
under present standards or those that will be formulated,
should be capable of being implemented in full. As matters
now stand, however, procedural and other barriers may prevent
this. Thus, since disputes of this nature often take considerable time to resolve in particular cases, an agreement may be
reached calling for a reduction in the tax previously paid to
one of the countries only for the parties to find that the
statute of limitations has run on the filing of a refund claim
or the payment of the refund.
Such a procedural barrier would
result in international double taxation. To avoid impediments
of this nature, the United States believes that treaties should
provide that an agreement once reached shall be fully implenented, and a refund allowed in accordance with the agreement,
despite such procedural or other barriers.
Such agreements
:ould relate either to the allocation of profits or to the
source of an item of income.
In the latter case the implementation should extend to the consequent effect of the agreed
30urce on a foreign tax credit.
Other countries appear to agree with this view, and
:lauses to this effect are being incorporated in our treaties,
1S in the German and the Netherlands protocols and the Israel
:reaty. It has also been agreed with Belgium that the language
)f our existing Belgian treaty has a similar effect. We regard
:his result as a significant step toward the goal of achieving
I proper framework to meet the problems of international allo:ation.
)rafting and Interpretation
Those who read and apply treaties -- as well as all persons
ith orderly minds and habits -- earnestly urge uniformity in
he drafting of tax treaties. And all treaty negotiators will
ully agree in principle. However, each negotiator usually has
is mind set on his own patternof a uniform and orderly treaty.
Qd there is no negotiator who will place uniformity above
greement when the hour is late and a seemingly intractable
roblem yields to a welcome solution that departs rljust a bit"
rom the words in other treaties and may "possibly" have some
nbiguities which the negotiators feel any reasonable men will
lter be able to resolve if the cases actually arise -- just as
1e negotiators have so successfully resolved their problem~

- 20 -

Uniformity and clairty never stand as impassable barriers to
compromise solutions. If they did, we would have the uniformity
of no treaties. Nor should uniformity with the past block
improvements that are now seen to be desirable.
All of this is not said to disparage the goal of uniformity,
and the United States seeks to achieve it as far as possible.
But in practice we know we will fall short. An offsetting
step is to clarify the disuniformity -- to state through Regulations or in other ways when and to what extent different words,
different phrases and different approaches in various treaties.
or even the same treaty, really embody differences in end
result and are so intended. Despite delays that have occurred,
we therefore are working on Regulations that would maintain
order among the variations. Whether this can be done within
the framework of a master set of treaty Regulations or whether
some other device is more useful remains to be seen, but the
end we seek seems clearly necessary.
Less Developed Countries
In my Montreal paper I described at length the interests
of the United States in achieving treaty relationships with
less developed countries, and the interests of those countries
in the same goal. We are not alone in recognizing these
values, for many of the other developed countries are engaged
in considerable efforts to achieve a network of treaties with
the less developed countries, and indeed are succeeding.
This in turn behoooves us to keep to the task, lest we lose the
advantage which others find in this very useful device for
ordering some of the relationships between the developed and
less developed worlds.
Fortunately, our efforts to achieve a proper set of treaties
are succeeding. We have negotiated treaties with the Philippines,
Thailand, and Israel, in that order, and these are before the
S2nate. We have agreed on a draft with India, and are engaged
in completing negotiations commenced earlier with Taiwan. We
are informally discussing with several Latin American countries
the appropriateness of negotiations. Also, existing treaties
are being revised; thus we are considering with Honduras, whose
treaty ~vas the first we negotiated with a less developed country,
appropriate modifications of that treaty. As another illustrat~n,
we are engaged in negotiations with Trinidad and Tobago to
explore revisions in a treaty which has its origin in the extension of our United Kingdom treaty to that country on its independence.

- 21 -

[ndeed, we are likely to overlook the fact that this process
)f treaty extension has given us a set of treaties with a
lumber of less developed countries which have achieved inde)endence .)j
We also have treaties with Honduras and Pakistan -- as
veil as the three pending in the Senate -- to complete the
)resent list of our treaties with independent less developed
!ountries.
These treaties in one sense are in an evolutionary period,
specially since for many of the countries involved the very
egotiation of tax treaties involves a new activity. Moreover,
any of these countries are negotiating against a background of
volving internal laws, as their tax policies change and as technical
mprovements are made under the pressure of modern commercial
elationships and transactions. Nevertheless, a certain pattern
s being achieved in these treaties, which we are seeking to
tilize as we extend the range of our negotiations. The
hree recent treaties, with the Philippines, Thailand, and
srael, largely exhibit that pattern, with the Israel treaty
videncing the arrangement and, in general, the technical
rafting which we regard as desirable.
The following is a summary of the developing pattern:
rrangement and Drafting
These treaties, while influenced by the GECD Draft, are
)t likely to be as closely tied to that draft in wording or
~rangement.
The treaty with Israel, for example, follows an
ltirely different arrangement of the treaty provisions, and one
deh we believe is more manageable.

Cyprus, Jamaica, Malawi, Nigeria, Sierra Leone, Trinidad and
Tobago, and Zambia (United Kingdome treaty extension); Burundi,
Congo (Dem. Rep. of), and Ruanda (Belgium treaty extension);
also Netherland Antilles (Netherlands treaty extension).

- 22 Relief from Double Taxation
The countries so far have followed a credit approach to
relieve double taxation, as does the United States. We may
not see therefore as much resort to the exemption approach,
or the combined exemption-credit approach, that we see on the
part of our treaty partners in our developed country treaties.
Source of Income
The treaties ~enerally contain a description of source
rules for various items of income, following international
standards. In some cases this treaty approach is a way of
meetin~ the problem caused by the absence of, or incomplete,
source rules in the statutory provisions of these countries.
Non-Discrimination
The OECD Convention respecting non-discrimination of
foreign nationals residing in the country, permanent establishments, and domestic corporations owned by nationals is being
followed.
Permanent Establishment and Industrial Profits
The OECD approach is ~enerally followed in the definition
of permanent establishment and on the treatment of industrial
and commercial profits, ",ith a few exceptions. One is that
the force of attraction approach is still being applied, as
perhaps simpler of administration, though the desirability of
continuing to use this approach is an open question. Another
is that some countries (not Israel) desire specifically to
treat as a permanent establishment an agent who regularly
secures orders in the country for the foreign taxpayer or
maintains a stock of goods from which delivery is regularly
made. If such an agent is an independent agent, however, he
'>vill not constitute a permanent establishment. These countries
may desire to specify that an agent is not independent who acts
exlusively or almost exclusively for the foreign taxpayer.
Aspects of this approach are a cause of concern to some
Unted States taxpayers who have been securing orders for
their goods through a subsidiary formed in the other country.
As a consequence, we will carefully explore with these
countries ways of meeting this situation which do not upset these
parent-subsidiary exporting arrangements or other appropriate
arrangements.

- 23 ~ividends

Some of these countries are hesitant to reduce their withaiding rates on dividends, fearing a loss of revenue. Where
'elevant they point out that extensive incentive provisions of
leir laws often eliminate or materially lessen the corporate
IX rate, so that the effective rate of total tax is well
=low 48 percent.
The United States, where relevant, calls
:tention to the desirability of reducing over-all effective
Ites to 48 percent, and even lower where not grossing-up the
Jreign dividend produces an excess foreign tax credit. The
Jreign reaction differs.
The Philippines were not ready to
ike any reduction in withholding rates on investment income,
2aving that country with a 30 percent internal corporation
3X and a 30 percent withholding tax for an effective rate of
1 percent on dividends going abroad (in the absence of a
Jmestic incentive provision). When all profits net of corpo3te tax are distributed this produces an excess credit of 8.4 percent.
lailand reduced its withholding rate from a maximum of 25
2rcent to 20 percent, with a corporate tax rate of 25 percent
in the absence of an incentive provision), giving an
ffective rate of 40 percent -- the prior rate was 43-3/4
2rcent, which resulted in an excess credit of about 1 percent
Jr a corporate shareholder.
Israel retained its 25 percent
ithholding rate.
Israel imposes a corporate profits tax of
g percent plus a tax of 25 percent on corporate net income
fter profits tax less any dividends distributed (in the
Jsence of an incentive provision).
Dividends distributed are
lUS subject to the corporate profits tax of 28 percent and a
Lthholding tax of 25 percent, leaving an effective rate of 46
~rcent, below our 48 percent rate but resulting in an excess
~edit in the absence of gross up of about 3.6 percent.
As will
? discussed below, the United States applied certain investment
'OV1Slons on its part, such as extension of our 7 percent
lvestment credit in the Thailand, Israel and Indian cases, but
,t in the case of the Philippines in part because its effective
tte exceeded 48 percent.
It should be recognized that in their treaties with other
veloped countries, the above countries adopt largely similar
proaches as respects their withholding rates.
terest
These countries appear even more hesitant about reducing
thholding rates on interest.
They are willing to do so if the
nder on our side is a Government Agency, where exemption is

- 24 -

granted, and in the case of Israel if it is a bank, where a 15
percent rate is used. But otherwise t?ey appear ~o f~r ~o put
revenue maintenance ahead of even posslble reductlon In lnterest
costs to their debtors where the foreign lender is passing on the
withholding tax to the borrowers.
Royalties
The royalty area presents a mixed approach. Some countries,
as Israel and Thailand, reduced their withholding rates to 15 perea
Others are not desirous of taking this step, but are willing to pen
royalties (and rents) to be taxed electivelv on a net in(""'~:,;, "'l"i~
In all of these situations -- dividends, interest, and
royalties -- these countries are not basically concerned about our
30 percent withholding rate since they do not receive investment
flows from the United States. As a matter of treaty reciprocity,
however, they ask for provisions that match their concessions.
Ships and Aircraft
These countries, paralleling deve loped country treaties, consel
to reciprocal exemption for air and ship transportation, though
sometimes the latter will receive only a reduction to 50 percentd
the otherwise applicable tax rather than complete exemption.
Temporary Visitors
These countries, here also paralleling to a considerable extent
developed country treaties, consent to exempt temporary business
visitors from their taxes. The standards will differ somewhat, but
usually involve a limited period of time, such as 183 days, and a
limitation on the amount earned, sometimes applied on a daily
basis in the case of entertainers and other performers.
Other Substantive Provisions
These treaties generally contain the other standard substantiVl
provisions, such as those affecting teachers students and trainees
(but with more emphasis on their part on thi~ aspect and perhaps
Hith more liberal exemptions at source ~eing sought), government
personnel, and pensions and annuities.
Procedural Provisions
These treati~s also contain the customarv procedural Drov~ioo
such as consultatlon, exchanges of taxpayer i~formation and ~.l

- 25 information, and taxpayer claims.
The Israel treaty and the
[ndian draft include the removal of procedural barriers to the
~[[ectuation of agreements on the allocation of profits and the
~ource of items of income.
)rovisions on the United States Side -- Investment Credit.z..
Technical Assistance and Charitable Contributions
The treaty pattern described above represents significant
lccommodatiOls by the less developed countries to the international
;tandards that have evolved in treaties between developed countries,
lut do not in turn represent any real concessions on the part of the
leveloped countries. The flows of investment income -- dividends,
nterest, royalties -- and of export trade, business and cultural
·isitors, and ships and aircraft are overwhelmingly from developed
ountries to less developed countries.
Perhaps the only exception
s that of students and trainees. This does not mean that the
reaty provisions are wrong or unfair in concept, but simply reflects
he economic relationships on which these international tax
tandards are being superimposed. Yet all of this understandably
resents problems to the less developed countries -- problem of
evenue loss, of negotiation, and of justification to their peoples.
Under these circumstances these countries have sought some
)ncession from the developed countries. This search, in the
ight of their desire for additional investment from abroad, has
2ntered around treaty provisions that they regard as offering
1couragement to this foreign investment,
As a consequence, the other industrialized countries entering
lto tax treaties with less developed countries -- and there appear
) be over 30 of these treaties -- have found it necessary to
lcorporate a provis ion which the less developed coun tries cons ider
stimulus to capital inflows in order to obtain d treaty with them.
Ie approach followed involves exemption by the industrialized
luntry of various forms of income received by its taxpayers from
:tivities in the less developed country. Another approach is the
I-called "tax sparing credit." In treaties incorpcLl.:..:Llg :;UCt-l a
·ovision, the capital exporting country agrees to allm,! a credit
ainst its tax, not only for the taxes actually paid to the less
veloped country, but also for the taxes th~t would have been
id to the less developed country if that country had not reduced
s income taxes under some special tax concession scheme.
There
pear to be some 20 "tax sparing" treaties in force bet~'I!een indusialized countries and the less developed countries.

- 26 -

In 0ur view these approaches are undesirable. Thus, tax
exemption of income derived from investment in less developed
countries would be viewed as a highly inequitable provision by
American taxpayers engaged in business in the United States and
would have a highly erratic effect on the relative tax burden of
foreign producers as compared with those engaged in domestic
production. It would be basically inconsistent with the principle
of the foreign tax credit which seeks to maintain neutrality in t~
burdens as between domestic and foreign economic activities. A t~
sparing credit would equally be undesirable since it would operate
capriciously, providing the largest tax benefits to our investors in
less developed countries having the highest nominal tax rates and
without any necessary relationship to the fundamental economic needs
of a country or to such policies as the "Alliance for Progress."
Moreover, such a credit would stimulate the rapid repatriation of
profits from less developed countries rather than the reinvestment
of profits in those countries.
Clearly we need some provision comparable in purpose if the
United States is to obtain treaties with less developed countries.
As a consequence the United States has offered to extend by trea~
to these countries the 7 percent credit that now exists in the
Internal Revenue Code for investment in the United States. Since
in the Code this credit does not extend to investment abroad, its
adoption established in effect a preference for domestic investment
as compared with foreign investment. Consequently, the extension of
the 7 percent investment credit by treaty to these countries offers
i tse If as a fitting approach to the recognition those countries seek
with respect to the encouragement of capital inflows. It would, so
far as the United States is concerned, remove an impediment to
investment in less developed countries and thereby in this respect
establish a general parity of treatment between domestic investment
and investment in the less developed country. In establishing
this parity and thus assisting investment in these countries, we
would also be pursuing a policy reflected in other tax legislatioo
recently adopted by Congress. Thus, the Revenue Act of 1962, ~kb
\Vas directed to "tax-haven" or "base companies" abroad, contains a
number of provisions favorable to investment in less developed
countries as compared with industrialized nations. Moreover, under
the interest equalization tax, loans made to enterprises in less
developed countries and investments therein are treated in the
same \Vay as domestic loans and investments and thus are exempt
from the tax.
Moreover, the investment credit approach is far more appropriately suited to less developed countries than the tax sparing
approach or the exemption of income approach, from the standpoint
of equi ty, effic iency, and adminis tra tion.
Since the investment

- 27 :redit operates on the act of investment, it eases the risk Gf
investment at the very outset.
Since the credit does not turn on
the receipt of income in the United States from the foreign investment,
~s do tax sparing and tax exemption, it does not encourage quick
repatriation of profits.
Since the credit does not turn on foreign
tax concessions, as does tax sparing, it does not have the capricious~ess of that device and its capacity to encourage "concession
:ompetition" among less developed countries, nor does it transfer
from the United States to a foreign country the decision as to whether
i tax benefit is to be conferred and, if so, the extent of such
Jenefit.
Since the extension of the investment credit to less
jeveloped countries would but follow the treatment accorded domestic
lnvestment, it does not involve the treaty process in favoring the
=oreign investor as against the domestic investor in a matter
:losely linked to the rates of tax, as did tax sparing.
The less developed countries so far have responded favorably
:0 our suggestion that extension of the 7 percent investment credit

.s a recognition of their desire for an encouragement of capital
nflows. We have been able to demonstrate, moreover, that the
lonetary benefits to the investor from this credit are generally
quivalent in among to what it would receive from a tax sparing
pproach, given reasonable assumptions as to the time pattern of
istributions, discount rates, and the like. And many countries
ecognize the advantages enumerated above, both to the investor and
he less developed country, of the credit approach over the tax
paring approach.
In this light the extension of the 7 percent credit by treaty
s the negotiating tool which permits the United States to achieve
ax treaties with less developed countries which both we and they
an regard as fair and balanced.
The importance of this provision
hus basically lies not in the benefits it extends to investors, but
~ther in what it thereby obtains for the United States -- a sound
reaty system with the less developed countries with all the advantages
lch a system provides -- for both parties to the treaty -- for
nproved investment, trade, and cultural relationships between the
lited States and these countries.
As a consequence, the provision is incorporated in the
lailand and Israel treaties and in the India draft.
Its technical
·ovisions, as expressed in the Israel draft, are of course subject
improvement as experience is gained. Moreover, the provision can
terminated after five years without a termination of the entire
eaty.

- 28 Ti,l' l'nitL,d States in these negotiations is quite clear on its
viL'\-.' that e'(tension of the investment credit is appropriate onlv
\v'here the other country is receptive to our investment and \vher~ ittax system, taken as a whole, does not involve measures that can be
regarded as significantly \vorking at cross purposes with this inve~t.
menc.
In many cases the existing tax systems of less developed
countries do ~ot meet this standard.
But the treaty process itself
permits the foreign country to modify its tax system through the
treaty and thus deal with the provisions of its tax law which act a~
disin~entives to investment from the United States.
For example, L
existence of a complex of corporate taxes and withholding taxes on
dividends in a less developed country, which brings the effective L:
of tax on profits earned there above the general level of the Unitt":
States corporate tax, creates a tax barrier to our investment in ~.,
countries.
It would generally be difficult to justify a tax credit
for United States investment in such a country unless that country~.
prepared to reduce its taxes to the level prevailing in the United
States. This often can be done by a treaty but not otherwise, since
that country may not be prepared to reduce its taxes on its own
nationals or those of third countries.
The treaty process also permits complementary modifications whe~i
appropriate in the tax laws of the other country which are conducive tl
improved international trade. Where the other country is not yet
ready to make certain modifications, or is more concerned with cootinuing a somewhat restrictive approach to foreign investors, then h
investment credit need not be extended. While it may well be that i~
most of these cases a treaty may presently not be negotiable, this
need not ahvays be the result, as the Philippine treaty indicates.
That treaty does not contain an extension of the investment credit.
The investment credit applies to investments of cash and tangib:i
property. The Israel and Thailand treaties, and the Indian draft,
also contain a complementary provision that seeks to offer encouragement for the investment of technical assistance.
Here the appro~h
is that of a deferral of both our tax and that of the less developec
country on any gain that \vould othenvise be recognized when intangi:::
assets, such as patents, processes or know-how, are exchanged by a
~nited States investor for stock in a corpo~ation of the less
developed country.
Under our statutory law this deferral would,
\\7here "property" is involved, be possible if 80 percent control is
obtained bv the enited States transferor.
Below this level of
control our tax would apply. Moreover, there is frequently a tax.
i~ the other country as \'7el1, even in the case of 80 percent cont~c.,
T:le treat~· provision deferring these taxes until the ,stock is sole
ref:'ovec: an i:-:'.oedinent to the transaction, and is of TTi:lOr effect o~'.;
~he ,L'nlt~d States revenues, since a foreign tax that would be inct.::'>
In ~~e absence,of the nrovision would generally be creditable
a~3=-nst t>e ~'nlted Star(jC; j-;:J';

- 29 -

Finally, '.~: a step in simplifying the process of contributions to
charitable organizations in these countries, a provision may be inserted, as in the Philippine and Thailand treaties but not Israel ,
to permit a deduction against United States tax of contributions made
directly to such organizations. Under our statute the deduction
could be obtained if made indirectly through a United States organization. The treaty provision requires that the foreign organization
must meet the standards established in each country for a charitable
organization. It may be observed that our Internal Revenue Service
has experience in passing on the charitable character of foreign
organizations as a result of its administration of the rule under our
statutory law that a foreign organization which meets our test of
"charitable" is not subject to any tax on income it receives from the
United States.
The Subcommittee of the Senate Committee on Foreign Relations
has performed a useful public service in holding last August full
hearings on the Thailand treaty. The published Hearings contain a
complete technical explanation of these United States provisions, as
well as a detailed analysis of the entire treaty and a description of
factors affecting negotiations with less developed countries. They
also contain the views of organizations representing United States
concerns that invest abroad, and the views are favorable to these
investment provisions and to the treaty itself. The only matter referred to as needing further consideration by the Treasury is that mentioned earlier in connection with the definition of permanent
establishment.
Necessarily as experience is gained the present pattern described
above that has so far evolved in our negotiations with the less developed countries can be improved. The progress of these negotiations
is encouraging, for it indicates that the United States and these
countries can reach a treaty arrangement that each regards as fair
and conducive to improved investment, trade, and cultural relationships. This attitude and the promise it holds for a growing network
of tax treaties represent a major step in our political and economic
relationships with these countries.
II.

ADMINISTRATION OF UNITED STATES STATUTORY
TAXATION OF FOREIGN INCOME

In the Montreal paper I stressed the importarlce of developing a
sound administration of the United States statutory taxation of
foreign income. This task is a formidable one: The field is
relatively new as tax matters go, and the needed experience, analysis
of detail, and synthesis of concepts are still in a formative stage;
the international business activities to which the rules relate are
rapidly expanding in importance and number, and the variety of transactions and business relationships involved thus steadily increases;
the tax rules moreover are constantly being buffeted by the shifting
exigencies of balance of payments problems. Beet all of this merely
underscores the challenge of the task, and the Treasury is seeking to
respond in a fitting manner.

- 30 As I sta ted in my r10ntreal paper, some matters have already beE~
accomplished. The Regulations for the 1962 Revenue Act provisioos
regarding foreign income have been issued. Further, one of these
Regulations provides the tax accounting concepts essential to a~
orderly administration of United States tax rules affecting
foreign income. These Regulations provide the guidance needed
to translate foreign income statements into the "earnings
and prof its" 0 f our tax laws.
Allocation of Income - Section 482
With this done, the Treasury has regarded as the next
order of business the establishment of a satisfactory framework for the administration of the rules governing transactions
between the domestic and the foreign units of our business
concerns with foreign activities. In our tax parlance, this
centers on the application of section 482 of our Code,
authorizing the Commissioner to allocate income and credits
between related units of an enterprise so as to prevent
evasion or clearly reflect the income of the various units.
While this section, whose presence and application are clearly
necessary to a sound income tax system, had its original
technical development in connection with transactions between
domestic units of a United States enterprise, its recent
importance is almost entirely in terms of its application to
the foreign income field. The very variety and number of
transactions in this field that lie within the reach of the
section had overstrained the level of technical development
that had be~n achieved in its domestic application. The
situation thus called for a many-faceted implementation
of the section so that it may carry the new burden placed
upon it. The following discussion catalogues the steps being
taken to achieve that implementation.
Order 11' Trea tmen t of the Pre -196 3 Years - - Revenue Procedure 64-~
The first major step needed was an orderly treatment
of the controversies that had arisen for the years prior to
1963. The recognition by the Internal Revenue Service in the
late 1950's that section 482 had to be applied on a much
wider basis in the foreign field brought a sudden surge of
audits and controversies, since many taxpayers in their
in ter -c ompany arrangemen ts may not have fully cons idered the
range or i~plications of that section. While some aspects
of the section -- such as the requirement of an "arm's length
price" on sales of products between related enterprise -were recognized, other requirements had not been explicitly
developed. .-\5 a consequence, many taxprtyers for these yea~s

- 31 -

were faced witn Internal Revenue Service adjustments increasing
their United States income under circumstances which made it
doubtful, at least in their view, that they could recoup
the foreign taxes paid on the income involved in the adjustment
as where on audit income was for section 482 purposes shifted
from a foreign subsidiary to a United States parent. The
double taxation that could result would thus generally make it
imperative for the United States taxpayer to resist strongly
any claimed adjustment, and the lines were being formed for
prolonged and widespread controversy.
To prevent this, the Treasury, in December, 1964, issued
Revenue Procedure 64-54, which allows taxpayers in the case
of adjustments for years prior to 1963 to offset against any
increase in United States taxes, occasioned by the adjustment,
the foreign taxes paid on the income involved and thus toavoid
double taxation.
In addition, the Revenue Procedure states
that the Revenue Service would not, except in certain limited
instances, pursue for those years adjustments based on
applications of section 482 that were not clearly required by
its previous technical development, such as the requirement
of interest on inter-company loans or royalties on patents
licensed to foreign subsidiaries, or the allocation of general
and administrative expenses.
The effect of this step has been quite salutary.
Through its achievement of an orderly treatment of the
pre-1963 years and the consequent very marked reduction in
number and dollar amount of deficiencies under the section
for those years, it has perillitted the needed technical
development of the section to proceed in an atmosphere
free of acrimonious disputes that would otherwise have existed.
It has thereby enabled -- and indeed requires -- taxpayers
and the Government to consider objectively and responsibly
the shape of that technical development.
The confinement to pre-1963 years of the ability under
the Revenue Procedure to offset foreign taxes against a
United States adjustment is of basic importance.
From the
standpoint of internal fairness, this limitation mirrors
the fact that taxpayers by the end of 1962 had generally
become aware both of the possible reach of section 482 and
of the Service's decision to apply the section in keeping
with that reach.
But, of more importance, the limitation
recognizes that a country cannot continue to administer such
a section in this self-denying manner.
For the continued
allowance of the foreign tax offset would simply mean that
the United States would be yielding control over its allocation

- 32 problems to the allocation rules of foreign countries and
the decisions of their administrators. Double taxation
would be averted -- but the cost would be borne by the
United States Treasury. While our foreign tax credit system
recognizes that to prevent double taxation we are willing
to yield first claim to the country of source, the integrity
of t~at system depends on a rational framework of international
allocation rules.
The United States is thus entitled to
insist on appropriate recognition of the rules it believes
proper, and is not required to surrender its part in the
construction of that framework.
The same privilege of course
belongs to any other country. The claims of the various
countries may conflict and their failure to resolve them will
lead to double taxation and increased burdens for the
international taxpayer.
But that is but another facet of
the problem, to be discussed later, rather than a signal
for us unilaterally to yield the field.
Hence, the import of Revenue Procedure 64-54 for the
future is to underscore the importance of the formulation of
rational internal guidelines under section 482.
Repatriation of Income and Section 482 Adjustments
Revenue Procedure 65-17

A section 482 adjustment in the foreign area usually
means that a United States taxpayer has understated its
United States income and overstated its foreign income -goods have been sold by a United States parent at too low
a price to its foreign subsidiary, services have been
rendered by that parent at an inadequate fee, and so on.
What are the rules that should govern the attempt to recast
the accounts between the subsidiary and the parent:
Suppose
the subsidiary desires now to transfer the income that is
said to be the parent's income -- will the transfer be a
taxable dividend or handled instead as a payment on account
of the section 482 adjustment? Suppose a dividend was
included in the parent's income for the year to which the
adjustment relates -- can the dividend be recast as a payment
on account of the adjustment? These questions of course
required answers so that the transactions could be fitted
into their proper tax niche.
But balance of payments
considerations added an extra urgency to the questions.
Taxpayers wishing to respond to the Government's stress on t~
desirability of repatriating foreign earnings were concerned
about distributing dividends from their foreign subsidiaries
if they also were to be faced by section 482 adjustments

- 33 in the parent's income.
They saw in the combination the
possibility of having more income being taxed m the United States
than they desired or was required by law.
To meet these questions, the Treasury in March, 1965
announced rules later embodied in Revenue Procedure 65-17,
establishing an appropriate relationship between repatriations
of income and section 482 adjustments. Under this Revenue
Procedure a taxpayer will be permitted to recast dividend
payments, for the year to which a section 482 adjustment
relates, into the type of payment required to reflect the
section 482 adjustment -- the dividend may thus become a payment
to the parent for goods or services, thereby avoiding the
enlargement of the parent's income that would occur if
dividend and adjustment were kept separate.
In this case,
of course, foreign taxes associated with the dividend are
not allowed as credits. A taxpayer that did not receive
a dividend in the year to which the adjustment relates (or
did not elect to recast a dividend of that year) may, within
90 days after the adjustment is made, transfer an amount
from the foreign subsidiary and have the transfer treated
as the required payment and not as a dividend. Necessarily,
the broad flexibility thus provided the taxpayer must be
protected against abuse, or else section 482 would be
deprived of any self-policing content. Hence the Revenue
Procedure states that for years after 1963 this flexibility
will not be available to taxpayers who cast their transactions
in a manner which had avoidance of United States tax as a
principal purpose.
This Revenue Procedure is thus an important step in
permitting the section 482 adjustment to be fitted into a
proper position within the flow of funds from the foreign
subsidiary, a position that both removes impediments to the
orderly repatriation of funds and makes it possible for a
taxpayer to accept the adjustment without increasing the
transfer of income from subsidiary to parent more than it
considers desirable. Again, as did Revenue Procedure 64-54,
its flexibility makes possible -- and likewise demands -- a
responsible approach to the guidelines governing the substantive
reach of section 482.

- 34 Section 482 Substantive Guidelines
The above procedural steps have set the stage for the
development of appropriate guidelines for the substantive
a pp 1 ica t ion of sec t ion 482.
The Treasury is approaching this
part of the task through the issuance of detailed proposed
Regulations under section 482, to replace the present Regulations
which for the most part simply establish the standard of arm's
length dealing. The assignment is a formidable one, but we
must remember that the development of the guidelines does not
start from an accounting vacuum.
The tax minded, and especially
the lawyers, tend to overlook the fact that their new tax
problems have very often been faced for some time in contexts
outside the tax field.
Thus, accounting practices and conventions
respecting allocations of income have had to be developed before
this in non-tax fields, both for internal accounting purposes
and to meet the requirements of outside interests. The vast
majority of industrial companies in the United States make
some allocation of general and administrative expenses to their
various operations as a normal business practice. The requirements of government procurement contracting and of public
utility regulation have necessitated allocations of expenses
between the government contract work and the other operations
and be tween the regula ted and the non-regula ted sec tors. And,
indeed, even in the tax field taxpayers have made allocations
to their foreign branches to determine the foreign taxes they
consider to be properly payable.
The first set of proposed Regulations, building in large
part on this experience, was issued in April, 1965.
In general,
it covers the allocations required where assets or services of
the parent are made available to the foreign subsidiary -where money is lent, where management or other services are
rendered or made available, where machinery and other tangible
assets are made available. Essentially the approach is to
provide guidelines which, if the taxpayer follows them, offer
a safe-conduct pass through section 482. The guidelines are
intended to furnish a maximum of flexibility, and of course
do not prevent the use by the taxpayer of other defensible
approaches.
For the most part they are based on the costs
incurred by the parent and an allocation of those costs to
the subsidiary in a manner that follows accepted accounting
precedents. The following offer general illustrations.
\.vhile the guidelines cover domestic as well as foreign transactions,
their discussion here, and their main area of application,
relate to the foreign area.

- 35 Loans -- Interest must be charged on a loan to a foreign
affiliate: a 4 percent rate is acceptable; a
lesser rate must be justified, and if it cannot
be justified, the Service will apply a 5 percent
rate.
Managerial and Other Services -- Managerial and other
services rendered by the parent to benefit a
foreign subsidiary must be compensated for,
though a profit need not be charged by the
parent. The amount of the compensation
generally may be the cost to the parent of those
services, since the subsidiary could itself
have employed the persons performing the
service. While cost includes both direct and
indirect costs and they are to be reflected
on a full cost and not a marginal cost basis,
the indirect costs may be allocated under any
reasonable, consistent method in keeping with
sound accounting practices.
Machinery and Tangible Assets -- Machinery and other
tangible assets made available to a foreign
subsidiary can be reimbursed on a cost basis,
covering out-of-pocket costs, depreciation and
a small profit representing an allowance for a
return on the parent's investment. This cost
allocation approach rather than that of
establishing a rental figure is a method of
reflecting on the income side what would otherwise
generally be the required disallowance of
deductions to the parent.
It also eliminates the
disputes that would arise under an approach
seeking to establish a fair rental value based
on market rates.
Arm's-Length Test -- The above rules are cast within the
general framework of an arm's-length test, and
do not turn on following the transactions
throughfue books of the subsidiary to see
whether it used in a profitable way the money
lent, the assets made available, or the services
rendered. The fact that the subsidiary is losing
money does not therefore prevent these allocations.

- 36 This is the essence of the arm's-length approach,
and is in keeping with the fact that these are
international transactions under which the United
States is entitled to a fair reflection of the
moneys, goods and services that are being
transferred. It is also in keeping with the
general deferral rules that are consequent upon
treatment of the foreign subsidiary as a
separate legal entity. It also is consistent
with a proper approach to consolidated return
accounting.
The second set of proposed Regulations, now in preparation,
will contain the rules applicable to inter-company sales of
products and transfers of intangibles, such as patent licenses.
The problems here faced in seeking appropriate criteria or
guidelines are much more difficult. The first set of
Regulations involved transactions which could be governed either
by cost standards or by establishing an appropriate charge for a
fungible item, money. But the second set of Regulations
involves the matter of determining a fair profit for assets
that, under the arm's length rule, are regarded as transferred
in a profit-seeking transaction. Nevertheless, we seek to
establish as helpful a set of rules as is possible in this area.
We have, in this context, in TIR 441 issued in 1963, established
guidelines to govern transactions between Puerto Rican affiliates
who typically engage in manufacturing activities, and their
United States mainland parents, who handle the distribution
of the goods. This TIR has been quite helpful in facilitating
the disposition of a large number of difficult cases. While
it deals with a situation that has some unique aspects,
it still provides us with some experience in approaching the
proposed Regulations.
Finally, we are preparing Regulations to coordinate our
section 482 Regulations with section 862 of the Code, a section
requiring an allocation between domestic and foreign source
income of expenses not allocable to specific items of gross
income. When such expenses are allocated to gross income from
sources outside the United States, the net amount of that
income is decreased. This allocation of expenses is important
largely for foreign tax credit purposes (the gross income and
expenses are independently already taken into account in
computing the taxpayer's domestic taxable income), because the
allocation, by reducing foreign source income, can reduce a
taxpayer's foreign tax credit. Clearly coordination with
section 482 is necessary -- as a simple example, an expense of
the parent for managerial services rendeved to its foreign

- 37 subsidiary and compensated for by a fee should be allocated
to that fee and not to a dividend received from the subsidiary.
The Needed International Accommodation
All of the above relates to the proper formulation of our
unilateral rules of allocation with respect to international
transactions.
But since they are international transactions,
a unilateral approach by the United States, or any country, is
not sufficient. For if our unilateral rules do not mesh with
those of other countries the result will be double taxation,
the tax burden of which will be borne either by one Government
through the foreign tax credit or by the taxpayer, with the
other Government obtaining an unwarranted benefit.
(Far less
likely, though possible, is undertaxation of the taxpayer.)
Each country, of course, must see both sides of the allocation
coin -- the rules which the United States regards as proper to
allocate income to our parent companies from transactions with
their foreign subsidiaries are the rules we must be willing to
accept when the subsidiary is here and its parent is a foreign
corporation. This factor should have an effect in tempering
the international assertion of rigid positions, and thus make
it easier to achieve international accommodation. For it is
clear that this must be the ultimate goal, an internationally
acceptable set of rational rules to govern the allocation of
international income arising through these transactions,
The United States believes that the OECD Fiscal Committee
is the proper body to undertake the task of establishing the
allocation standards to guide countries in reaching accommodations
with each other.
The OECD Fiscal Committee appointed a
Working Party for this purpose. We intend, as a measure of
assistance to that Working Party, to lay before it our proposed
section 482 Regulations as they are developed.
It is quite
likely that these Regulatiornmay represent a more structurally
developed and detailed framework of allocation rules than has
been formulated elsewhere, and hence may prove helpful as a
starting point and as a way of focusing attention on a wide
range of issues. We would, of course, welcome the analysis
and discussion which we expect this would stimulate. We would
be ready to make mod ifica t ions in these proposed rules if such
changes are seen to be appropriate as a result of this international
dis c u s s ion.

- 38 It may turn out that full international agreement on all the
rules is not possible. We would then expect that the various
Governments would consider what steps may be appropriate in
dealing with the resulting conflicts and their double taxation
effects. Various devices, which can be mentioned without an
endorsement, have been suggested, such as arbitration, a payment
once by the taxpayer at the higher of the two rates, or some
formula to divide the burden among the taxpayer and the Governmer
While this formulation of international rules is proceeding,
we must remember that adjustments will be made under existing
unilateral rules and many will be acceptable to both the
countries concerned. However, as these cases te.nd to
involve a considerable time before agreement is reached on the
adjustment, a taxpayer and the countries concerned may find
that procedural barriers, such as a statute of limitations on
refunds, may make it impossible to implement the adjustment
in the country that has overtaxed the income. To remedy this,
the United States suggests that tax treaties contain provisions
waiving these barriers and thus permitting the adjustment to
be implemented. We are finding other countries receptive to
this approach, and as observed in the discussion above under
treaties, have already included such a provision in several
treaties.
Section 367
There is another important aspect of our treatment of
foreign income that requires an elaboration of the applicable
administrative rules. This is Section 367 of our Code, which
in effect requires the Commissioner's consent to be obtained
by the taxpayer before the benefits available under a number
of the corporate tax provisions can be achieved if the
transaction in question involves a foreign corporation. Here
also we are concerned with a provision of wide application
necessary to prevent tax avoidance in the field of foreign
income, for the taxpayer must satisfy the Commissioner that
the proposed transaction -- such as the formation or
liquidation of a foreign corporation -- does not have tax
avoidance as one of its principal purposes. It would be helpful
to taxpayers -- and administrators -- if detailed guidelines
could be formulated setting forth objective standards to govern
the application of that section. The Treasury is now engaged
in the preparation of these guidelines and is hopeful of early
action in this regard.

- 39 III.

UNITED STATES STATUTORY TAXATION OF FOREIGNERS

The steady attention focused by the United States in
recent years on its balance of payments position has resulted
in an extensive examination of the United States tax treatment
of foreigners who invest in the United States. This examination commenced with the report on April 27, 1964 of the
Committee appointed by President Kennedy on Promoting Increased
Foreign Investment in United States Corporate Securities
and Increased Foreign Financing for United States Corporations
Operating Abroad, which was chaired by the then Under Secretary,
and now Secretary of the Treasury, Henry H. Fowler. The Treasury
Department study of that Report, and of the entire statutory
treatment of foreigners investing here, resulted in proposals
to Congress embodied in H.R. 5916, introduced in March, 1965.
The House Committee on Ways and Means then gave extensive
consideration to that bill and in September, 1965 Chairman
Mills, at the instruction of the Committee, introduced a
modified version of that bill for comment before the bill is
reported to the House in 1966. The new bill, H.R. 11297,
entitled the Foreign Investors Tax Act, contains the essential
elements of the predecessor bill, but with certain modifications.
In my Montreal paper I discussed the principles which the
Treasury Department considered applicable to the revision of
this aspect of international tax relationships, and these
may briefly be summarized: (1) The rules adopted should be
in conformity with acceptable international norms. The United
States, with its large flows of capital and goods in and out
of the country, has a responsibility to take a major role in
seeing that there is developed a proper international tax framework against which the tax system of any particular country
can be considered. (2) The rules should permit a fair and
sensible allocation among the various countries of the income
from activities that reach across international borders.
(3) The rules should assist in maintaining as far as possible
the free international market of capital and goods, with taxes
in any country as neutral a factor as possible consistent with
the domestic policies to be served by a tax system. (4) A
proper balance must be maintained between the taxes paid by
our citizens on their United States income and those paid by
foreigners on the same income arising here. (5) The rules
should not permit the United States to be turned into a tax
haven country vis-a-vis foreign investors,nor be so framed

- 40 as to permit, in combination with the tax rules of another
country, the transformation of that country into a tax haven
that would attract foreigners seeking to invest in the
United States. (6) The rules should not be structured as to
cause the capital of less developed countries, which are
badly in need of the capital at horne, to be drained off for
investment in the United States. (7) Any benefits granted
unilaterally by the United States should be so structured
as to preserve a proper bargaining position for the
United States in tax treaty negotiations.
The bill that has evolved from the consideration by the
Committee on Ways and Means represents a balanced application of
these principles. It recognizes that some of the existing
provisions of our Code have become discriminatory and
inequitable to foreign investors and thus a barrier to
investment in the United States. In correcting this treatment
the bill avoids at the other extreme rules that would represent
only
a desire to attract foreign investment, rules which
would be but mere tax inducements or tax concessions. Indeed,
the bill moves to correct certain instances where in the past
our legislation was too favorable to foreigners when compared
with the treatment of our own citizens.
The main provisions of the bill are here summarized:
Corporate Activity
Most foreign corporations that are involved in business
activities in the United States generally operate through
ownership of United States domestic subsidiaries or of
significant stock interests in those corporations. The
United States tax rules applicable are not complicated, and
generally relate to our withholding taxes. This is equally
so as to royalty situations. But where the foreign corporation
operates here in branch form, the rules become more involved.
The existing statutory rules provide that a foreign
corporation (or an individual) engaged in trade or business
in the United States is taxed on all its income from United
States sources at the regular rates applicable to business
income, including not only the income from trade or business
but also any unrelated investment income. The result

- 41 sralleled the force of attraction concept of the permanent
stablishment provision in tax treaties.
The new bill confines
1is taxation at regular business income rates (0 the income
3ffectively connected with the conduct of the trade or business
Lthin the United States," leaving the other income of the
)reigner from United States sources to be taxed at our
) percent statutory withholding rate or lower treaty rates.
le bill thus moves our treatment in this area over to the
=neral approach followed by many other nations.
It also is
1 accord with the OECD Model Income Tax Convention and our
=w treaty approach, evidenced in our protocols with Germany
1d the Netherlands, and thus has the advantage of conformity
) international practice. The bill offers guidelines, to be
lpplemented by the legislative history, to the application
= the "effectively connected" concept.
A foreigner who is
~ceiving large amounts of investment income from the
lited States, under the approach of the bill would no longer
~ed be concerned that some other activity in the United States
_11 suddenly be considered as giving him a trade or business
:atus in the United States, and thus subjecting the investment
lcome to business taxation.
Instead, as long as the investment
Icome is not connected with the other activity, any uncertainty
to the status of the latter would not color or affect the investment
come.
The bill implements the "effectively connected" concept by:
) Making taxable any income so connected even though its source
not within the United States, such as where a branch located
I the United States imports goods from abroad and then resells
Ie goods outside the United States, with title passing outside the
lited States. The income from the sale, untaxed today by the
lited States and indeed often untaxed by any country, would be
.xable under the bill. (Any income not so connected with the trade
business is taxed only if it is from sources within the United
ates under the usual source rules.)
(2) In keeping with the
'ave approach, providing a foreign tax credit, against the
ited States tax on the trade or business income, for foreign
xes paid on that income, if the foreign tax is levied on the basis
source jurisdiction by the other country.
In this manner the bill obtains for the United States its
oper tax on the full income of the trade or business conducted
ere, and on any investment income effectively connected with it.
the same time, by freeing the unrelated investment income from
siness tax rates, it leaves that income to be taxed at the rates
consider appropriate for investment income.

- 42 A number of our treaties provide for reduced withholding ra~s
or exemption on investment income only if the foreign taxpayer has
no permanent establishment in the United States. The adoption of
the "effectively connected" approach, however, reflects a desire to
permit application of those lower rates or exemption to all investment
income which is not connected with a permanent establishment. We
could achieve this result by a revision of each of our treaties to
apply
the lower rates or exemption despite the permanent establish.
ment. However, this process would take a period of time. The bill
eliminates this problem by unilaterally stating that these treaties
will be applied to income not "effectively connected" as if the taxpa~
did not have a permanent establishment in the United States.
.
Individual Investment
Most foreign individuals with interests in the United States
are involved in investment activities, such as the ownership of
United States stocks or securities. Under existing rules forei~
individual investors in the United States have been subject to
progressive rates of tax on their United States income, when the total
amount of that income involved a greater tax under the progressive
rates than was collected through our withholding taxes. The investors
in turn have sought to sidestep those rates through placing their
investments in a foreign corporation and thereby obtaining either the
30 percent statutory withholding rate or lower treaty rates on the
investment income. But they have had to be careful to structure the
foreign corporation to avoid its being a personal holding company with
respect to its United States source income. And of course some
investors have simply sought to cover their tracks, recognizing the
difficulties any tax administration faces when it moves beyond with·
holding taxes in its attempt to reach income going to foreigners.
The consequence of all this was that the United States collected
very little taxes under the progressive rates, so that the withho~~
rates were in practice the effective rates.
The bill simplifies this whole area by abandoning the application of progressive rates and limiting our assertion of tax, as
respects investment income (not "effectively connected" with a trade
o~ busin~ss), to the technique of withholding and to the level of
wlthholdlng rates. The bill, in keeping with this approach, also
e~empts from personal holding company tax liability a foreign corpora·
tl0n \vhose stock is owned entirely by foreigners. Moreover, in the
case of any foreign corporation receiving income from United States
sources, it confines our assertion that dividends distributed by that
corporation to its shareholders are in turn to be considered by us,
in the shareholders' ha~ds, as income from United States sources,
to a situation where 80 percent or more of the gross income of t~

- 43 foreign corporation is effectively connected with the conduct of a
trade or business in the United States. The tax on that
portion of the dividends of the foreign corporation -- our
so-called "second dividend" tax -- is thus confined to a case
~here the activities of the foreign corporation largely consist
Df operating a branch in the United States, so that the
combination of our corporate tax on the branch profits and the
second dividend tax results in about the same tax burden that
Nould exist if the foreign corporation had conducted its United
States business through a United States subsidiary.
The bill in two specific types of investment revises
)resent law to remove tax clouds over that investment. As
:0 real estate investment, an individual foreigner (or corpo~ation) is permitted to elect to treat the income from the
~nvestment as trade or business income.
He thereby may
~eceive the benefits of deductions connected with that income
Ind is taxable on the resulting net income at business rates
.f that approach is preferable to taxation on the gross income
It withholding rates. This provision eliminates many tax
mcertainties that presently attend investment in real property
n the United States. As to stocks and securities, the bill
rovides generally that a foreigner, individual or corporate,
rading in those investment in person or through a resident
gent, who mayor may not have discretion to carryon investment
ctivities, will not thereby be regarded as being engaged in
rade or business in the United States. This provision should
erve to clarify uncertainties in present law which have
onfused potential foreign investors.
Finally, as respects the United States capital gains of
Dreign individual investors, the present unrealistic and
Dmplicated rules have been restated to tax such gains only
f the foreigner is in the United States for 183 days or
)re during the year, and thus has a "presence" here comparable
) that which would make him a "resident" under the tax laws of
i~ foreign countries. Also, capital gains effectively connected
~th a trade or business are subject to tax.
In the case of
)reign corporations, this is the only situation in which its
lited States capital gains are taxable.
This drawing back of United States source jurisdiction
a more realistic and administratively manageable position
'uld materially simplify the tax rules which we present to
e foreigner desiring to invest in our stocks and securities
real property. As a general rule, his periodic income

- 44 would be subject only to withholding taxes, either at 30 percent
or a lower treaty rate, and his capital gains would not be
taxed. These results are not altered by extensive trading
in stocks or securities, even where the trading is conducted
by a United States broker who has discretion to act for him.
His real estate investments would be taxed on a net income
basis at regular rates if that is preferable, and if his real
estate investments are so active or so conducted as to constitute a trade or business on their own account, and
consequently taxable in any event at regular rates, any other
investments not connected with the real estate would still
remain subject only to the usual withholding rates. This
simpler, logical pattern would serve to remove income tax
barriers which our present structure now presents to the
foreign investor.
Estate and Gift Taxation
The United States now presents the foreign individual
investor with extremely high rates of estate tax on his United
States investment. The estate tax starts at the $2,000 level
and the rates climb to 77 percent. For a $100,000 estate in
the United States this means an effective rate of 17 percent;
for $500,000, 26 percent; for $1,000,000, 29 percent; and
for $5,000,000, 43 percent. Such rates are among the highest
in the lvorld. Moreover, they are far above the rates we
impose on our own citizens, a relationship that is just the
reverse of that \vhich generally prevails in other countries,
or under our income tax provisions applicable to foreigners.
It is thus clear why foreigners regard our estate tax as a
real barrier to investment in the United States, and one that
very often bars the investment or channels it into an investment made in foreign corporate form.
The bill recognizes the unreality of this existing rate
structure. In seeking a lower and more realistic level, the
bill uses as a standard the effective rates applied to our
own citizens (under conditions where the estate of the
United States decedent is eligible for the marital deduction,
\vhich permits property passing to a spouse to be untaxed up
to one-half the total estate). The bill thus starts with an
exemption of $30,000, in place of the present $2 000 and
applies a 5 percent rate to the first $100 000 of ta~able
United States estate, rising to 10 percent' thereafter up to
$500,000 and then 15 percent up to $1 million. The top rate
is 25 percent reachirl at $2,000,000 (higher than the 15 percent

- 45 recommended by the Treasury). The new rate schedule would
thus provide effective rates of 3 percent on a $100,000
estate, 7 percent for $500,000, 10 percent for $1,000,000,
and 18 percent for $5,000,000.
The bill reshapes the definition of United States property
to include bonds of a United States corporation and other debt
obligations of a United States obligor, regardless of the
physical location of the instruments, and also deposits in
United States banks. It thus rounds out the present definitions into a consistent pattern.
As a consequence, the foreign investor would see a far
lower scale of United States estate tax rates on his United
States investment, and one that compares favorably with a
number of foreign countries. Moreover, since many of the
European countries grant their citizens, either by statute
or treaty with the United States, a credit against their
domestic estate tax for the United States tax on the United
States estate, the new rates would be largely or entirely
absorbed through these credits. As respects our gift tax,
the bill would leave applicable to that tax only tangible
property located in the United States. Thus, the bill would
present the foreigner with a United States estate and gift
tax structure vastly different from the present pattern, and
one that should in a meaningful way remove barriers that the
present pattern now imposes.
Relationship to Tax Treaties
The provisions of the bill provide distinct benefits
to foreigners with United States income or assets as
compared to present law through the changes that we would
be making in our statutory provisions. These changes, at
the same time, represent approaches which we think are
appropriate in the treaty area as well. Thus, our recent
protocol with Germany, and the tentative draft of the
Netherlands protocol, reflect in a number of instances the
changes in the bill, for example, with respect to the
abandonment of the force of attraction and the cut-back in
capital gains taxation. And in the past our treaties, in
establishing reduced withholding rates for investment income,
have thereby also abandoned application to that income of
our progressive rates. But treaties are bilateral and

- 46 their restrictions reciprocal. These concessions on our
part have been matched by similar concessions granted by
the treaty country on incoIT,e our taxpayers derive from that
country. A unilateral grant of these concessions on our
part, by a statutory revision, might thus seriously affect
our treaty bargaining strength and make it more difficult
for us to secure similar treaty concessions in the future.
At the same time, we desire to remove as quickly as possible
any inappropriate tax barriers to the foreign investor now
contained in our statutory system.
Unilateral action can
be prompt and cover all foreigners, while the treaty process
takes time and operates country by country.
The bill neatly meets these difficulties by, first,
providing prompt action and wide coverage through the unilateral
act of a statutory revision, and, second, by retaining treaty
bargaining power and flexibility through empowering the
President to reinstate the former statutory rules. The
President can do so, with respect to the residents of a
foreign country, when he finds that the foreign country, if
requested by the United States, in a treaty negotiation for
example, does not modify its taxes to parallel the changes
we are making unilaterallyo This power of the President can
be applied on a selective basis, country by country and tax
provision by tax provision, and need be applied only when
he finds that it is in the public interest to do so in each
case. Our treaty negotiators will thus be able to point out
to a foreign country that our concessions are reversible, so
that the negotiations can, in effect, proceed on a reciprocal
basis.
Expatriates
The abandonment of the application of the progressive
income tax rates to foreign individuals investing in the
United States, the cut-back of other income tax provisions,
and the reduction of estate tax rates would establish a
distinctly brighter tax picture in the United States for the
foreigner.
Indeed, the picture is such that Americans
may be tempted to become "foreigners" for tax reasons.
In
1936, when the United States had similarly abandoned its
pr~gressive income tax rates as respects foreigners, it
qu~ckly restored them a year later, in part because some
Americans had given up their citizenship to take advantage
of the change.
But to the extent possible we should not
permi t our tax problems \vi th Americans to act as a bar to

- 47 -

rational revisions in our treatment of foreigners. The
proposed bill meets this objective by keeping American
expatriates still subject to full United States tax on
their United States income and assets, for five years after
loss of citizenship in the case of the income tax and for
ten years in the case of the estate tax, where the loss of
citizenship is motivated by the desire to avoid our taxes.
Where such a result is contrary, however, to a tax treaty,
the treaty would govern. But since our tax treaties are
largely with countries whose tax systems involve rates at
significant levels, an expatriate who establishes residence
in those countries is not likely to be motivated by a desire
to avoid United States taxes.
CONCLUSION
Current developments in our international tax relationships underscore the wide range of policy and administrative
issues that are under consideration. Indeed, the continued
rapid growth in international investment and trade has
Jrought with it a multitude of varied tax problems that
severely strain and press beyond our present framework of
:oncepts and analysis. Intensive legal and economic thought
:0 develop that framework into one adequate to the task -- a
Eramework that embodies a coherent logic capable of expansion
:0 meet new patterns and relationshipso
In one sense this is a truly
:ormidable task, since each of the countries of the world
~an claim a voice in the effort.
But the ingenuity and
_nsight promised by this host of architects should be viewed
is welcome assets. The task for the United States is to see
:hat in this international effort we play a role fitting to
>ur position. We can do so if all of us with a stake in the
'utcome -- the Government and its officials, our taxpayers
lith international activities and their advisors, our
miversities and research institutions and their scholars -lork cooperatively in shaping our contribution.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE
ANTIDUMPING PROCEEDING ON
CAST mON SOIL PIPE

On November 3, 1965, the Commissioner of Customs received 1nformation in proper form pursuant to the provisions of section l4.6(b)
of the Customs Regulations indicating a possibility that cast iron
soil pipe and fittings for cast iron soil pipe imported from

Pol~

are being, or likely to be, sold at less than fair value within the
meaning of the Antidumping Act, 1921., as amended.
In order to establish the validity of the information, the Bureau

of Customs is iustitutiug an inquiry pursuant to the provisions of
section 14.6(d)(1)(ii), (2) and (3) of the Customs Regulations.
The information was submitted by the Cast Iron Soil Pipe 1nstitute, Washington, D. C.
An I!Antidumping Proceeding Notice II to this effect is being published in the Federal Register pursuant to section l4.6(d)(1)(1) of
the Customs Regulations.
Imports of the involved merchandise received during the period
April 1, 1965, through October 32, 1965, amounted to approximately

$360,000.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE
ANTIDUMPING PROCEEDING ON
CAST IRON SOIL PIPE

On November 3, 1965, the Commissioner of Customs received information in proper form pursuant to the provisions of section l4.6(b)
of the Customs Regulations indicating a possibility that cast iron
soil pipe and iittings for cast iron soil pipe imported from Poland
are being, or likely to be, sold at less than fair y&lue Within the
meaning of the Antidumping Act, 1921., as amended.
In order to establish the validity of the information, the Bureau

of Customs is instituting an inquiry pursuant to the provisions of
section l4.6(d)(l)(ii), (2) and (3) of the Customs Regulations.
The information was submitted by the Cast Iron Soil Pipe 1nstitute, Washington, D. C.
An "Antidumping Proceeding Notice II to this effect is being published in the Federal Register pursuant to section l4.6(d)(l)(i) of
the Customs Regulations.
Imports of the involved merchandise received during the period
April 1, 1965, through October 31, 1965, amounted to approxLmately

$360,000.

TREASURY DEPARTMENT

December 6, 1965
FOR. IMMEDIATE RELEASE

UNITED STATES FOREIGN GOLD TRANSACTIONS
FOR THIRD QUARTER OF 1965
During the third quarter of 1965, the net sales of
monetary gold by the United States amounted to $95.5 million,
Included among these sales is one to Australia in the amount
of $8.3 million which is, however, fully offset by a deposit
made by the IMF with the United States. This is the first in
an expected series of transactions connected with the current
round of IMF quota increases in which the burden of gold sales
on the U,S. will be alleviated through deposits with the U,S.
of equivalent amounts of gold by the IMF.
The total decrease in the U.S. gold stock in the third
quarter of 1965 was $123.5 million, including the net sale
of $28.0 million worth of gold for domestic, industrial, professional, and artistic uses. For the combined first three
quarters of the year, the total decrease was $1,545.4 million
of which $81 million was for such non-monetary purposes.
The Treasury's quarterly report, made public today,
summarizes U.S. net monetary gold transactions for the first
three quarters of Calendar Year 1965. (Table on reverse side,)

F-292

UNITED STATES NET

MONETA~Y

GOLD TRANSACTIONS

WITH FORE-::-CN COUNTRIES AND INTERNATIONAL INSTITtITIONS
January 1. 1965 - September 30. 1965
(In Millions of Dollars at $35 per fine troy ounce)
Negative figures represent net sales by the
.
f'l~ures , ne t
' . t 'lons
acqUl,Sl
United States; positlve
Third
Second
Total
First
Quarter
Quarter
January 1..
Quarter
Sept 30, 196:
1965
1965
1965
- 8.3
- 8.3 **"
Australia
-37.5
-37.5
-100.0
-25.0
Austria
-21.0
-22 1
-39.6
- 82.7
Belgium
-1.0
+28.2
-1.0
+26.2
Brazil
-4.3
-4.3
Ceylon
-2.6
-1.0
-3.6
Chile
+30.0
+30.0
*
Colombia

-1.3
-1.0
-482.5

Costa Rica
Egypt
France
I. M. F.
Iran
Iraq
Ireland

-80.0

-35.0
-2.7
-0.1
-1.5
-90.0

Sudan
Sr..,i tzerland
Syria
Turkey
U. K.
Uruguay
Yugoslavia

-37.5
-0.2
-15.7
-75.7
-0.1
-0,6

All Other

-10,0
-1.0

-0.4

Italy
Morocco
Netherlands
Panama
Phi1iDpines
Salvador
Spain

-0.1
-1.0
-147.5
-258.8**

-0.1
-

-60.0
-7.6
-12.5
-0.2
-2.5
+29,4
-0.1
-0,5

-0.1
-1.0
-117.2
+8.3k**
-2.2

-1.5
-3.0
- 747.2
- 250.5
-2.2

-10.0
-1.8

-80.0
- 5.2
-35.0

-0.4
-5.2

-30.0

-0.2
-8.0
+132.3
-0.1
-0.7

- 2.7

-0.2
-1.5
-180.0
-7.6
-50.0
-0.6
- 26.2
+86.0
-0.3

-1.8

-0 2
-0.1
-OJ.
-0.6
Total
-811.1
-1. 464.9
-558.3
-95.5
Figures may not add to totals because of roundi
* Less than $50,~
**.)rU bl'J.C Law 89 - 31) approved June 2. 1965 authorized
ng.
an increase 0f
$1.035 million in the quota of the U S i~ the IMF - On June 30, 196~,
t h
T
•
•
•
e L: S. made the required p~yment of 25% of its quota increase in
crold ln the amount
$258,750,004.03
~**Sale for IMF quota increase and oftsetting ~906i.t by TMF. Totsl
of such mitigated sales through the thir~ quarter was $8.3 ~illi~.
1

TREASURY DEPARTMeNT
WASHINGTON. D.C.
FOR R~~SE 6:30 P.M.,
Monday} December 6 1 1965.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two series of Treas~:
bills, one series to be an additional issue of tr.e bills dated September 9, 1965, ~d:
other series to be dated December 9, 1965, which "'ere offered on December 1, were ope:,
at the Federal Reserve Banks or.. December 6. Tenders were invited 1"or $1,200,000,000,1
thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-day b111s.
The details of the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:

lligh

Low
Average

91-day Treasury bills
maturing March 10, 1966
Approx. Equiv.
Price
Annual Rate
98.910 ~
4.312%
98.895
4.371~
98.902
4.344%

l82-day Treasury bills
maturing June 9, 1966
Approx. Equ1~
Price
Annual Rate
97.756
4.439~
97.731
4.488~
97.741
4.46B~ 1

af Excepting 3 tenders totaling $874,000; b/ :-xcepting 2 tenders totaling $200,000
75 percent of the amount of 9l-day bills b1:d ;'or at the low price was accepted
9 percent of the amount of 182-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Applied For
Accepted
: Applied For
Accepted
Doston
$ 24,690,000 $ 14,690,000
$ l6,974}000 $ lO,974,~
New York
l,576 ,l79 ,000
761,429,000:
l,554,,054,OOO
768/854,~
Philadelphia
25,879,000
13,879,000
15,544,0'00
7,544,~
Cleveland
32,086,000
32,086,000
47,292,000
32,292,~
Richmond
12,870,000
12,870,000
6,695,000
6,695,~
Atlanta
38,338,000
34,538} 000
31,538,000
20, 738,~
Chicago
400,092,000
119,967,000
290,135,000
75,135,~
St. Louis
43,478,000
38,978,000
23,915,000
13,915,001
Minneapolis
18,399,000
18,399,000
10,839,000
10,839,001
Kansas City
27,121,000
26,121,000
15,663,000
13,663,001
Dallas
25,885,000
16,635,000
13,619,000
9,619,001
San Francisco
133,708,000
111,558,000
107,620,000
30,0202
TOTALS
$2,358,725,000 $1,201,150,000 ~ $2,133,888,000
$1,OOO,288,~v
V Includes $251,197,000noncompetitive tenders accepted at the average price of98.:1
Includes $125,262,000noncompet1tive tenders accepted at the -average price of97.;~
On a coupon issue of the same length and for the same amount invested, the retur::.~
these bills would provide yields of 4.45'jt, for the 91-day bills, and 4.63%, fO~.~
lS2-clay bills. Interest rates on bills are quoted in terms of bank discount Ill,,·
the return related to the face amount of the bills payable at maturity rathert~
the amount invested and their length in actual number of days related to a 360-1:&:
year. In contrast, yields on certificates, notes, and bonds are computed in te~
of interest on the amount invested, and relate the number of days remaining in ~.
interest payment period to the actual number of days in the period, with 6~
compounding if more than one coupon period is involved.

y
Y

1"-('93

TREASUR'{ DEPARTMENT

ELEASE 6:30 P.M.,
y, December 6, 1965.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two series of Treasury
, one series to be an additional issue of the bills dated September 9, 1965, and the
series to be dated December 9, 1965, which were offered on December 1, were opened
e Federal Reserve Banks or. December 6. Tenders were invited for $1,200,000,000, or
abouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-day bills.
etails of the two series are as follows:
OF ACCEPTED
rITIVE BIDS:

igh

ow
verage

9l-day Treasury bills
maturing March 10l 1966
Approx. Equiv.
Annual Rate
Price
98.910 ~
4.312%
98.895
4.3711)
" /
1..1
98.902
4.344% ::::J

l82-day Treasury bills
maturing June 9 z 1966
Approx. Equiv.
Price
Annual Rate
97.756 'E./
4.439%
97.731
4.488%
97.741
4.468% !/

xcepting 3 tenders totaling $874,0(>0; b/ Excepting 2 tenders totaling $200,000
ercent of the amount of 91-day bills b"!d for a't the low price was accepted
ercent of the amount of 182-day bills bid. for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FE:DEHAL RESERVE DISTRICTS:
rict
Applied For
Accepte=-?-____
Applied For
Accepted
on
$ 24,690,000 :;, H:GJO,OUO
:$
16,974,000
$
10,974,000
York
1,576,179,000
751,429,000
1,554,054,000
768,854,000
adelphia
25,879,000
13,879,000
15,544,000
7,544,000
e]and
32,086,000
32,086,000
47,292,000
32,292,000
mond
12,870,000
12,870,000
6,695,000
6,695,000
nta
38,338,000
34,538,000
31,538,000
20,738,000
ago
400,092,000
lJ.:3 ;9G7 ,000
290)135,000
75,135,000
Louis
43,478,000
38 ;978 ,000
23,915,000
::; ,915 ,000
eapolis
18,399,000
18,399,000
10,839,000L',839,000
as City
27,121,000
26,121,000
15,663,000
13,663,000
as
25,885,000
16,635,000
13,619,000
9,619,000
Francisco
133,708,000
__:!:P_}552,000
107,620,000
30,020,000
TOTALS
$2,358,725,000 $)1,201,150,000 ~j $2,133,888,000
$1,000,288,000 9J
ludes $251,197,000noncompetitive tenciers accepted at the average price of 98.902
ludes $125,262,000noncompetitive tenders accepted at the average price of 97.741
3. coupon issue of the same leng"tlt and for the same amount invested, the return on
se bills would provide yields of 4.4510.1 for the 91-day bills, and 4.6310, for the
-day bills. Interest rates on bills are quoted in terms of bank discount with
return related to the face &~ount of the bills payable at maturity rather than
amount invested and their length in actual number of days related to a 360-day
r. In contrast, yields on certificates, notes, and bonds are computed in terms
lnterest on the amount invested) and relate the number of days remaining in an
~rest payment period to t~;e actual number of days in the period, with semiannual
~unding if more than one coupon period is involved.

TREASURY DEPARTMENT

December 7, 1965

FOR INMEDIATE REIEASE
TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIOOMPING ACT

The Treasury Department has determined that titanium dioxide,
pigment grade, from France is not being, nor

like~

to be, sold at

less than fair value within the meaning of the Antidumping Act.

"Notice of Tentative Determination," was published in the Federal
Register on May 15, 1905.
All submissions received in opposition to the tentative determination were given full consideration.
Imports of the involved merchandise received during the perioo
Ju~ 1964 through 1v1a.y

1965 amounted to approximately $2,500}OOO.

TREASURY DEPARTMENT

December 7,1965

FOR IMMEDIATE REIEASE

TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIOOMPING ACT
The Treasury Department has determined that titanium dioxide,
pigment grade, from France is not being, nor likely to be, sold at
less than fair value within the meaning of the Antidumping Act.

"Notice of Tentative Determination, If was published in the Federal
Register on ~ 15, 1965.
All submissions received in opposition to the tentative determination were given full consideration .
Imports of the involved merchandise received during the period
July 1964 through ~ 1965 amounted to approximately $2,500,000.

- 2 -

and the job was always done well. This
award is made in recognition of his
outstanding contribution to a better
public understanding of Treasury policy."
Mr. Manning, a native of New Orleans who now lives in
Alexandria, Virginia, was named Deputy Assistant to the
secretary for Public Affairs in 1958.

He carne to Treasury

from the Maritime Administration where he had served as
Public Information Officer since 1950.

Before that, he

was an information officer with the U. S. Maritime Commission
and the United States Forest Service.
Mr. Manning began his professional career as a reporter
on The New Orleans States.

Before joining the government,

Mr. Manning also worked as an advertising copywriter.
Mr. Manning attended Tulane University in New Orleans
and later George Washington Univers ity in Washington.
a member of The Press Club.

He is

FOR RELEASE AoMo NEWSPAPERS
FRIDAY, DECEMBER 10, 1965:
Stephen C. Manning, Jr., Receives Award
Treasury Secretary Henry H. Fowler Thursday night presented the Treasury's Meritorious Service Award to Stephen C.
Manning, Jr., Deputy Assistant to the Secretary for Public
Affairs.
Secretary Fowler made the Award at a party given to
honor Mr. Manning, who is retiring from government at the
end of this year.
In making the Award, Secretary Fowler said:
"Stephen C. Manning, Jr., has performed
his duties as Deputy Assistant to the
Secretary in a manner which reflects
credit upon him, upon the Treasury
Department, and upon the United States
Government. His high professional skill,
his wise judgment, and his strong integrity
have earned the respect of the three
Secretaries of the Treasury under whom he
served. His unfailing tact, his warm
concern for the welfare of others, and his
generosity of spirit have endeared him to
all of his associates.
"Whatever the job was that needed doing,
he gave it his judgment, his patience and
his time -- often at night and on weekends

TREASURY DEPARTMENT

December 7, 1965
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, DECEMBER 10, 1965
STEPHEN C. MANNING, JR., RECEIVES AWARD
Treasury Secretary Henry H. Fowler Thursday night presented
the Treasury's Meritorious Service Award to Stephen C.
Manning, Jr., Deputy Assistant to the Secretary for Public
Affairs.
Secretary Fowler made the Award at a party given to honor
Mr. Manning, who is retiring from government at the end of this
year.
In making the Award, Secretary Fowler said:
"Stephen C. Manning, Jr., has performed
his duties as Deputy Assistant to the
Secretary in a manner which reflects credit
upon him, upon the Treasury Department, and
upon the United States Government. His high
professional skill, his wise judgment, and
his strong integrity have earned the respect
of the three Secretaries of the Treasury under
whom he served. His unfailing tact, his warm
concern for the welfare of others, and his
generosity of spirit have endeared him to all
of his associates.
"Whatever the job was that needed doing,
he gave it his judgment, his patience and his
time -- often at night and on weekends -- and
the job was always done well. This award is
made in recognition of his outstanding contribution
to a better public understanding of Treasury
pol icy."
Mr. Manning, a native of New Orleans who now lives in
Alexandria, Virginia, was named Deputy Assistant to the
Secretary for Public Affairs in 1958. He came to Treasury from
F-294

- 2 the Maritime Administration where he had served as Public
Information Officer since 1950. Before that, he was an information
officer with the U. S. Maritime Commission and the United States
Forest Service.
Mr. Manning began his professional career as a reporter on
The New Orleans States. Before joining the governmen4Mr. Manning
also worked as an advertising copywriter.
Mr. Manning attended Tulane University in New Orleans
and later George Washington University in Washington. He is
a member of The Press Club.

000

TREASURY DEPARTMENT
Washington

REMARKS BY ARNOLD SAGALYN, DIRECTOR
OFFICE OF LAW ENFORCEMENT COORDINATION,
U. S. TREASURY DEPARTMENT, AND U. S. REPRESENTATIVE
INTERNATIONAL CRIMINAL POLICE ORGANIZATION - (INTERPOL)
BEFORE THE DUKE INTERNATIONAL LAW SOCIETY
DUKE UNIVERSITY SCHOOL OF LAW
DURHAM, NORTH CAROLINA, WEDNESDAY, DECEMBER 8, 1965
11:00 A.M., EST.

THE PURSUIT OF INTERNATIONAL CRIMINALS
The lawyer who likes his legal problems to be challenging
will have a field day in handling international criminal
cases. He will find legal precedents are often non-existent;
that the legal requirements and procedures involved are
usually so complex and subject to so many limitations that an
aspiring counselor would be better advised to forget
Blackstone and study Houdini.
In recognizing the inadequacy of standard legal schooling
and expertise, I am reminded of the experience of a wife of an
American official who was stationed in an under-developed
country. The lights in her house didn't function properly
and she called in a local electrician. He arrived laden
down with all kinds of tools and equipment and then proceeded
to spend the day tinkering futilely to correct the problem.
Finally, pointing out that the electrician was getting nowhere,
the lady, in great exasperation, explained "Good Heavens, man,
can't you use a little common sense~" Whereupon the
electrician drew himself up erect and very defensively replied,
"Madame, common sense is a gift of the Gods.
I have had only
a technical education."
In international criminal problems in particular, a
little common sense can be more important than two semesters
of international law.

- 2 To start with, let us look at the problem posed by
jurisdiction -- or lack of jurisdiction. In international
law, a country has no obligation to surrender a fugitive from
justice to another country, unless it has contracted to do so.
This is generally by an extradition treaty. The United
States has extradition treaties with approximately 77 out of
the 127 countries we recognize as being independent states.
I say "approximately" because the status of our treaties
in some countries is very unclear. This arises out of recent
changes in the form of government that have taken place in
some countries , particulary former European colonial
possessions in Africa.
Moreover, even where a treaty of extradition exists,
many crimes are not subject to extradition.
It is traditional,
for example, that so-called" fiscal offenses" are excluded
from extradition. The same is true for offenses of a political,
military or religious nature.
As a matter of fact, very few crimes against our Federal
laws are extraditable.
For nearly all our Federal offenses
are based on statutory laws involving interstate commerce,
which has no counterpart in other countries. Since the
extraditable offenses as a rule must involve double
criminality -- that is, be recognized as a crime by both
parties to the treaty -- our Federal crimes rarely qualify.
A few however, do, such as narcotics trafficking, counterfeiting,
and forgery.
Tax offenses are not subject to extradition nor with
one or two exceptions are crimes of smuggling or those
involving security and exchange violations. Mail frauds are
another example of an offense which is not a crime in many
countries.
Generally speaking the specific crimes which are covered
by nearly all of our treaties of extradition and are
recognized as extraditable offenses by other countries are:
murder; rape; bigamy; (although not in the case of Chile,
Bolivia, Denmark or Panama) arson; certain crimes committed at
sea, including robbery, sinking or destroying vessels at sea,
mutiny and assaults with intent to do bodily harm; robbery;
burglary, forgery; counterfeiting of money; embezzlement;
larceny, fraud; perjury and kidnapping.

- 3 Unless a crime is listed specifically in our treaty,
for all practical purposes it is not an extraditable offense.
If you think this is getting to look as if the cards are stacked
against a government lawyer who would like to extradite a
fugitive, you are right. A sovereign state does not take
lightly the act of surrendering a person to another country.
It has only been within relatively recent times that
extradition has become accepted as a necessary form of
international cooperation in the control of crime.
As you know, the impetus was started in the 18th Century
by France which initiated treaties of extradition with its
immediate neighbors and established a well regulated set of
rules governing extradition proceedings. By 1868 France had
53 treaties of extradition, while the United States had only 13.
~ngland on the other hand, with her tradition of asylum, had
)nly three treaties of extradition.
With the rapid development of international transportation
lnd communication and the concurrent increase in widespread
Lmmigration, the spread of extradition treaties greatly
lccelerated. Although our historical policy of political and
~eligious asylum slowed the process in the United States until
vell into the 1900's, the need to deal with common law criminals
Led the United States to join the world trend towards additional
:reaties of extradition.
Compared with other countries, however, the legal safeguards
lrotecting persons residing in the United States are unusually
itrong and restrictive. Most countries for example, will
lrrest and hold a person on the basis of a foreign warrant
If arrest or even just at the request of a law enforcement
lfficial. This is not true in the United States, however.
fe require a warrant of arrest to be obtained in this country
lefore any arrest can be made.
Another legal booby trap against the extradition of a
'anted fugitive is triggered if he turns out to be a national
If the country. Usually, countries will not surrender their
~n nationals to another state.
Insofar as our own policy on
his is concerned, it varies with the individual treaty. Some
rohibit extradition of United States nationals, some require
t while other treaties leave it optional.

- 4 The legal assistance prov~s~ons of our treaties were
obviously drawn by lawyers who would never qualify as invitees
to an International Cooperation Year Conference. Even when the
crime is subject to a treaty and there is no problem of nationality,
the legal processes involved in securing the extradition of
a fugitive are extremely cumbersome and time consuming. Only
30 of our treaties provide for United States assistance in
the extradition of a fugitive. In most cases the country with
iVhom we have a treaty must hire its own lawyer to handle the
~xtradition processes and must tilt with the legal windmills on
its own. I should add however that our government faces
)roblems and built-in obstacles which are equally frustrating.
Before you start to feel sorry for the international lawyer,
~onsider the plight of the police officer who has to locate
:he fugitive and find the criminal evidence required before the
:oreign court will authorize the extradition. No matter
lOW outrageous the crime might be, no country will permit a
:oreign police officer to follow a criminal in hot pursuit
lcross its border or to make an arrest within its territory.
~et what is our detective to do in order to track down a
:ugitive or gather evidence and information that he needs that
an only be found in a foreign country?
Despite what you may see on television, in the international
aw enforcement fraternity we never say "UNCLE." Instead
e call in Interpol - or the International Criminal Police
'rganization, as it is formally titled. For just as the
eed for international cooperation led to treaties of extradition,
o the problem face by law enforcement officers inevitably
ed to the organization of an international police mechanism
o promote assistance between police in different countries and
rovide for the mutual exchange of information and intelligence
bout common crimes and criminals.
With the help of INTERPOL, we can pick up the trail of the
19itive and locate him so that his arrest and extradition can be
~cured.
In addition, the resources and facilities of the
)lice in each Interpol member country can be drawn upon to
ither information and evidence which may be needed.
Essentially, INTERPOL is a cooperative international
;sociation which enables the police of member countries to
:change information and obtain assistance on criminal matters

- 5 -

directly, without the loss of time involved in going through
diplomatic channels. Its Secretariat at Paris serves as a
focal point and control center for an international police
communications network stretching around the world. It operates
a central criminal intelligence and information exchange for
Interpol countries, and its central files contain records on
more than 150,000 known international criminals.
Membership in INTERPOL must be by application from the
appropriate head of government of a country. Each country
upon joining INTERPOL designates a National Central Bureau
to serve as its representative in all Interpol matters
affecting the country. No individual police department or
law enforcement agency can obtain membership. Participation
by the law enforcement agencies of a country must be through
its designated Interpol representative, and any requests for
information or assistance to the Interpol Secretariat in Paris
or to Interpol representatives in foreign countries must clear
through the Interpol bureau of the country concerned.
Today, 95 countries are members of INTERPOL and the
Organization includes almost every major country in the wur1d,
with the exception of the Soviet Union, Mainland China and
their satellites.
The International Criminal Police Organization was
founded in 1923 when delegates representing 20 countries
and territories met in Vienna and established the
"International Criminal Police Commission." The outbre.ak of
World War II disrupted its activities, but in 1946 the
international police agency was reconstituted. The headquarters
was moved to Paris, where it remains today. In 1956 the title
was changed from the International Criminal Police Commission
to its present name.
The United States first joined INTER~OL in 1938 by an
Act of Congress and was originally represented by the
Federal Bureau of Investigation. In 1950, the F.B.I.
withdrew from INTERPOL and formal U. S. membership ended.
However, informal relations were maintained by the Treasury
Department's Bureau of Narcotics, Bureau of Customs, and the
U. S. Secret Service.

- 6 In view of our major international enforcement responsibilities
in the field of narcotics trafficking, counterfeiting and
smuggling, the Treasury Department then offered to assume
responsibility for U. S. membership, whereupon, Congress
amended the Enabling Act in 1958 to permit the Attorney
General to designate the Treasury Department as U. S.
Representative for TNTERPOL. The U. S. has participated as a
full member ever since.
I want to stress that INTERPOL'S effectiveness depends
entirely on the voluntary nature and cooperative services of
its members. Interpol has no investigative force or police
authority of its own.
There is no obligation on the part of any country to
comply with any request for information or assitance. If
for any reason the recipient Interpol bureau decides that a
request is improper or not permitted under its own laws -or that it is otherwise unwilling to obtain the information
requested -- the matter ends. Each country is the sole
arbiter as to whether or not a request for assistance, either
from the Secretariat in Paris or from a member country
directly, is processed; and any investigation made is performed
by its own police or responsible investigative branch.
Unlike most countries, which have national, centralized
police bureaus whose jurisdiction extend down to the local
communities, the United States has thousands of law enforcement
agencies with autonomous jurisdiction over local criminal
matters. Therefore, when a request from a foreign country
comes into Treasury's INTERPOL office, it is referred for
action to whatever agency has jurisdiction. It may be a
Treasury investigative agency, the New York City Police
Department or the Alameda, County, California Sheriff's
office or some other law enforcement agency. Our Interpol
Bureau serves largely as a clearing-house and depends on the
agency to whom we transmit the Interpol communication to make
whatever investigation may be necessary.
Under the Interpol Constitution, all matters of political,
military, religious or racial nature are strictly prohibited.
Any request for information or assistance which relates to
one of these proscribed categories cannot be transmitted
through the Interpol mechanism, or in anyway involve the
Organization.

- 7 For instance, not long ago an aircraft carrying a large
shipment of military firearms and equipment was apprehended
in a Mediterrean country. As the arms traffickers involved
in this case were apparently motivated by political considerations, the crime involved was considered outside INTERPOLiS
proper scope and the parties concerned were notified accordingly.
Later on, it was learned that a person representing himself to
be a foreign representative of INTERPOL interrogated one of
the principals involved in a European country. This was
brought to the immediate attention of the chief Interpol official
concerned. His investigation showed that the Interpol agent
was unknown either to him or to the country whom he was purported
to represent, and steps were taken to assure against any further
mispresentation or the use of INTERPoL'S name in the matter.
It is largely because INTERPOL has been so careful to
avoid being drawn into such proscribed areas that it has enjoyed
a unique acceptance and prestige by its diverse international
membership.
Its surprising success in maintaining its professional
and impartial criminal role has made it possible for delegates
from India and Pakistan, Israel and Egypt, Indonesia and
Malaysia to meet and work together amicably in a common cause -the suppression of international crime.
In addition to its function as an international
criminal information exchange and communications center,
INTERPOL organizes international conferences on criminal
problems and publishes numerous reports and studies. Once a
year the Organization convenes a General Assembly of all its
members to discuss matters of mutual interest and decide on new.
programs and activities designed to strengthen their common
efforts against international crimes. The following items
taken from recent Interpol agendas depict the nature and range
of subjects taken up at the annual General Assemblies: The
Illicit Traffic in Narcotic Drugs; International Traffic in
Gold and Diamonds; International Forms of Traffic in Women;
The Study of Crime Prevention Bureaus; Air Police Problems;
The Restitution of Property to the Victim of an Offense;
Thefts Committed During Air Transport; The Use of DataProcessing Methods in Criminal Records; Counterfeiting of
Currency and Gold Coins; International Cooperation on the Study
of Fingerprinting Methods; The Identification of Firearms;
~nd the Development and Use of Criminal Intelligence.

- 8 At the International conference held earlier this year
in Rio de Janiero, the United States delegation drew the
attention of the other Interpol countries to the increasing
number of international frauds which have been coming to light.
These fraudulent activities, which pose extremely difficult
problems in detection as well as suppression, include such
things as foreign-based "boiler rooms" which sell worthless or
near worthless securities to Americans at grossly excessive
prices; the sale of fraudulent certificates of deposit by banks
located in other countries, which in reality are only paper
institutions without assets; the issuance of performance bonds
or other forms of re-insurance by foreign insurance companies,
which turn out to be worthless when a claim is presented.
Heretofore, such swindles were limited by the ability of
the operator to make personal contacts with his
victims. With
the ease of rapid international travel and communication, however,
these international fraudulent schemes are reaching hundreds
and even thousands of victims in this country.
In some cases
the principal was never physically present in the victims'
country and these international swindles are raising many
serious legal problems, such as: Was the crime committed in
the country where the principal is a resident or where the
victim resides? Which country conducts the investigation and
where is the culprit to be charged and tried?
This is an area where INTERPOL can provide invaluable
assistance through its cooperative facilities and perhaps
initiate studies leading to needed legal instruments for
coping with this kind of legal no-man's land.
In dealing with major criminal problems that extend beyond
our own borders, the United States has additional and special
resources of its own apart from INTERPOL. Our responsibility
for protecting our citizens against illicit trafficking and
smuggling in of narcotic drugs, the importance of safeguarding
our money against foreign counterfeiting and other serious
threats abroad has led to the establishment of liaison offices
in key countries. The Treasury Department, for example, has
representatives from its criminal investigative agencies assigned
overseas to work with police authorities in France, Italy,
Turkey, Lebanon, Germany, England, Mexico, Japan, Hong Kong and
Thailand.
Similarly, the FBI maintains liaison offices in
designated countries to facilitate its own investigative
responsibilities.

- 9 -

The work of our American agents overseas, in cooperation
with the police of the countries in which they are stationed,
has enabled us to get information which has led to the
breaking up of many important criminal enterprises and to the
conviction and jailing of some of our country's most dangerous
criminals.
The late Vice-President and Senator, Alben Barkley, was
fond of telling a story about a Southern minister who delivered
a sermon on the subject of hate. He dwelt at great length
~n the evils of hate, how it corroded the soul, turned man's
heart black and left his spirit bleak and bitter.
Finally, he turned to his parishioners and inquired:
"Now, is there anyone in this entire congregation
Nho can tell me that he does not hate any man, that he has
10 enemies in the world?"
There was a great silence. Then at the back of the hall
in old, bent man arose feebly from his seat and in a creaky
,oice called out, "I can."
The preacher was ecstatic.

"How old are you, my friend?"

"97," the old man replied.
"Isn't that wonderful," the preacher exclaimed. "Here is
1 man who has lived 97 years and who can stand up in God's
:hurch and before his fellow men say that he has no enemies in
:he world! Now, my friend, I would like you to tell me and
~veryone else in this great congregation how it is that you
la ve lived to be 97 and have no enemies."
The old man looked around the congregation slowly and then
lith a note of triumph in his voice cried out, "I've outlived
:he sons-of-bitches!"
I don't expect that any of us will see the day when all men
an say that they have no enemies. Until them, as long as
len prey on their fellow men, the law enforcement officer -ocal and international -- will be needed to protect society
gainst its enemy, the criminal.

000

TREASURY DEPARTMENT

WASHINGTON, D,C.

December 8, ]965
FOR IMMEDIATE RELEASE

INDUSTRIAL PAYROLL SAVINGS COMMITTEE
MEETS DECEMBER 10 WITH SECRETARY FOWLER
The U. S. Industrial Payroll Savings Committee, comprised
of leading American industrialists and business leaders, meets
in Washington on Friday, December 10, to review program accomplishments in 1965 and to set goals and make plans for the
1966 campaign.
Secretary of the Treasury Henry H. Fowler and other Administration leaders will meet with the 23-man Committee. Lynn A.
Townsend, President of Chrysler Corp., is to be installed as
1966 Chairman, succeeding 1965 Chairman Dr. Elmer W. Engstrom,
President of Radio Corporation of America.
Dr. Engstrom is to preside over the meeting, in the Benjamin Franklin Room of the State Department's Diplomatic Suite.
Other speakers on the day's program are Under Secretary
of the Treasury for Monetary Affairs, Frederick L. Deming,
and William H. Neal, National Director of the Savings Bonds
Division of the Treasury Department.
During the past year, the Committee, members of which led
Payroll Savings activities in the major industrial areas of
the country, spearheaded a "Practical Patriots" drive in which
more than 1,250,000 new Payroll Savers were added -- 180,000
of whom were within companies of the Committee members.
A list of the 1965 Committee and of the new members who
will serve on the 1966 Committee is attached.
000

F-295

u, S.

]NDU~,~~RI~

PAYROLL SAVINGS COMMITTEE F'OH ] 965

~---"''''''''

----

Dr. Elmer W. Engs trom, CHAIPJv1t'lN
President
Radio Coql()t"Cltion of America
New York, New York
William M. Allen
President
The Boeing Company
Seattle, Washington

Gilbert M. Dorland
President
Nashville Bridge Company
Nashville, Tennessee

O. Kelley Anderson
President
New England Mutual Life
Insurance Company
Boston, Massachusetts

Robert E. Garrett
President
United States Pipe and
Foundry Company
Birmingham, Aldbama

Orville E, Beal
President
The Prudential Insurance
Company of America
Newark, New Jersey

William p, Gwinn.
President
United Aircraft Corporation
East Hartford, Connecticut

Eugene N. Beesley
President
Eli LiJly & ~ompany
Indianapolis, Indiana
Bvrom
Pres ide-a (
Koppers Company, Inc.
Koppers Building
Pittsburgh, Pennsylvania
Fe LJ"

Henry Z. Carter
President
Avondale Shipyards, Inc.
New Orleans, Louisiana

Wade N. Harris
Chairman of the Board
Midland-Ross Corporntion
Clevelan.d, Ohio
Daniel J. Haughton
President
Lockheed Aircraft Corporati.on
Burbank) California
(Representifig Los Angeles)
Howard Holderness
President
Jefferson Standard Life
Insurance Company
Greensboro, North Carolina
(MDRE)

1965 COMMITTEE
PAGE 2
A. F. Jacobson
President
Northwestern Bell Telephone Co.
Omaha, Nebraska

James F. Oates, Jr.
Chairman of the Board
The Equitable Life Assurance
Society of the U. S.

William H. Kendall
President
Louisville and Nashville
Railroad Company
Louisville, Kentucky

William J. Quinn
President
Chicago, Milwaukee, St. Paul
and Pacific Railroad Co.

Robert S. Kerr, Jr.
Director
Kerr-McGee Oil Industries, Inc.
Oklahoma City, Oklahoma
Walter K. Koch
President
The Mountain States Telephone
and Telegraph Company
Denver, Colorado
David S. Lewis
President
McDonnell Aircraft Corporation
St. Louis, Missouri
CarlO. Lindeman
Chairman of the Board
The Pacific Telephone and
Telegraph Company
San Francisco, California
Robert S. Macfarlane
President
Northern Pacific Railway Co.
St. Paul, Minnesota

Alfred P. Ramsey
President
Baltimore Gas and Electric Co.
Baltimore, Maryland
Stuart T. Saunders
Chairman of the Board
The Pennsylvania Railroad Co.
Philadelphia, Pennsylvania
Sidney ShlUTIan
President
Reed Roller Bit Company
Houston, Texas
Robert S. Stevenson
Chairman
Allis-Chalmers Manufacturing Co,
Milwaukee, Wisconsin
Fladger F. Tannery
Executive Vice President
PepsiCo, Inc.
Dallas, Texas
(MORE)

1965 Cmft.lI TTEE
PAGE 3

Lynn A. Townsend
President
Chrysler Corporation
Detroit, Michigan

MEMBERS-AT-LARGE

Frank R. Milliken
President
Kennecott Copper Corporation
New York, New York
Harold S. Geneen
President and Chairman
International Telephone and
Telegraph Corporation
New York, New York

~. ~

INDUSTRIAL PAYROLL SAVINGS COMMITTEE FOR 1966
Lynn A. Townsend, CHAIRMAN
President
Chrysler Corporation
Detroit, Michigan

Allen G. Barry
President
New England Telephone
& Telegraph Company
Boston, Massachusetts
William B. Bergen
President
The Martin Company
Baltimore, Maryland
Harold Burrow
Tennessee Gas Transmission
Company
Houston, Texas
Tom A. Finch
Fresident
Thomasville Furniture
Industries, Inc.
Thomasville, N. C.
A. P. Fontaine
Chairman and Chief
Executive Officer
Bendix Corporation
Detroit, Michigan
James M. Hait
President
FMC Corporation
San Jose, California
(Representing San Francisco)

Wade N. Harris
Chairman of the Board
Midland-Ross Corporation
Cleveland, Ohio
John A. Hill
President
Aetna Life Insurance Company
Hartford, Connecticut
Logan T. Johnston
Chairman of the Board
Armco Steel Corporation
Middletown, Ohio
(Representing Cincinnati)
W. F. Joyce
Senior Vice President
Texas Instruments, Inc.
Dallas, Texas
David S. Lewis
President
McDonnell Aircraft Corporation
•
St. Louis, Missouri
Robert D. Lilley
President
New Jersey Bell Telephone Co.
Newark, New Jersey

(MORE)

1966 COFllni C c'e

Page 2
Rohert S. Macfarlane
President
Northern Pacific Railway Co.
St. Paul, Minnesota
Jr.
:hairman of the Board
be Equitable Life Assurance
Society of the U. S.
Jew York, New York

Rohert S. Stevenson
Chairman
Allis-Chalmers Manufacturing
Company
Milwaukee, Wisconsin

I am f> sF. 0 ate s,

Walter W. Straley
President
Pacific Northwest Bell
Telephone Company
Seattle, Washington

ri lliam J. Quinn

'resident
hicago, Milwaukee, St. Paul
dnd Pacific Railroad Co,
:hi.cago, Illinois
riLlard F. Rockwell, Jr.
'rpsident
~ckwell Standard Corp.
'ittsburgh, Pennsylvania
,tuayt T. Saunders
:hai.rman of the Board
'he Pennsylvania Railroad Co.
'hiladelphia, Pennsylvania
. .J. Skutt

:hairman of the Board
utual of Omaha
roaha, Nebraska
udolph Smi th
resident
Glorado Fuel & Iron Corp.
enver, Colorado

MEMBERS-AT-LARGE

Dr. Elmer W. Engstrom
President
Radio Corporation of America
Ne<w York, New York
Frank R. Milliken
President
Kennecott Copper Corp.
New York, New York
Harold S. Geneen
Chairman and President
International Telephone and
Telegraph Corporation
New York, New York

- :3 -

sale or other disposition of Treasury bills does not have any special treatment, I.
such, under the Internal Revenue Code of 1954.

The bills are subject to estate ,

inheritance, gi1't or other excise taxes, whether Federal or State, but are exe!Dpt flQI
all taxation now or hereafter imposed on the principal or interest thereot by &IIJ SI
or any ot the possessions ot the United States, or by any local taxing authorlt1. fa
purposes ot taxation the amount of discount at which Treasury bills are orlg1nall1.
by th~ United states is considered to be interest.

Under Sections 454 (b) and 12211

ot the Internal Revenue Code ot 1954 the amount of discount at which .bills issued ba
under are sold is not considered to accrue until such bills are 801d,

redeemedor~

wise disposed ot, and such bills are excluded from consideration as capital asset•.
. Accordingly, the owner ot Treasury bills (other than life insurance companies) 111\11
hereunder need include in his income tax return only the difference between the pria
paid tor such bills, whether on original issue or on subsequent purchase, and the •
actually received either upon sale or redemption at maturity during the taxable

1111'

tor which the return is made, a8 ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, presel
the tems of the Treasury bills and govern the conditions of their issue. Copies ot
the circular may be obtained from any Federal Reserve Bank or Branch.

- 2 BETA - MOBIFIEL
printed forms and forwarded in the special envelopes which will be supplied by ?e~1I
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers p:'fl.
others than bani1I

vided the names of the customers are set forth in such tenders.

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust
and from responsible and recognized dealers in investment securities.

Tenders frlI

others must be accompanied by payment of 2 percent of the face amount of Treasury I
applied for, unless the tenders are accompanied by an express guaranty of payment ~
an incorporated bank or trust company.
Immediately after the closing hour, tenders vill be opened at the Federal ReM
Banks and Branches, following which public anouncement will be made by the Tl'easUl'J
Department of the amount and price range of accepted bids.
vill be advised of the acceptance or rejection thereof.

Those submitting tenile

The Secretary of the TreI

expressly reserves the right to accept or reject any or all tenders, in whole or 1

part, and his action in any such respect shall be final.

Subject to these resem

tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder will be accepted in full at the average price (int~
decimals) of accepted competitive bids for the respective issues.

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the ~

16, 1965
, in cash or other immediately Bvail.8ble ~
(is)
or in a like face amount of Treasury bills maturing December 16, 1965
' ~
(5id)
I
and exchange tenders will receive equal treatment. Cash adjustments will ~.~

Reserve Bank on

Dec~nbc~

differences between the par value of maturing bills accepted in exchange and

tj;e

price of the new bills.
The income deri Yed from Treasury bills, whether interest or gain from the ~
other disposition of the bills, does not have any exemption,

Buch, and 10"

TREASURY DEPARTMENT

Washington

FOR IMMEDIATE RELEASE,

December 8, 1965

(x)

rl:::'~!ClS~:'

S iFZ:':lJl BT'}--, O?f=:R.T'G

The Treasury Department, by this public notice, invites tenders for two aertft
of Treasury bills to the aggregate amount of $ 2,200,000,000

(I)

cash and in exchange for Treasury bills maturing
of $

~~C" ,.~s ,~, ,OC:)

, or thereabouts, tor

DeccJabel' 16, 1965 , in the . .

(I)

, as follows:

(I)

:~, -day bills (to maturity date) to be issued

Dec(;;l1bor 16, 1%5

(I)

....,~,...,....)r-

in the amount of $1,:200,C!oo,OOO

, or thereabouts, represent-

(:I )
ing an additional amount of bills dated

80rt cubc}' 16, 1965,

, fi}

and to mature __: ,_'c,_::,'_c;_'_1...,.7.,,;;1,....-1_-::_6_6__ , originally issued in the

(w)

amount of $l,OO;=:,·:'oGO,OO'J

, the additional and original bills

(m)
to be freely interchangeable.
1~,:

en)

-day bills, for
7k~cc;;:'j:::-:..'

$ J.,OOO,OOO,OOO

bit

, or thereabouts, to be dated

E, iJGS, and to mature

Junc 16, 1966
------~T.Hi=+}-----

The bills of both series will be issued on a discount basis under competltl11
and noncompetitive bidding as hereinafter provided, and at maturity their faee.
will be payable without interest.

They will, be issued in bearer form only, 8114 JI

denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and

$1,000,.

(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the clall

<.,

hour, one-thirty p.m., Eastern Standard time, ~:on(l[y, Decenl)e}' 13, 1965
will not be received at the Treasury Department, Washington.

•

III

Each tender- ti

for an even multiple Of $1,000, and in the case of competitive tenders the pdCI
offered !DUst be expressed on the basis of 100, with not more than three d.eeiJlll,
e. g., 99.925.

•

Fractions may not be used.

It 1s urged that tenders be made OD'

TREASURY C1::PARTMENT
129.::

- =:=

December 8, 1965

R IMMEDIATE RELEASE
TREASURY IS \\fEEKLY BILL OFFERING

The Treasury Department, by this public notice, lnvl tes tenders
two series of Treasury bills to the aggregate amount of
,200,000,000, or thereabouts, for cash and 1n exchange for
~asury bills maturing December 16, 1965, in the amount of
,202,556,000, as follows:

91-day bills (to maturity date) to be issued December 16) 1965)
the amount of $ 1,200,000,000, or thereabouts, representing an
iitional amount of bills dated September 16, 196~and to
;ure Harch 17, 1966,
originally issued in the amount of
,005,460,000, the additional and orIginal bills to be freely
:erchangeable.
182-day bills, for $1,000,000,000, or thereabouts? to be dated
16, 1965, and to mature June 16, 1966.

~ember

The bills of both series will be issued on a discount ~aBiB und~r
and noncompetitive bidding as hereinafter provided, and at
;urity their face amount will be payable without interest. They
.1 be issued in bearer form only, and in denominations of $lJOOO,
~etitive

000, $10,000, $50,000,

$100,000, $500,000 and $l~OOO,OOO

lturi ty value).
Tenders will be rece i ved at Federal Res,~rve Banks and Branc hes
to the closing hour, one-thirty p.m., Easte.rn Standard
e, Monday, December 13, 1965.
Tenders will not be
ei ved at the Treasury De~artment, vI ashingtol1 . Each tende r must
for an even multiple of $1,000, and In the case of competttlve
ders the price offered must be expressed on the basis of 100,
h not more than three decimals, e. g., 99.925. Fractions may not
used. It is urged that tenders be mad~ on the printed forms and.
~arded in the special envelopes which will be supplied by Federal
erve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
Gomers provided the names of the customers are set forth in such
jers. Others than banking institutions will not be permitted to
nit tenders except for their own account. 'renders w11l be received
10ut deposit from incorporated banks and trust companies and from
)onsible and recognized dealers in investment securitles
Tenders
n others must be accompanied by payment of 2 percent of the face
lnt of Treasury bills applied for, unless the tenders are
)mpanied by an express guaranty of payment by an incorporated be.nlt.:
;rust company.
-296
o

- 2 Immediately after the closing hour, tenders will be opened at thl
Federal Reserve Banks and Branches, following which public announce.
ment will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasu!"/
expre s sly re serve s the right to accep t or rej ec t any or a 11 tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on December 16, 1965, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing December 16, 1965. Cash and exchange tenderl
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not ha~
any exemption, as such, and loss from the sale or other dispositioo
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject ~
estate, inheritance, gift or other excise taxes, whether Federal M
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to ~
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereundEr are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lIs are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upoo
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtainedfrl
any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT
Washington
FOR RELEASE A.M. NEWSPAPERS
THURSDAY, DECEMBER 9, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE
THE U. S. COUNCIL OF THE INTERNATIONAL CHAMBER OF COMMERCE
AT THE HOTEL PIERRE, NEW YORK, NEW YORK
WEDNESDAY, DECEMBER 8, 1965, 6:30 P.M., EST
Over recent years we have witnessed a growing awareness
in this nation that there is no serious problem before us,
no important challenge -- whether it be economic, social or
political -- whose solution does not require joint effort by
both the public and private sectors of our national life. We
have indeed discovered that our progress as a nation rests
upon our success in dovetailing both public and private policies
toward a common national purpose. We have learned that neither
the public nor private interest can be served at the expense
of the other -- that we cannot really serve one without
serving the other.
Today, we are also beginning to see more clearly that
this same inherent interdependence -- interdependence which
has become a palpable fact of life -- exists on the international level as well. In particular, we hav~ all come to
a far greater appreciation of the importance of the private
sector in our nation's role as a leader in world affairs -expecially of the importance of our multi-national companies,
which are based in the United States but which also conduct
extensive production and marketing operations in other
countries. I am sure a number of these corporations are
represented here tonight.
These corporations -- these mighty engines of enlightened
Capitalism -- have contributed substantially to the economic
growth of the Free World since World War II, and it is
difficult to overstate their importance to continued growth
in the Free World economy -- particularly among the less
developed nations.
Y-297

- 2 -

In the future -- much more even than in the past -their contribution, their role in a growing world economy,
will depend critically upon how successfully we can
reconcile national interests in both base and host countries
with their own private interests.
But the harsh reality is that,at times, they seem to
be moving -- not on complementary paths to a common purpose
but on a collision course. And today, more than ever, we
can ill afford such collisions -- today, more than ever, we
must all recognize that the reconciliation of national
interests and those of multi-national corporations is essential
to a future with freedom and a healthy, dynamic economic
environment for the Free World.
The expansion of international trade, the freedom
of money to flow across national boundaries, the welcome
extended to foreign business units, the stimulating effects
of broadened competition, and the spread of technical and
organizational knowledge -- these hallmarks of multinational business have helped to bring an expanding, more
integrated and efficient structure to the West since World War II.
And there is no doubt that, given these same conditions,
plus some reasonable assurance against state confiscation,
state competition and discrimination against foreign enterprise,
the multi-national corporations of the West can make
significant contributions to the emergence of viable and free
economic societies in the less developed countries.
But certain facts must be faced. In many of the less
developed countries, the rising tide of nationalism
nixed with state intervention or discrimination in varying
degrees has created an uncongenial atmosphere for multi-national
private business. Indeed, the same trend is evident in some
)f the developed countries where multi-national companies
lave become well established.
So today -- with multi-national business at an all-time
)eak, and the multi-national corporations of the developed
~ountries who are members of the Organization for Economic
;ooperation and Development possessed of the greatest potential
:or international economic development in history -- the
!angers and opportunities match each other in equal challenge.

- 3 -

There is no single, simple way to minimize or avoid
the dangers and to expand the opportunities. It is, however,
clear that progress can only come from a growing understanding
of each other's needs and problems by political leaders in
base and host countries and the corporate bodies of multinational units. And in the context of growing understanding,
both sides must work to discover and broaden the areas of
common purpose as well as to narrow the areas of conflict.
Let us look, first, at some of these areas of common
purpose from the standpoint of the United States and the
multi-national companies based here.
We can gather some idea of the national public interest
of the United States in multi-national corporations from the
simple fact that at the end of last year the book value
investment of U. S. companies in foreign branches and
subsidiaries amounted to $44.3 billion -- of which about
$35 billion was in manufacturing, petroleum, and mining and
smelting.
In this enormous extension of U. S. corporate business
on a multi-national scale much more is involved than the
economic advantages of investors of capital and the return
of profits -- although it must never be forgotten that this
is always the controlling rationale.
Multi-national companies are playing an increasingly
important role in the expansion of world trade, in serving
the interests of the less developed countries, and in
proving capital, knowledge, industrial know-how and useful
employment in countries other than the base country, as well
as increased employment, assets and profit returns for the
base country.
For this nation, therefore, they have not only a
commercial importance -- but a highly significant role in
a U. S. foreign policy that has met with general approval
by the Atlantic countries. Since World War II, every
President, practically every Congress, and numerous public
and lay leaders of national and international reputation have
emphasized the importance to national interests of the role
of these private companies operating on a multi-national basis.

- 4 For example, the various foreign aid enactments beginning
with the Marshall Plan in 1948 have all stressed the
importance of promoting U. S. private investment abroad in
their provisions for investment guarantees and other means
of encouraging foreign investments by American business.
The importance of the foreign operations of U. S.
based companies in lending momentum to the economic and
industrial development of the Free World during the
reconstruction of Western Europe and Japan, and now in the
continents of Asia, Africa and Latin America, has been
acknowledged for some years.
And we are all equally aware -- those of us in
government as well as those in private business -- of the
long-term importance to the United States of investment
income from and participation in the industrial development
of other nations by U. S. private corporations.
For example, from 1950 through 1964 receipts of
earnings, interest payments, management fees and royalties
by the U. S. in direct investments overseas totaled some
$37.3 billion; this compares with the $20.4 billion capital
outflow from direct investment abroad in the same period.
Last year, in 1964, our receipts from this investment amounted
to $4 billion, second only to our receipts from exports as a
favorable factor in our balance of payments. In fact, we
count upon rising returns from direct investment overseas to
serve as one of our most consistent elements of balance of
payments strength in the months and years ahead. Furthermore,
additional exports have been generated in the form of capital
equipment, materials, parts and services required to export
these investments.
Recipient countries as well can receive abundant
)enefits from the operations of these corporations -)enefits in the form of fresh investments of capital, of
Lnfusions of new or additional know-how, techniques and
;kills, of new or additional jobs and products, of heightened
>roductivity and enlarged export capacity.
In short, modern multi-national corporations have the
apacity to contribute substantially to rising incomes
nd economic progress in both the home country and in
'oreign lands -- and thus to better relations between all
oncerned not only in the economic sphere, but in the political
nd s~cial spheres as well.

- 5 -

Indeed, there is much to support the thesis of a
distinguished American industrial leader, Mr. Roger Blough,
Chairman of the Board of the United States Steel Corporation
who remarked recently that the multi-national corporation
"may ultimately prove to be the most productive economic
development of the twentieth century for bringing the
people of nations together for peaceful purposes to their
mutual advantage . . . an instrument which could do more to
bind nations together than any other development yet found
by man in his pursuit of peace."
But while -- as I have made clear -- this nation and
all nations concerned have a great deal to gain from the
endeavors abroad of American-based multi-national
corporations, let no one think it is all a one-way street.
In particular, let no one forget the crucial importance to
the multi-national corporation of a United States government
that commands world respect for its economic and military
prowess as well as for its commitment to the highest human
ideals -- a United States government whose political,
diplomatic and military strength is fully commensurate with
its role as leader of the Free World.
For let us all understand that the United States
government has consistently sought -- and will continue
to seek -- to expand and extend the role of the multi-national
corporation as an essential instrument of strong and
healthy economic progress throughout the Free World.
The government has, first of all, sought -- and will
continue to seek -- in countless ways to enlarge the
freedom of opportunity for multi-national firms operating
overseas -- by diplomatic efforts to allay fears of
foreign domination and exploitation, as well as to remove
local barriers to foreign private investment, by programs
aimed at deepening and widening understanding in less
developed countries of the workings of a privately-oriented
economy, and by programs to encourage and directly assist
prospective investors in foreign countries, and by other
2fforts far too numerous to mention here.
Equally important -- and far too little appreciated -Ls the crucial extent to which the successes of our
rulti-national corporations abroad have depended -- and must
:ontinue to depend -- upon the success of our government in
laintaining a viable international monetary system to
:acilitate stable exchange rates and a free flow of funds,
.n lowering trade barriers and in pursuing peace.

- 6 -

Indeed, while it is most difficult to quantify, it is
also impossible to overestimate the extent to which the
efforts and the opportunities for American firms abroad depend
upon the vast presence and influence and prestige that
America holds in the world. It is impossible to overestimate
the extent to which private American ventures overseas benefit
from our commitments -- tangible and intangible -- to furnish
economic assistance to those in need and to defend the
frontiers of freedom.
In fact, were we to contemplate abandoning those
frontiers and withholding our assistance -- as some continually
suggest -- I wonder not whether the opportunities for private
American enterprise abroad would wither -- I wonder only how
long it would take.
Now, let us look at some specific areas of real or
potential conflict between national interests and the multinational corporation -- conflict which again requires that
all sides concerned exert every effort to better understand
and appreciate each other's problems and needs.
I think it a fair assessment of the current situation
to say that more than any time since the end of World War II
the rising tide of nationalism in both developed and less
developed countries is generating public attitudes and policies
that could obstruct the growth and development of the
multi-national corporation or halt the movement toward an
atmosphere of greater freedom that is conducive to their
proliferation.
There are signs in quite a few developed countries
that their political leaders believe they have a diminishing
need for foreign capital, technology or management. In a
number of the less developed countries, new political
leaders manifest a distinct preference for government-togovernment grants and loans for local cr state-owned
enterprises over the entry of foreign private direct
investment. And as the number and size of foreign private
firms within the borders of both developed and less developed
nations continues to increase, conflicts between the
policies of these countries and guest corporations often
follow -- conflicts that often lead to tensions between the
host countries and our government and that often give rise to
a growing host of regulations or laws that discriminate against
foreign firms.

- 7 -

A brief review of some of the specific areas where
thoughtful and temperate policies by both government and
business are necessary to minimize potential conflict between
national interests and multi-national business would include
at least five:
First, the area of trade. It is, I think, fairly clear
that the movement toward the general lowering of trade
barriers and the creation or enlargement of regional
marketing areas -- encompassing many countries in which
goods move relatively freely -- are conducive to the
infusion of capital, initiative and technology from external
as well as internal sources. The multi-national corporation,
therefore -- as well as the Free World economy generally
has a large stake in the success of the Kennedy Round as
well as of efforts to enlarge marketing or regional
groupings in which many countries dispense with trade and
customs barriers. And failure in these efforts and these
negotiations will bring the multi-national corporation hard
up against national or larger regional interests seeking
self-containment and self-sufficiency and turning away from
the post-war movement toward increasing interdependence.
Second,there is the fact that both the entry and
the operations of a multi-national corporation into a given
country are subject -- not to some supra-national authority
but to the laws of the country where they operate. Around this
simple, inescapable fact centers a vast area of potential
conflict -- conflict which can be minimized only by applied
good will, mutual understanding and equal treatment under
the law for foreign and domestic enterprises.
Third, in the less developed countries perhaps the
most serious deterrent to the multi-national private
corporation is the specter of state confiscation and state
operation of competitive units. This is, as you know,
a specter not easily exorcised. But the United States
government -- together with other governments and with
appropriate international agencies -- must try to bring home
to governments and peoples of less developed countries by
word and deed the truth that the multi-national corporation
cannot and will not play its proper role in developing
countries in an institutional environment that accepts state
confiscation or state operation of competitive units on an
unrestricted basis as a national policy.

- 8 ...

Fourth, there is the troublesome area of conflict
between national interests and the multi-national
corporation that stems from decisions resulting in the
transfer of production and employment from one country to
another. These decisions -- involving a loss of jobs or
exports -- can often have serious political repercussions.
Obviously, to avoid these repercussions is in the best interests
of all concerned -- and the only way to avoid them is for both
the management and the public officials concerned to work out some
means for minimizing the adverse impacts of these transfers.
Fifth, there are the necessities that the international
monetary system imposes upon governments to maintain sufficient
reserves of gold and foreign exchange or credits to meet
external payment requirements. Today -- as you are well
aware -- this is a subjectcr considerable current concern
to our multi-national corporations who, since early
February of this year, have been asked to do their share in
meeting an urgent national challenge -- the challenge of
bringing our balance of payments into early and sustained
equilibrium. But before turning to this matter in particular,
let me say that -- in all these areas of potential conflict -something more is needed if national interests and multinational corporations are to live harmoniously together. We
must, I think, be continually searching for an improved
institutional environment.
In this search, we from the United States naturally
look for guidance into our own experience with the gradual
submergence of tension between our individual states and
our interstate corporations. That experience -- beginning
with the commerce clause in the Constitution -- is one of
a constant and successful effort to insure the fullest
possible freedom of commerce within our borders. That
experience -- embodied in a network of laws to protect
commerce from abuse by public authority -- has enabled the
interstate corporation to become the great force that it is
in the U. S. economy.
This process was feasible because the people and their
representatives felt that the interstate corporations
Jetter served the needs and desires of the society than if
,ole reliance were placed on local capital, know-how and
)rganizational initiative.

- 9 Equally important was the fact that the management
of interstate corporations -- exercising good long range
corporate planning principles -- developed a tradition and
practice of good corporate citizenship in the areas where the
company conducted substantial producing or selling operations.
This system has produced, in an atmosphere relatively
free from any imperialistic overtones of the more powerful
states, a great measure of economic development, reasonably
well balanced between regions, and a considerable degree of
political unity.
What carry-over value, if any, does this experience
have for creating a better institutional environment for
the multi-national corporation as it deals with nationalism
and national sensibilities?
Let me simply suggest a few possibilities.
First of all, it is essential that there be developed
and observed a Code of Good Corporate Citizenship on the
part of multi-national corporations.
Basic to that Code must be a two-way flow of accurate
informaQon between the main office and its outlets abroad -so that the corporation can avoid the host of misunderstandings,
that can arise from faulty channels of communication.
Of great importance is the employment of citizens of
the host country in line management, accounting, marketing
and technical areas as well as lesser positions. The
upgrading of citizens of the host country to positions leading
to advancement and influence in the top management of the
parent is equally significant, giving the company the flavor
of a truly international rather than merely a multi-national
firm. These policies must place a high premium on training.
Somewhat related is the widening of the corporate
research base, wherever practicable, through the foreign
subsidiary in cooperation with local educational institutions.
Worthy also of full exploration are the possibilities of
~nership participation.
Mr. Frederick Donner, Chairman
)f the General Motors Corporation, put it this way:
"Hasn't
~he time come when thought should be given to making the

- 10 -

ownership of these international corporations also truly
international? In other words, should it not be possible for
investors in the countries in which international corporations
operate plants to participate directly in the ownership of
these international corporations?"
This does not necessarily mean direct local participation
in the ownership and earnings of the local subsidiary. It
may take the form of ownership of stock of the parent, which
Mr. Donner envisaged as more desirable in cases where unified
ownership interest is necessary because of the close business
relationships of parent and subsidiary or subsidiaries of the
same parent.
A keen sense and practice of good public relations will
disclose many other attributes of good corporate citizenship
and measures that avoid offense to national sensibilities.
We have already referred to transfers of production. Some
consideration should also be given to avoiding acquisitions
or ventures, particularly in developed countries, which tend
to cause the proportion of foreign investment in a key sector
of industry or trade to raise questions of economic or political
self-determination.
These are but a few of the many phases of good corporate
citizenship in which long-range corporate planning -strategic and tactical -- can playa vital role for the
multi-national corporation.
Policies of the base or home country government of
the parent in a multi-national complex can supplement these
efforts. The home government can eschew utilizing the
multi-national company as an instrument of national policy
to obtain political influence in foreign activities. It
can insure firms against losses from political disturbances
and currency devaluations which sometimes invite corporate
intervention in political affairs. It can review its tax
laws and regulations to make sure there are incentives for
private investment in less developed countries where external
capital flows are badly needed. It ~8n make sure that there
are no legal obstacles to joint ventures with nationals of the
host country where that is an appropriate business course.

- 11 -

But in the final analysis, the prospect for an
improving institutional environment for multi-national
companies depends primarily on the willingness of potential
host countries to forego voluntarily as a matter of national
policy the exercise of extremes of nationalism, even though
within the bounds of national sovereignty.
A current case in point is the International Convention
on the Settlement of Investment disputes between States and
Nationals of other States, sponsored by the World Bank and
signed last August by the United States. This convention is
aimed at promoting economic growth -- particularly in the
developing countries -- through private investment, by helping
create an atmosphere of mutual confidence between private
foreign investors and countries which wish to attract a larger
flaw of private international capital. This convention will
go into effect as soon as it has been ratified by the required
20 member governments of the World Bank.
Let me also note an interesting suggestion -- certainly
worthy of exploration
put forth last summer in the report
of the Advisory Committee on Private Enterprise in Foreign
Aid, headed by Mr. Arthur Watson, Chairman, IBM World Trade
Corporation. The Committee recommended -- and I quote -"that the United States Government lend its full support to
the principle of an investment code under international
sponsorship; and that as part of such a code the United
States be prepared to accept a reasonable statement of the
obligations of investors, to accompany a statement of the
obligations of host countries."
The Committee felt that, while such a move could offer
no final guarantees to the hesitant investor, it would
improve the general climate for private investment abroad and
would offer large advantages to less developed countries.
This country is today engaged in two sets of
1egotiations whose successful outcome hinges upon the
~illingness of all to forego excessive nationalism -- the
(ennedy Round of Trade talks and the preliminary
1egotiations now underway toward improving the international
nonetary system.

- 12 For its part, this nation is committed to the fullest
reductions possible of all trade barriers among the
developed nations. We have demonstrated -- and will continue
to demonstrate -- that commitment in the Kennedy Round.
We accept the fact that there must be give and take -and we are willing to do our share of giving. But others
must do the same.
We have also demonstrated our commitment to
a world monetary system capable of continuing to
needs of expanding world trade and commerce over
twenty years and more with the same success that
displayed over the past twenty years.

insuring
meet the
the next
it has

Indeed, our efforts in these areas reflect our acute
awareness of how deeply interdependent, how indissolubly linked,
are the American economy and the economy of the Free World.
For it is upon the stability and soundness of the American
dollar -- as much as upon any other single factor -- that
the entire international monetary system is anchored. And
an effective world monetary system is essential for strong and
sustained growth in world trade.
These, as you well understand, are factors that underlie
our own economic prosperity as well as that of the entire
Free World. Nor is their impact or their importance
confined to the economic sphere. For our ability to shoulder
the burdens of world leadership -- economically, politically,
militarily -- must rest as much upon the firm foundation of
a strong dollar as upon any other aspect of national strength.
To ourselves, therefore, and to the world, the
stability of the dollar -- and of the world monetary system
which the dollar so critically supports -- is a matter of
the first importance.
This is why the solution of our balance of payments
jifficulties and the strengthening of our international
nonetary system must be of deep concern to all of us in
this country as well as to the peoples of the Free World.
\nd they must be of particular concern to our businesses
~ith operations abroad.
For, as you know, the heart of our current program to
~each sustained equilibrium in our balance of payments
~s the voluntary program of restraints upon private capital
:lows overseas.

- 13 And the critical area in that voluntary program is the
one that encompasses direct investment abroad by the U. S.
corporations. In the announcement this past Monday of the
President's intensified balance of payments program for 1966,
it was made quite clear that we must look, above all, to
marked improvement in the direct investment sector if we
are to reach our goal of equilibirium in 1966 -- a goal we
defined as within the range of a quarter of a billion
dollars either side of absolute balance in our overall account.
I will not now repeat the details of Monday's
announcements. I want simply to clear up some very basic
misunderstandings.
Let me, first, make it clear that we fully recognize
the fact that direct investment abroad ultimately returns
handsome dividends to the United States in the form of
repatriated earnings. We fully appreciate the fact that
current outflows through direct investment will more than pay
for themselves over the long run.
The problem very simply is that we cannot wait for the
long run. We simply do not have the time to wait until the
future returns from these outflows equalize, or surpass,
their current heavy cost to our balance of payments.
The problem is that the outflows have been currently
growing too fast in relation to the inflows they generate, and
in relation to the improvements we have been making in other·
areas of our balance of payments. We cannot simply sit and
wait for the return flows to mount, for in the meantime
there would grow abroad an ever-rising tide of short-term
liquid claims on us -- claims that could seriously endanger
the dollar and touch off a whole series of disastrous
consequences that would affect all aspects of our nation's
position in the world.
The fact is that some of the surplus countries of
continental Europe have made quite clear their unwillingness
to accumulate more dollars. And the United States and the
existing Free World monetary system simply cannot afford
continued deficits in the U. S. balance of payments with the
continued erosion and attenuation of our reserves.
We have asked, therefore, that -- for the time being
corporations moderate the annual increases in their rate
of overseas investment. We have asked that they maintain
the outflow from direct investment at a reasonable level -to an amount which our bQlan~ of payments can safely absorb.

- 14 Let me emphasize, also, that these restraints are
temporary measures required to alleviate a serious and current
problem. There are signs that the rate of profits on direct
investments in Europe is not as large as it was only a few
years ago -- signs even that it is now not very much higher
than in this country. As economic growth in Europe becomes
more moderate, the need for large capital outflow to finance
the expansion of U. S. foreign affiliates will also become
more moderate. The long-run trend of the U. S. trade surplus
is probably still rising, despite the cyclical decline this
year. If world trade continues to grow, and if U. S. prices
and costs remain competitive, our export surplus -- including
remitted profits from foreign investment -- will grow. In
short, there is every likelihood that within a period of time
the problem may solve itself as private capital outflow from
the United States abates and the surplus on current account grows.
In the meantime, we need the voluntary programs. To be
sure, they require some sacrifices and involve some hardships.
But the sooner we get down to business and make these programs
work, the sooner the day will come when we will need them no
longer.
The stakes are high -- and they involve not only the best
interests of the nation but the best interests of all who do
business abroad. For the strength of our dollar, and the
strength of our nation, is their strength as well.
Nor need our businesses and financial institutions feel
they are carrying the burden alone. They are only being
asked to bear their share of a burden that the government
bore -- more or less alone -- for some five years or so.
As President Johnson made clear -- in connection with the
intensified balance of payments program announced last
Monday -- five years of intensive government effort have
resulted in a 40 percent reduction in the balance of payments
cost of military spending abroad -- despite rising costs
overseas, the requirements of the Berlin build-up in 1962 and
of the current struggle in Vietnam. That effort has also resulted
in a full 50 percent reduction in the balance of payments
impact of foreign assistance. We will not only sustain
that effort, but intensify it wherever we can. At the same
time, we recognize -- and all must recognize -- that we
cannot in the foreseeable future expect large savings in this
area, whose potential for savings we have already so thoroughly
explored and in such large measure exhausted.

- 15 We must, therefore, in the words of President Johnson __
and I quote:
" .... reject the counsel of those who would have
the Government do the entire job, at whatever cost
to American security and leadership. It is private
outflow that has grown so sharply since 1960. Some
further reduction in that outflow is essential if we
are to solve this problem without crippling our
economy at home, or compromising our leadership abroad."
Thus, we must understand that, while the government can
and will hold to its essential minimum the dollar drain
through military and aid expenditures abroad, the overall
dollar costs of those programs must be measured by the value
of the national purposes they serve. And when those purposes
are well served, when the welfare of the nation is advanced
then we are all well served, then the welfare of us all is
advanced -- including the business community.
And, as I have made clear, one of our greatest benefits
from our foreign programs -- benefits in which the business
and financial community most abundantly share -- is the
maintenance abroad of the broadest possible areas of
opportunity for free enterprise. Ours is an interdependent
world, and interdependence has its costs. We must be
prepared to meet those costs, for only by doing so can we keep
the world safe and strong for free peoples and free enterprise.

000

TREASURY DEPARTMENT

December 9, 1965

FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN NOVEMBER
During November 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net purchases by the Treasury Department of
$232,960,500.00.
000

F-298

TREASURY DEPARTMENT

December 9, 1965

F-298

TREASURY DEPARTMENT
(

RELEASE P.M. NEWSPAPERS
'RIDAY, DECEMBER 10 1965

December 9, 1965

~OR

GOAL OF 1966 PAYROLL SAVINGS COMMITTEE
IS ONE MILLION, 200 THOUSAND SAVERS
Business leaders from all sections of the United States met
lere today with Secretary of the Treasury Henry H. Fowler to
traft plans for signing up an additional 1,200,000 purchasers
f U. S. Savings Bonds through the Payroll Savings Plan.
The Committee, consisting of 23 of the nation's business
nd industrial leaders, is headed by Lynn A. Townsend, President
f the Chrysler Corporation, Detroit.
Mr. Townsend, whose appointment was announced by Secretary
owler, succeeds Dr. Elmer W. Engstrom, President of the Radio
orporation of America, New York, as Chairman. Other chairmen
f the group, established in 1963 by former Secretary Douglas
illon, have been Harold S. Geneen, President of the Interational Telephone and Telegraph Corporation, and Frank R.
illiken, President of the Kennecott Copper Corporation.
The three former chairmen will continue to serve as memberst-large of the group, composed of 22 business leaders and
Jairman Townsend. Each member represents a metropolitan area
1 which he will organize intensive campaigns to enlist addilonal interest in the Payroll Savings Plan.
About 40 of the nation's top business and industrial leaders,
)mprising both the 1966 and 1965 Committees, attended the session
ld heard praise from Secretary Fowler for their activities. Each
~mber of the Committee represents a major marketing area in the
ition.
The Committee will steer the Payroll Savings program into
le 25th or Silver Anniversary year of the E Bond. The first
lch bond was sold to President Franklin D. Roosevelt on May 1,
141. Since then, more than 149 billion dollars of E and H
Inds have been sold, and more than 49 billion dollars worth
'e s till outs tanding.

299

- 2 The ceremony included presentation of special awards to
l Dr.
Engstrom and Mr. Townsend for their services in
.if of the Bond program. Chairman Townsend was honored
only as head of the Committee for 1966 but as organizer
:he Savings Bond effort in the Detroit area in 1965.
Secretary Fowler told the members that, largely as a
.it of their activities, E Bond sales today are running
rate of more than three billion dollars a year and
unt for approximately 68 per cent of the E and H Bond
s dollar. These sales are largely in the payroll-saver
minations, ranging from $25 to $200.

000

~ ~

INDUSTRIAL PAYROLL SAVINGS COMMITTEE

. Kelley Anderson
resident
ew England Mutual Life
Insurance Company
oston, Massachusetts
Member, 1965
llen G. Barry
resident
ew England Telephone
& Telegraph Corp.
oston, Massachusetts
Member, 1966
. L. Beesley
enior Vice President
he Equitable Life Assurance
Society of the U. S.
ew York, New York
Representing James F. Oates
Chairman of the Board
Member, 1966 and 1965
illiam B.
resident
l1e Martin
3ltimore,
Member,

Bergen
Company
Maryland
1966

:!x Brack
:!nior Vice President
raniff International
311as, Texas
Representing W. F. Joyce
Senior Vice President
Texas Instruments, Inc.
Member, 1966

Harold Burrow
President
Tennessee Gas Transmission Co.
Houston, Texas
Member, 1966
Henry Z. Carter
President
Avondale Shipyards, Inc.
New Orleans, Louisiana
Member, 1965
Arthur W. Cowles
Vice President
Koppers Company, Inc.
Koppers Building
Pittsburgh, Pennsylvania
Representing F. L. Byrom
President and Member, 1965
A. D. Dennis
Vice President/Finance
Allis-Chalmers Manufacturing Co.
Milwaukee, Wisconsin
Representing Robert S. Stevenson, Chairman
Member, 1966 and 1965
Gilbert M. Dorland
President
Nashville Bridge Company
Nashville, Tennessee
Member, 1965
Dr. Elmer W. Engstrom
President
Radio Corporation of America
New York, New York
1965 Committee Chairman
1966 Mernber-at-Large

- 2 -

lam P. Gwinn
ldent
3d Aircraft Corporation
Hartford, Connecticut
3Illber, 1965

John A. Hill
President
Aetna Life & Casualty
Hartford, Connecticut
Member, 1966

Finch
Ldent
lsvi11e Furniture
ius tries , Inc.
lsvi11e, N. C.
~mber, 1966

Howard Holderness
President
Jefferson Standard Life
Insurance Company
Greensboro, N. C.
Member, 1965

Fontaine
:man and Chief
!cutive Officer
.x Corporation
Ii t, Michigan
mber, 1966

Robert S. Kerr, Jr.
Director
Kerr-McGee Oil Industries, Inc.
Oklahoma City, Oklahoma
Member, 1965

,d S. Geneen
man and President
national Telephone
'e1egraph Corp.
'ark, New York
63 Committee Chairman
66 Member-at-Large

N. Harris
man of the Board
nd-Ross Corporation
land, Ohio
nber, 1966 and 1965
1 J. Haughton

:lent
3ed Aircraft Corp.
lk, California
nber, 1965

David S. Lewis
President
McDonnell Aircraft Corporation
St. Louis, Missouri
Member, 1966 and 1965
Robert D. Lilley
President
New Jersey Bell Telephone Co.
Newark, New Jersey
Member, 1966
Robert S. Macfarlane
President
Northern Pacific Railway Co.
St. Paul, Minnesota
Member, 1966 and 1965

- 4 -

Walter W. Straley
President
Pacific Northwest Bell
Telephone Company
Seattle, Washington
Member, 1966
Fladger F. Tannery
Executive Vice President
PepsiCo, Inc.
Dallas, Texas
Member, 1966
Lynn A. Towns end
President
Chrysler Corporation
Detroit, Michigan
1966 Committee Chairman
Lester Ziffren
Director, Public Relations
Kennecott Copper Corporation
New York, New York
Representing Frank R. Milliken
President
1964 Committee Chairman
1966 Member-at-Large

A. Wayne Elwood
Senior Vice President
FMC Corporation
Washington, D. C.
Representing James M. Hait
President, FMC Corp.
San Jose, California
Member, 1966

- 10 -

defense of peace.

Our obligations constitute a constant

challenge to our collective effort.
I know that with your help we will meet that challenge
successfully.

- 9 growth and fiscal soundness that your business experience

constantly fosters.
There are few more direct means by which you, as individual

citizens, can bolster our Nation's financial position than by

promoting Savings Bond ownership on the part of your employees

- - and those of other companies within your community of inter.

I know that you are all deeply concerned with the soundne.

of our contry' s fiscal position; with its ability to meet its

worldwide financial obligations -- particularly when increased

Federal spending is needed to meet our commitment in Viet Nam.

And, that spells out rather clearly an extra emphasis to

the purpose of our partnership here today.

For , to those IrIho

must bear the direct burden of that conflict, we owe the best

support that we can provide.

Our commitments are cast in

8 -

Now, more than ever, it is important to obtain through

Savings Bonds the widest possible ownership of the public

debt.

The Payroll Savings Plan has proved to be one of our

bes t means of doing so.

It is the only method for investing

in bonds on an installment basis.

Each of you, by your leadership in one of America's leading

industrial market areas, is making a substantial contribution

to the growth and strength of our economy.

Already your

abilities and your energies are responsible for the success [

the Payroll Plan in your companies.

Now, you are undertaking

to further extend your efforts throughout the companies whose

executives you will be contacting.

Your acceptance of that

responsibility reflects the qualities that have brought

yOU

the forefront of your industries - - and the concern for ecor.c:

- 7 our Nation as a whole is in his debt.

"His generous service is in the finest tradition of the

volunteer spirit which symbolizes the Savings Bonds program

and gives strength and vitality to our American way of life.

"Given under my hand and seal this tenth day of December,

nineteen hundred and sixty-five.
/s/ Henry H. Fowler
Secretary of the Treasury"

The Savings Bonds program -- which brings this group

together here for the fourth time since it was established by

my dist inguished predecessor, the Honorable Douglas Dillon··

is vital to the success of our debt management policy.

For

the Savings Bonds program is one of our most significant mea~.5

of placing the ownership of the nati onal debt in the hands

genuine savers.

- 6 in gold.

But, he will know that they will always represent

to him the enduring regards of an appreciative Committee, a
thankful Treasury and a grateful Government. Dr. Engstrom is

to receive the first "Gold Patriots" medal, but let me first
read the accompanying citation • • •

"TREASURY DEPARTMENT CITATION

ELMER W. ENGSTROM
Chairman
U. S. Industrial Payroll Savings Committee
"For exceptional leadership of the 'Practical Patriots 1
Payroll Savings campaign.

"Inspired by his enthusiasm and splended example, American

industry in 1965 substantially exceeded its goal of enrolling

more than one million new regular buyers of United States

Savings Bonds through the Payroll Savings Plan.

While these

savers are the direct beneficiaries of his devoted efforts,

- 5 -

and Hal Geneen -- who are to remain with us as members-at-

large.
I know that President Johnson shares my admiration and

respect for the lessons in good business citizenship that yoo

have so ably provided.

I know that he would join in my

confidence tha t you will carry the new 1966 campaign through to

a successful conclusion.

We in Treasury will be watching yoor

progress, wishing you the best of success.

I want to talk now about a man who personifies his own

campaign theme, "Practical Patriotism".

Elmer Engstrom has

deeply etched his qualities of leadership and citizenship on

the cornerstone of your Committee structure for 1965.

The

magni tude of his contribut ions cannot be adequa tely exernplif~~d
by the words of any citation or the elementsof any medal str~C~

- 4 -

( stcRVAay

PRE'?OO~"TOWUSgWJ:L..l._

Now then, let us consider our plans for next year.

targe t for 1966 - - and your mis s ion - - is to s tr ive to enrol:

1,200,000 new employee part ic ipants in the Payroll Savings Plan.

I need not dwell on the geography and strategy of your respecti!

respons ib i1 it ies as maj or market- area cha irmen.

I need not

remind you that the surest and shortest road to travel in

reaching your individual campaign goals requires personal

commitment by the top command of the principal companies within

your specific area.

It is encouraging to those of us at Treasury and, I'm s~=e~

to a 11 of this year's Committee members to know that we shaL

continue to profit from the untiring good counsel of the three

past Chairmen of the Committee -- Elmer Engstrom, Frank MiL:a

- 3 -

like to read . • •

"My warmest congratulations on the results of the 1965

Savings Bonds campaign.

E Bond sales in the 'Payroll Sav~

denominations' have been raised to more than $3 billion a

year and the Conunittee' s goal for new Payroll Savers has been

substantially exceeded.

"You, as Chairman for the Detroit area, and the other

members of the U. S. Industrial Payroll

Savings Committee

have made a major contribution to bringing about this mighty

accomplishment, benefiting the individual saver and the nation.

"As a symbol of the thanks and appreciation of a grateful

Government, please accept the accompanying Savings Bonds
Division's Patriots Medal.

"W·
- ~t h warm regards."

- 2 These accomplishments, for which you gentlemen are so

largely responsible, are truly substantial.
As a token of our appreciation for your effort, for

yo~

enthusiasm, and for your determination during this year's

Payroll Savings campaign, I am both pleased and proud to presenl

the award which was created to honor the members of the

1965 Committee.

I now call upon your new Chairman for 1966, Lynn Townsend l

to receive his award as 1965 Chairman for the Detroit area.

And let me say, first, that we are indeed fortunate to be able

to count on his reputation for results to spearhead our 1966

campaign.

award.

Now, then, Mr. Townsend, this is our "Silver Patriotl

It is framed in company with a letter that I should

\: ~ . ,~,. (t. t :. (;..

{( E t.. ;:A- t.- () {Y;
II

FI I

-: ,.. " , ] )

/. )

1f . /

",'

TH~~ HENRY H. FOWLER
SECRETARY OF THE TREASURY, BEFORE THE
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
DIPLOMATIC FUNCTIONS AREA, DEPARTMENT OF STATE
FRIDAY, DECEMBER 10, 1965, ~ P.M., EST
SIP 77772 REMARKS FOR

2.: 00

All of you are, in truth, "Patriots"

tradition of the "Minute Man".

in the finest

You have impressed your employetj

as such, to join with you in furthering the mutual good of the

individual citizen and his government through the Industrial

Payroll Savings Plan.

New sign-ups of Payroll Savers, during 1965, approximated

1,250,000.

Of that impressive number, some 180,881 were

employees of the companies represented on this Committee.

Consequently, the overall sale of the Payroll-Saver Bonds
-- that is, the $25 to $200 denominations -- is today running

at a remarkable peacetime rate of more than $3 billion annually:

accounting for 68 percent of the E and H Bond sales dollar.

TREASURY DEPARTMENT
Washington
RELEASE P. M. NEWSPAPERS
FRIDAY, DECEMBER 10, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE
THE U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
DIPLOMATIC FUNCTIONS AREA, DEPARTMENT OF STATE
FRIDAY, DECEMBER 10, 1965, 2:00 P.M., EST
All of you are, in tru th, "Pa triots" in the fines t
tradition of the "Minute Man". You have impressed your
employees, as such, to join with you in furthering the mu tual
good of the individual citizen and his government through the
Industrial Payroll Savings Plan.
New sign-ups of Payroll Savers, during 1965, approximated
1,250,000. Of that impressive number, some 180,881 were
employees of the companies represented on this Committee.
Consequently, the overall sale of
that is, the $25 to $200 denominations
at a remarkable peacetime rate of more
annually, accounting for 68 percent of
dollar.

the Payroll-Saver Bonds
-- is today running
than $3 billion
the E and H Bond sales

These accomplishments, for which you gentlemen are so
largely responsible, are truly substantial.
As a token of our appreciation for your effort, for your
enthusiasm, and for your determination during this year's
Payroll Savings campaign, I am both pleased and proud to
present the award which was created to honor the members of the
1965 Committee.
I now call upon your new Chairman for 1966, Lynn Townsend,
to receive his award as 1965 Chairman for the Detroit area.
And let me say, first, that we are indeed fortunate to be able
to count on his reputation for results to spearhead our 1966
campaign. Now, then, Mr. Townsend, this i.s our "Silver Patriots"
award. It is framed in company with a letter that I should
like to read . . .
F-300

- 2 "My warmest congratulations on the results
of the 1965 Savings Bonds campaign. E Bond
sales in the 'Payroll Saver denominations' have
been raised to more than $3 billion a year and
the Committee's goal for new Payroll Savers has
been substantially exceeded.
"You, as Chairman for the Detroit area, and
the other members of the U. S. Industrial Payroll
Savings Committee have made a major contribution
to bringing about this mighty accomplishment,
benefiting the individual saver and the nation.
"As a symbol of the thanks and appreciation
of a grateful Government, please accept the
accompany Savings Bonds Division's Patriots Medal.
"Wi th warm regards."
Now then, let us consider our plans for next year. Our
target for 1966 -- and your mission -- is to strive to enroll
1,200,000 new employee participants in the Payroll Savings
Plan. I need not dwell on the geography and strategy of your
respective responsibilities as major market-area chairmen. I
need not remind you that the surest and shortest road to
travel in reaching your individual campaign goals requires
personal commitment by the top command of the principal companies
within your specific area.
It is encouraging to those of us at Treasury and, I'm sure,
to all of this year's Committee members to know that we shall
continue to profit from the untiring good counsel of the three
past Chairmen of the Committee -- Elmer Engstrom, Frank Milliken
and Hal Geneen -- who are to remain with us as members-at-large.
I know that President Johnson shares my admiration and
respect for the lessons in good business citizenship that you
have so ably provided.
I know that he would join in my
confidence that you will carry the new 1966 campaign through
to a successful conclusion. We in Treasury will be watching
your progress, wishing you the best of success.
I want to talk now about a man who personifies his own
campaign theme, "Practical Patriotism". Elmer Engstrom has
deeply etched his qualities of leadership and citizenship on
the cornerstone of your Committee structure for 1965. The
magnitude of his contributions cannot be adequately exemplified
by the words of any citation or the elements of any medal struck

- 3 -

in gold. But, he will know that they will always represent
to him the enduring regards of an appreciative Committee, a
thankful Treasury and a grateful Government. Dr. Engstrom is
to receive the first "Gold Patriots" medal, but let me first
read the accompanying citation . . .
"TREASURY DEPARTMENT CITATION
ELMER W. ENGSTROM
Chairman
U. S. Industrial Payroll Savings Committee
"For exceptional leadership of the 'Practical Patriots'
Payroll Savings campaign.
"Inspired by his enthusiasm and splendid example, American
industry in 1965 substantially exceeded its goal of enrolling
more than one million new regular buyers of United States
Savings Bonds through the Payroll Savings Plan. While these
savers are the direct beneficiaries of his devoted efforts,
our Nation as a whole is in his debt.
"His generous service is in the fines t trad ition of the
volunteer spirit which symbolizes the Savings Bonds program
and gives strength and vitality to our American way of life.
"Given under my hand and seal this tenth day of December,
nineteen hundred and sixty-five.
/s/ HENRY H. FOWLER
Secretary of the Treasury
The Savings Bonds program -- which brings this group
together here for the fourth time since it was established by
my distinguished predecessor, the Honorable Douglas Dillon
is vital to the success of our debt management policy. For
the Savings Bonds program is one of our most significant means
of placing the ownership of the national debt in the hands of
genuine savers.

- 4 Now, more than ever, it is important to obtain through
~vings Bonds the widest possible ownership of the public
2bt. The Payroll Savings Plan has proved to be one of our
2st means of doing so.
It is the only method for investing
1 bonds on an installment basis.
Each of you, by your leadership in one of America's
=ading industrial market areas, is making a substantial
)ntribution to the growth and strength of our economy.
lready your abilities and your energies are responsible for
1e success of the Payroll Plan in your companies. Now, you
~e undertaking to further extend your efforts throughout
le companies whose executives you will be contacting. Your
~ceptance of that responsibility reflects the qualities that
Ive brought you to the forefront of your industries -- and
le concern for economic growth and fiscal soundness that your
lsiness experience constantly fosters.
There are few more direct means by which you, as individual
~tizens, can bolster our Nation's financial position than by
~omoting Savings Bond ownership on the part of your employees -ld those of other companies within your community of interest.
I know that you are all deeply concerned with the soundness
our country's fiscal position; with its ability to meet its
lrldwide financial obligations -- particularly when increased
:deral spending is needed to meet our commitment in Viet Nam.
And, that spells out rather clearly an extra emphasis to
purpose of our partnership here today. For, to those who
st bear the direct burden of that conflict, we owe the best
pport that we can provide. Our commitments are cast in
fense of peace. Our obligations constitute a constant
allenge to our collective effort.

I know that with your help we will meet that challenge
ccessfully.

000

- 12-of healthy competition and price stability in our own
economy at home.
And this brings us back to savings bonds, because
cannot emphasize to you too much the highly significant
role played by the savings bonds program in helping to
finance soundly our own Government, and in helping to
maintain a strong dollar internationally.

You gentleuD

have indeed undertaken a worthwhile and challenging talk,
and I hope that you will find it satisfying as well.
Judging from the excellent past accomplishments of

yo~

Committee, I can confidently rely upon you for a major
share of what I believe wi 11 be a highly successful 1966
payroll savings campaign.

000

- 10 -

generate earnings abroad and, hence, are, of cour.e, a
great source of strength to our pay_nts position, can
nevertheless drain our reserve. in the short-run if tbe
flow is proceeding too fast.

The ne. direct inve.t. . t

measures are expected to aChieve balanc:;e of pay_nte
savings of better than '1 billion in 1966.
program is by

investment flows.

_ana designed to stifle

However, tbe
theae product1..

Indeed, it is expected that the 1966

level might be about equal to that of 1964, and SUbtltUUIU,
greater than in other recent years.
We expect this greater effort toward IlOderatiDI dil'ect
invest_nt outflows to play a key role in achievinl

0\11'

pal

of approxiu.tely balanced international accounts in 1168.
But this 1s only one part of a laaDy-pronged attack.

1'be

highty successful program to li.tt foreign lending b.1 ~
and other financial inati tutiona will be continued aest ,."

- 8 -

anticipated earlier.

Indeed, before the Viet Nam spending

built up, there was an excellent prospect that the current
fiscal year deficit would be considerably under the
$5-1/4 billion figure estimated last

January.

As it is,

we would now expect to exceed that figure by perhaps
$2 to $3 billion.
Before concluding, I want to revie. with you

~iefly

another area in which the past year has seen gratifying
progress, but in which a difficult job remains to be done.
I am referring to the shrinkage in our international baluc.
of payments deficit, which has given us a significantly
stronger dollar internationally at the same time that a
prosperous domestic economy and a relatively stable price
level have provided a strong dollar at home.
Through the first three quarters of this year, our
over-all payments deficit has run at an annual rate of a~ut

- 7 -

made in the last few years, particularly 1n lightening the
volume of issues just a year or two away from maturity,
permits us to have a little breather now and then, but"
remain alert to the need for maintaining a well-balanced
debt structure.
TIle greater spending needs caused by the Viet Nam
conflict have made the robust savings bonds program all
the more important in maintaining economic equ8libriUll at
this time.

The latest reassessment of the budget for th.

current fiscal year showed that spending might rise to u
much as a $105-$107 billion range, compared with the
estimate last January of just under $100 billion.
Fortunately, this fiscal year's prospective deficit
has increased by nowhere near the SaBle margin as spendlJli
because revenues are also expected to rise above the 1.v.1

- 6 deut over the past year.

When I met wi th this group elanD

months .l.go, we were just in the midst of a large advlUlce
refunding operation -- one of a series of such operatiou
that has contributed quite hamdsomely to an improvement in
the debt structure ofer the last several years.

Following

that offering, in which holders of nearly $9.8 billion of
relatively short-term issues elected to exchange their
holdings for bonds maturing in 5, 9, or 27-1/2 years, the
average maturity of the marketable debt was raised to
5 years and 5 months

up from a low point of 4 year. ud

2 months as recently as 1960.-1

-.,~~

This this is an area where one has to run pretty flit
just to keep from losing ground.

In subsequent debt

operations this past year, while we have sold additional
9-yeal' bonds and refunded other maturing issues into the

•

l-to-5 year area, the average maturi ty has drl-fted back to
the level of

years.

Fortunately, the excellent progr...

- 5 -

a year of wrestling with the Treasury's perennial probl-.
in the area of debt management, I am more than ever keenl,
aware of the vital contribution of savings bonda to our
over-all financial
As

mana~ent.

all of us know, a by-product of our unparalleled

national prosperity, with large credit demands

pr.8.iDg~

the available supplies of funds, is that market rate. of
interest have risen.

Quite naturally, the upward rate

trend has not made our task of refinancing maturing i ••WN
and raising some new cash any easier.

And clearly, if it

were not for the substantial sales of savings bonds, th,job
would have been all the more difficult and costly.
Given the buoyant, economic climate, and keen
competition for funds in the economy, the Tr.asury noD'tb'~
has made continued progress in restructuring the

marketlb~

- 4 attribute that all who believe in a free enterprise

econ~

should value.
The campaign in this 25th Anniversary Year will be
offering new challenges.

More people are at work than

ever before in our history -- and at higher wages and
salaries.

With our economy now well into the fifth ye.,ol

a broadly based expansion, and unemployment at its low.lt
ebb in nearly a decade, many thousands of Americans are
just reaching a threshold of financial well-being where th.,
are ready to take part in a program of systematic savinp.
New workers should also be new savers, participating in OV
Nation's high purposes, while at the same time benefitting
from and contributing to its financial strength.
Those of us responsible for the management of the
Federal debt have, of course, a special concern for the
success of your savings bonds campaign efforts.

Indeed aft.

- 2 -

have increased the amount of their systematic savings.

the 1965 campaign, W1der the highly effective leadership of
Dr. Engstrom, sales of the $25 to $200 E Bonds will reach

peacetime annual record of more than $3 billion.

I don't baft

to remind you that the steady sales of those smaller
denomina tions are the backbone of the payroll savings plan.
Payroll savings now account for 60 percent of all E Bond
sales -- a rise of about 10 percent in the past three yeul
-- testifying to the quali ty of the Commi ttee's leadership,
enthusiasm, and determination.
We are meeting here today to map out another year's
successful payroll savings campaign.

Each of you has

volunteered your energies, your resources, and your tid
because of your personal experience and belief in the
savings bonds program.

No one is more aware than you ~.of

the importance of the program to Americans as a savings
medi urn.

REMARKS BY THE HONORABLE FREDERICK L. DEllING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS

BEFORE
THE U. S. INDUSTRIAL PAYROLL SAVINGS COIOIITTII

DIPLOMATIC FUNCTIONS AREA, DEPARTKINT OF STATI
FRIDAY, DECEMBER 10, 1965, 1:1: P.M., EST
For a quarter of a century, American industry haa
made a substantial contribution to the financial stabil1t,
of this country through its active promotion of the payroll
savings plan.

This joint effort of business and Gover...,

started with the very beginning of the program in 1941.
During World War

II, it was an important part of the war

financing effort; and throughout the postwar years, the
payroll savings plan has been the solid foundation of

savings bonds program.
In the past three years since your Corami ttee waa f1,,'
formed, some major additions have been made to this soU4
foundation.

New enrollments of payroll savers in

have exceeded one million each year.

iDdU8~

In addition, ..~

thousands of employees already partiCipating in the p~

TREASURY

DEPAR~lliNT

Washington

:LEASE P. M. NEWSPAPERS
~IDAY, DECEMBER 10, 1965
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
BEFORE
THE U, S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
DIPLOMATIC FUNCTIONS AREA, DEPARTMENT OF STATE
FRIDAY, DECEMBER 10, 1965, 1:30 P. M., EST
For a quarter of a century, American industry has made a
bstantial contribution to the financial stability of this
untry through its active promotion of the payroll savings plan.
is joint effort of business and Government started with the
ry beginning of the program in 1941. During World War II,
was an important part of the war financing effort; and throught the postwar years, the payroll savings plan has been the solid
undation of the savings bonds program.
In the past three years since yo~r Committee was first formed,
me major additions have been made to this solid foundation.
w enrollments of payroll savers in industry have exceeded one
llion each year.
In addition, many thousands of employees already
rticipating in the plan have increased the amount of their systemic savings.
In the 1965 campaign, under the highly effective
ldership of Dr. Engstrom, sales of the $25 to $200 E Bonds will
lch a peacetime annual record of more than $3 billion.
I don't
Ie to remind you that the steady sales of those smaller denominaJns are the backbone of the payroll savings plan. Payroll savings
- account for 60 percent of all E Bond sales -- a rise of about
percent in the past three years -- testifying to the quality of
Committee's leadership, enthusiasm, and determination.
We are meeting here today to map out another year's successful
'roll savings campaign. Each of you has volunteered your energies,
lr resources, and your time because of your personal experience
belief in the savings bonds program. No one is more aware than
are of the importance of the program to Americans as a savings
ium.
The contribution your efforts are making to the sound management
our public debt, and in turn to the financial stability of our
F-301

-2.on, is evidenced by the fact that E and H Bonds outstanding now
lunt for some 23 percent of the entire publicly held Federal debt.
lther nation has achieved anything like the broad public participaI in financing
its government that we, as a direct result of the
.ngs bonds program, too often take for granted in this country.
The $49 billion now outstanding in these bonds is also a valuable
rvoir of personal financial security for the millions of Americans
through their savings bonds purchases are sharing in responsible
zenship and responsible Government. Through payroll savings,
people who might not otherwise save at all are learning how to
and how to build their own family security. This is an attrithat all who believe in a free enterprise economy should value.
The campaign in this 25th Anniversary Year will be offering new
lenges. More people are at work than ever before in our history
nd at higher wages and salaries. With our economy now well into
fifth year of a broadly based expansion, and unemployment at its
st ebb in nearly a decade, many thousands of Americans are just
hing a threshold of financial well-being where they are ready to
part in a program of systematic savings. New workers should
be new savers, participating in our Nation's high purposes,
2 at the same time benefitting from and contributing to its
lcial strength.
rhose of us responsible for the management of the Federal
have, of course, a special concern for the success of your
19S bonds campaign efforts.
Indeed after a year of wrestling
the Treasury's perennial problems in the area of debt
~ement, I am more than ever keenly aware of the vital contri)n of savings bonds to our over-all financial management .
•s all of us know, a by-product of our unparalleled national
lerity, with large credit demands pressing on the available
.ies of funds, is that market rates of interest have risen.
: naturally, the upward rate trend has not made our task of
ancing maturing issues and raising some new cash any easier.
learly, if it were not for the substantial sales of savings
, the job would have been all the more difficult and costly.
iven the buoyant, economic climate, and keen competition for
in the economy, the Treasury nonetheless has made continued
ess in restructuring the marketable debt over the past year.

-3£n I met with this group eleven months ago, we were just in
e midst of a large advance refunding operation -- one of a
ries of such operations that has contributed quite handsomely
, an improvement in the debt structure over the last several
ars.
Following that offering, in which holders of nearly
.8 billion of relatively short-term issues elected to exchange
eir holdings [or bonds maturing in 5, 9, or 27-1/2 years,
e average maturity of the marketable debt was raised to 5
ars and 5 months -- up from a low point of 4 years and 2 months
recently as 1960.
This is an area where one has to run pretty fast just to keep
Jm losing ground.
In subsequent debt operations this past year,
ile we have sold additional 9-year bonds and refunded other matur~ issues into the l-to-5 year area, the average maturity has
if ted back to the level of 5 years.
Fortunately, the excellent
)gress made in the last few years, particularly in lightening the
Lume of issues just a year or two away from maturity, permits
to have a little breather now and then, but we remain alert
the need for maintaining a well-balanced debt structure.
The greater spending needs caused by the Viet Nam conflict
7e made the robust savings bonds program all the more important
maintaining economic equilibrium at this time.
The latest
lsseSSment of the budget for the current fiscal year showed that
~nding might rise to as much as a $105-Sl07 billion range, com:ed with the estimate last January of just under $100 billion.
Fortunately, this fiscal year's prospective deficit has inby nowhere near the same margin as spending because :::-evenues
, also expected to rise above the level anticipated earlier.
ieed, before the Viet Nam spending built up) there was an excelIt prospect that the current fiscal year deficit would be considbly under the $5-1/4 billion figure estimated last January.
it is, we would now expect to exceed that figL1 re by perhaps
o $3 bill ion.
~ased

Before concluding, I want to review with you briefly another
a in whic 1'1 the past year has seeil gratifying progress, but
which a difficult job remains to be done.
I am referring to
shrinkage in our international balance of payments deficit,
ch has given us a significantly stronger dollar internationally
the same time that a prosperous domestic economy and a relativestable price level have provided a strong dollar at home.

-4Through the first three quarters of this year, our over-all
1yments deficit has run at an annual rate of about $1.3 billion,
: about half of the 1964 rate and about one-third of the high
)60 rate. A good share of the credit for the improvement this
~ar must go to the program of voluntary credit restraint launched
1St February, under which banks, other financial institutions, and
Lsiness corporations have made significant progress in curbing
Lpital outflows.
Referring to this progress, and to the job still remaining to
. done, President Johnson recently said -- "We have done well,
Lt we must do even better." As part of the effort to eliminate
le deficit an extension and strengthening of certain aspects of
le voluntary program was announced just a few days ago. A particulr effort is being made in the area of direct investment abroad
, U. S. corporations. These outflows, which over the long-run
~nerate earnings abroad and, hence, are, of course, a great source
: strength to our payments position, can nevertheless drain our
'serves in the short-run if the flow is proceeding too fast.
le new direct investment measures are expected to achieve balance
. payments savings of better than $1 billion in 1966. However,
.e program is by no means designed to stifle these productive
vestment flows. Indeed, -it is expected that the 1966 level
ght be about equal to that of 1964, and substantially greater than
other recent years.
We expect this greater effort toward moderating direct investnt outflows to play a key role in achieving our goal of
proximately balanced international accounts in 1966. But this
only one part of a many-pronged attack. The highly successful
ogram to limit foreign lending by banks and other financial
stitutions will be continued next year, as will the interest
ualization tax on purchases by U. S. residents of various foreign
curities issues. I won't take the time here to mention every
her aspect of this program, but two points should certainly
covered:
First, the Government, itself, is making every further effort,
thin the contraints posed by vital military and economic aid
mnitments, to curtail its own dollar outflow; these efforts in
2 past few years have succeeded in cutting back sharply the
penditure of Federal dollars abroad.

-5Second, and perhaps most vital of all in terms of achieving
long-lasting solution to our problem of deficlts, we must
!double our efforts to expand American exports. And that, in
way, brings us full circle -- because the most effective means
know tc"' assure our success in the world's highly competitive
:port markets is to maintain a climate of healthy competition and
'ice stabili ty in our own economy at home.
And this brings us back to savings bonds, because I cannot
lphasize to you too much the highly significant role played by
e savings bonds program in helping to finance soundly our own
vernment, and in helping to maintain a strong dollar internationalYou gentlemen have indeed undertaken a worthwhile and challengg task, and I hope that you will find it satisfying as well.
dging from the excellent past accomplishments of your Committee,
can confidently rely upon you for a major share of what I believe
11 be a highly successful 1966 payroll savings campaign.

000

- 54 ail ever widening membership of countries willing to believe
that their rnaxLmurn indivtdual benefits will be found in

max imum common ga iI;. •

000

- 53 I~-

we have learded aflythL1;' about the solution of

ec-...

prol.lelus, o:-e 01 the great lessons is that la8ting progreaa
o,~

arises 0Ut
1. ~lat

expanded eco:lomic resources.

we ,leed tor the development ot a stronger Free

::orld -- Li.cluding, at the very heart, a stronger Atlantic
Coomu,-,ity -- is to put these lessons
develpp

tog~ther.

Let

our trade .and our investment policies, public and

private, h-, ways that permit the maximum sound econo.1c
ex?a~tS

use

iOT , as a :.:;rwifl6 pool of economic resources for the

each

0 .... l..lS

for the benefit of all of us.

A,d let us, in realization of our interdependence, CCIltS.
that developm2nt of internatkonal cooperation and collahcldll
tha t has become the hallmark. of the Free World in the laiC til
jecades, to the end that we bind ourselves ever more finl1

t'ltO !l

::aatrix

0';:-

peaceful progress and devel()l)m8nt.

ooen

- 52 bus iness.

L,deed, the same trend is evident 1n some of the

developed countries where multinational companies have becOlDl

well established.

So today --with multinational business at an all-time
peak, al:d the multiilstional corporations of the developed
COUll tries

who are members of the Organization for Economic

Cooperatio.l and Development possessed of the greatest potent1l1

l:OJ:'

i'lternatio,l.al economic development in history -- the

darlL;ers and opportunities match each other in equal

I tni,k this brLlgs us to a good parting point.

\Je are interdependent, as countries, as developed and 1111
developed worlds, and as public and private sectors.

- 51 broadened competition, and the spread of technical and

QrIM~

knowledge -- these hallmarks of multinational bu.1ne •• have
helped to bring an expanding, more integrated and efficient
structure to the West since World War II.
And there is no doubt that. given theae same

condltl~.

plus some reasonable assurance against state confi.cation.
state competition and

dlscr~lnation

against foreign

.n~iM

the multinational corporations can make significant
contributions to the emergence of iiable and free econ.-te
societies in the less developed countries.
But certain facts must be faced.

In many of the Le ••

developed countries, the rising tide of nationa11sm .!sed
with state intervention or discrLDination in ver;tng

d.~

has created an uncongenial atmosphere for aultlnatlonal pri.-l

- 50 multir.atiodal companies cannot be regarded as sound enterprh...
So the £act of life is, that the multinational company. valuable
as its contribution is, must be willing to moderate its
activities on a temporary basis sufficiently to help pay the

costs of

rn8Lltainii~g

a saie and sound world.

Today, we have all come to a far greater appreciatioo
oj.. the importa:lce of the private sector in our nation's roll
as a leader in world affairs -- especially of the importanc.
oZ our multLlatimJal companies.

It is difficult to overaute

their imoorta(cce to continued growth in the Free World
eco·,omy -- particularly among the less developed nations.
The expansion of Llternational trade, the freedom of
mo,",ey to flow across national boundaries, the welcome
extellded to foreign business units, the stimulating effectl of

- 49 ir'terdependent economic development -- ••ons d. . . lop.d • • •u
as amo~\g less developed countries.

This 1. the _ltlDatlloal

company.
If we olace
some restraints upon the dollar outflOll of
,
U,.ited States Da11tinational companies nOlI, it 1s only bee...
it is temporarily necessary to do so in order that they ..,

continue to function ill a safe and healthy world envtron.nc.

U.,less the dollar remains sound -- and it cannot do

great surplus paola of dollars develop around the v«ld ..

the result of chronic United States payments deficit. -Wlle88

the dollar reru.ins strong, American corporatloo.. CIIJIII

remain strong.

And inle8s we continue with the econom.c

and mil itary aaskance around the world that cr•• tea a

bee.

environment for all of us to live and work and for priM.
Li.stitutio,s to flourish, the invesbDenta of our

- 48 I thil'~" the OECD's '-Jork -- and its even greater potential

as we come ever closer to grips with the problems and

possibilities or ir:terdepende:tt Atlantic Community and Fre.

I'}orld developme,lt -- are so important that we should be c.rtain

that it is as capable as

\-le

can make it.

To this end, I •

wo Iderin6 it t~1e time may ,~ot have come for the member

oatio"s to take a new lookaat OECD, after the passage of

nearly five years, with the objective

making any

Llstittltional ct18!1ges that such an examination might 8Ugg..t,

a;-ld also with the objective oE givifl6 OECD

llew working

i, structio,-lS fully L-j keepinG with conditions and oppor ~U1itfAI

as ttley are nm;, aqd as they seem to be developing

A Valuable Private AgeLt of Interdependent Eco'

Cne MultL1atio,al C00ly)8uy

Let me ciose

.CM by 6etting down

- 47 -

it is my hope that the Lldustrialized nations that
have not yet signified their support of the Asian
Developmeut Ea;,k will do so, and that other nations
will carefully assess the adequacy of their capital
subscriptions.; .
I think that you will agree with me when I say that it
lot too much to expect that this hope will be fulfilled.
~

Valuable Public Agent For Private Economic Growth in tnt
Atlac1tic Community -- the OECD
A zood deal has been said iii my remarks about the

)r0anizatio:~

laS

ll~

for Economic Cooperation and Development.

What

been said reflects the fact that this Organization filll

essential spot, and does vital work, ill the Atlantic

~ornmUl1 ity 8ltd

the Free Horld.

- 46 III

sending the United States delegation to Manila to 11gn

the Charter of the Asian Development Bank, Pfesident Johnson
said:
I regard the organization of this great new
illstitutiop

one of the most hopeful events of our

times because the Asian Development Bank has been put
together by Asians, and because they themselves are
contributing the greater part of its capital and will
direct its lendiilg for development in Asia.
'1Even so, I should note that the problems of
Asia are of an order and a diversity requiring the
widest possible participation in their sohution by the
economically better developed nations.

Consequently,

- 45 who have already signed to increase their subscriptions

80 ••

to bri.l; the capital of the Baak up to the full authorized
figure of $1 billiot!.

The Asian nations have accepted responsibility for
$650 millio)! of the authorized capital, and are very near
to that mark.

Of this, Japan has pledged $200 million.

rernainiag $350 milliol"

Of the

the United States has accepted

res,mlsibility for $200 billion and pledges have been made
by

r~rmany,

Canada, the Netherlands, Italy, the United Kingda.,

Belgium and Denmark.

However, these !"lon-regional pledges

are not sufficient to fill out the $1 billion authorized
capital needed to launch this highly important new venture in
E;-;st-\']est interdependence with the funds it should have to Itlrt
its

y,~orl<.

- 44 -

acceptance of increased development aid responsibilities by
surplus countries, makes sense from both international

moneta~

and development standpoints.
There are other ways -- bilateral and through the
regional financial institutions -- in which needs can be lDIt.
Not one alone, or two -- but all those in a position should
see how best to respond to the need and to share realistically
in the response.
One of these responsibilities t and one t I may add that 11
not at present being adequately shared by the advanced
countries of Western Europe, is presented by the Asian
Development Bank.

In Manila on December 4, more than 20

Asian, American and European founding nations signed the nn
Bank's Charter, but left the books open until January 31 for
other countries to become founding members, and for thoae

- 43 me8"lS for developmel1t consistel.t with the 'tmounting burden of

debt repayments by the less developed countries.
doue, ar',d hope to continue to do, our part
sound affiliate of the World Bank.

iii

We have

this worthwhile,

We look for others to

share more in. this endeavor and we are willing to consider

doini; more provided that the burden sharing by others

is forthcomilig.
1.1 the light of the realities of i~lternational finance,

ways and procedures should be found to reflect the willingne ••
of the developed countries to shoulder these larger commitmentl,
subject to the condition that when the time to fulfill them
arrives, the expar.ded obligations need

not be performed by

those developed countries in serious balallce of payments

difficulties.

This type of arrangement. looking toward the

- 42 -

To a

COIlS iderable

exte,lt, they show up in the account.

of other countries as balance of payments surpluses.
I repeat

flOW

what we have suggested before:

one of the

maj or elements in a long term solution to the world payments
oroblem
lies ia finding better meatlS of placing balance of
,.
payme:-lts surpluses back into circulation.

One of these

better usages of payments surpluses, I suggest, would be

f~d

it. it,creased commitments by surplus countries to development

ass is tance.

There are mauy concrete chat1nels for increased coopered. .
The L!ternational DevelopmeLLt Association, for example, wal
brought il,to beiq1 to meet some of the urgent £leeds I hate

described.

Dri a multilateral level, it mobilizes resources

from the developed countries to less developed and does so on

the kiod oE easy repayment terms that makes sense in providinl

- 41 also is the magnitude of external debt problema.

From

$10 billion in 1956, outstanding international debt of
dev;lopirlg countries reached an estimated $33 billion.

The

amount of foreign exchange needed annually to service this
debt rose even faster -- from $800 million to $3.5 billion.
It can be expected to rise even more rapidly in the future.
I believe that one of the major advances in international
cooperation in development assistance is to be found in
exploitation of rnle of the facets of the

internatior~l

Monetary situation we have just been discussing.

I noted

that there has been a vast outflow of ddlars in recent year.,
and that these dollrs but have lodged abroad represent our
balance of payments deficits.

- 40 For one thing, the task is

gigantic tbat we need a

much greater commitmer.t to the sharing of the ta.k elDOng the
developed nations than we have had, if we can hope to make
visible progress with it.
There have be6n many estimates of what is needed to
support adequate growth in the developing countries.

1964 some $6 bi1liml in set disbursements of official aid . .t
from the indus trial to the developing countries and the fl.
of private long term finance added another $2.9 billion.

What

of the future?
The annual Report of the World Bank lIives a ataff
estimate that some $3 to $4 billion a year more than pre. .nt
flows of development finance could be effectively u8ed.

not going to give or endorse any specific estimate., but the
magnitude of the task is, to say the least impressive.

- 39 from the same sick.less.
We are economically ir,terdependent with this world becaul.
it provides us with most of our raw materials, and because. as
its markets grow, it will increas ingly be an outlet for our ev.r
increasing ability to produce goods and services.

And we are iflterdependent with this world because we
want it to remaii.. open for the developmeut of the ways of

freedom that have made us strong and that offer

tl~

best

for a future world strongly kuit together, in peace, by
shared economic

a~,d

social progress.

But it is not enough simply to realize that we have

compellLlg reasons for assisting the less developed nation.
toward a better liLe, to succeed in helping them.

- 38 -

11e sa id:

This is ;ot a rna t ter of at' immed ia te cris is,
~(c

but it is a matter

ow.

~ve

0;-'

must bet;irr

which we must begirl to

to provide machiliery for

the crea t io·. of add itioc,al reserves.

Gold alone

will uot be enough to support the healthy growth the entire If
deman.ds . .,

The I,·terdependence of the Developed and less Developed Countriea

The L terdeperidence of the world Li widcll we live is

not a simple two way street runnL1g among theddeveloped nation•.

There are maiiY side streets, and they lead off from our welll1t
world .slowi~lb with promise into dark precincts where poverty
is t~le rule.

The developed countries are not Lldependent

i:rom tile less developed world because, in the first place, the
less developed tvorld is part of tnat'lkhtd, and so long as part ofl

ki.id is sick. we

cannot

count ourselvEi completely well .. c,' .. I

- 37 -

11 terll8tiol:al LUo:-,etary system, L,cluding arrangements for the

future creation of reserve assets and credits as and when
I ,eeded.

This work is gOi.-Lg forward on an accelerat.d schedule, ..

a report

OLl

the progress made has been requested by the

Mil-listers in the Sprillg of 1966.

When these major countries

shall have found a basis for agreement, I have urged -- and my
colleagues in th.e Group have agreed -- that there should be a
secolld stage, to permit broader consideration of question. that
a f:i:ect the world economy as a whole, including the developing
countries as well as the advanced countries.

President JohLson gave the Annual Meeting of the
Internatioll81 Monetary Fund ir. October, a thumbnail aase.8l11nt
of this situation_ that is highly accurate for all its brevity.

- 36 -

countries in amounts and

Oll

terms that are consistent wi.th

the realities of the adjustment process in a world of fixed
parities where sharp deflation or 'stop-go" patterns of
economic growth are not acceptable alternatives.
There is no simple statistical test for the adequacy of
reserves.

However, it is worth noting that even. the very

large aggregate additions to reserves of foreign countrle••
outside the United States. during the palt six years. did
not avoid a moderate decline in the ratio of reserves to the
annual value of imports.

Reserves stood at 41 percent of

trade value in 1958 but fell to 38 percent in 1964.
Representatives of what is known as the Group of Ten .ten leading industrial nations of the West -- are currently
seekirlg a basis of agreement on improvements needed in the

- 35 additio!l8 to reserve holdings.

With.out an alternative Bourc.

for growth in world reserves, the pace of the world'

ecollomic growth in the future could be endangered.
Here again, as with international trade. unless we ca.lt
ourselves to growing interdependence -- and look to
in terdependence to insure our growth -- there are potential clanp

free World fragmentatiorl.

If the limited supplies of new gold

production are not supplemented by arrabgements to create
additional reserve assets, countries finding that their Aa.nu
are not increasing -- while the economic expectations of their
people do increase -- may drift, consciously or uncon.cloualy,
into restrictive domestic ar!d external policies.
To provide for continued economic growth in the
AtlaLtic Community we must find the f.asible means of
assuring that reserves or credits will be available to deficit

- 34 -

The Need for New International Monetary Arrangements
The Free World can help to assure continuing economic
growth by reaching decisions at an early date that will
provide for creating a supplementary form of international
re8erve asset. to insure that there can be an adequate incr••••
in world monetary reserves in the future.
World mBnetary reserves increased during the six year.,
1958 to 1964, by approximately $17 billion, and nearly $13
billion of this amount was inttheform of dollar reserve ••
Such a large addition to the official dollar holding. of
foreign countries was made possible by our large balance of
payments deficits.

As our balance of payments moves into equilibrium, we
will no lorAger supply the rest of the world with11arge annual

- 33 -

units huddled up each with its own protective system, each
una~vare

that it 1s lagging far behind its potential because

it permits no comparisons.
If there are any here

~'lho

take this as a flight of the

imagination, I invite them to take a look at the nations ••
each imprisoned with its own central plan -- of the marxist
persua.ion, where the ab.lition of competition in all of it.
creative forms has worked precisely such a miserable result
as I have just been describing.

It.£!!l aappen to the Free

\,]orld ,and it is not even necessary to be marxist -- the
immense benefits of market competition can be lost just al
easily

~vithout

doctrintl as with its guidance.

- 32 movements are justified in prices and wages.
Should the Kennedy Round aim of greatly reducing tariff.
and other impediments to international trade competition fall
victim to economic nationalism or regionalism, the Free WorW
stands in danger of growing economic dist..cion and

in.ffio1~

perpetuated by an inward looking illusion that all is well.
In these conditions, some economic growth can, of course

c~u.

But judged by the standards of the rapidity of economic
growth, and the stability and the widespread real benefit.
to be gained from growth taking place under competitive
conditions, the advances under restrictive conditions will
be niggling, the benefits will tend to be more illusory tba
real due to disguised inflation, and, worst of all, the

'r.

World will tend to pull apart into a congeries of closed

- 31 -

trading partners view as barriers to their exports.

Mutual

concessions are the :key to the success of the Kennedy Round.
And the success of the Kennedy Round is a matter of higheat
importance to the continued economic strength of the Free
World.
At a time when centralized governmental planning and
dl.rection',of economic development is practised even in

10M

of the industrialized nations of the West, the winds of
competition from international trade become particularly
important.

In these circumstances, competitive internatiOMl

trade is ~~idly becoming not only the best, but in a grow~
number of instances, it is almost the only reliable

mann.~

tcs ting the costs of labor and capital, of measur6ng relative
efficiency, and of indicating where investment is needed,
\'lhere it is already sufficient or in surplus, and what

- 30 -

schedule \vith the understanding that the ERe would make it.
offers as soon as practicable.
One of our objectives in the Kennedy Round is to maxim1••
trade benefits to the exports of the less developed countri...
and we are now actively engaged in talks for this purpose
with more than 20 developing lations.

I would like to atat.

that there are wide benefits for such countries in the off."
which the United States has put down.
In addition, we are conscious of the danger that the
effect of signifieant tariff reductions could be impaired_
nullified by non-tariff barriers.

Such trade barriers, •• I

stated above, are therefore an important sector of the
negotiations.
If we hope to secure reduction of barriers to our ~
';"e mus t be prepared to liberalize U. S. practices which our

- 29 The Redudeion of Barriers to the Freer Flow of

International~

This Kennedy IBund of trade talks now going on at Gan_ft.
so called because the talks were made possible by new tariff
reduction authority granted by the Congress to the President
at Pres ••ent Kennedy's requ.. t -- is the boldest approach b
multilateral liberalization of barriers to international tn_
which the United States has ever undertaken.

We are firmly

committed to bring this historic effort to a successful
conclusion.
Thus far in the negotiat6ans we have exchanged offer.
for an unpreOwdented 50 percent redwction in tariffs on a
broad range of industrial products.

In agricultural producb j

initial offers were exchaRged in September of this year. tM
European Economic Community was unable to join in this axcM
but the other partici,.ants maintained the previously agr.·..

- 28 -

embodied in new income tax treaties the United States 1.

now

negotiating in the course of an extensive revision of ita
income tax agreements with developed countries, prompted by
recent changes in the corporate tax systems of the Eu..,••n
countries and the adoption in 1963 by the OECD of a MOdel
Income Tax Convention.

The pattern emer*"ng from these

negotiations provides a widened flexibility to

internati~l

trade and investment activities between the United State ••'
Europe.
The elimination of all sorts of non-tariff barriers to
trade, including e1tmination of tartffs disguised as taxa.,
IS

~ one of the major objectives of United States negotiator.

in the current, Kennedy Round, talks with our trade partnen
for '\vorld trade liberalization.

- '27 for

s~m!Jl.lfying,

aDro~td,

reduculg or elimin<.1ting taxation. here and

s tandl.ng .1.n the way of the cleve lopment of a stronger

and Jeeper Free World interdependeat economy.

As examples of

the type of actl.on needed to claar away the barriers in this

area let me cite our main conclusions.
The Uaited States government should proceed unilaterally

to reduce or eliminate a number of tax obstables to invesbMmt

.i..n the Unl-ted States.

He should not wait upon the negotiation

of reciprocal acti.on oy otber countries on their

imped~ts

to 1:he sale of dollar securities abroad because this is a

slow proces sand \Je need to

quickly.

:~et

the bllance of payments ben.fitl

We accompanied this \Jith a series of seven recoumen-

dat.1.ons for specific tax act10ns aimed at making for.ign invest.-!

Unl.ted States corporate securities easier and more profitable.

H:my of the :Lmprovements our Task Force reconmended are

- 26 -

restraint on the flow of foreign investment funds to thil
country, and that flow needs to be increased to

~lp

right

our balance of payments.

H international

A Free World looking to the growth _

trade

and of international investment as major factors promoting
sound economic growth, and the improvement of living • tancla", ,
needs to .weep away the tax barriers to trade and
As I have already indicated, I was privileged

inve8~.

to~.

Ta.k Force established by President Kennedy as part of hi.
program for kringing our balance of paymewcs deficits to an
end, and continued by President Johnson.

Our task Force

charged with developing programs to promote increased

w,U

fore~

investment in United States corporate securities and lncreaei'
foreign financing for United States corporations operatinl
abroad.

A major part of our recoumenciations dealt with ....

- 25 bring its foreign payments into sustainable equilibrium
some interferences with the free flow of funds.

wi~t

While U. S.

private internatimoney markets are efficient and relatively
free of controls, and European markets are controlled or
inefficient -- or both -- there will be -- lacking con.cio~
restraint on our part -- a strong tendency for the rigid1tUJ
and insensitivities of Europe's capital markets to impel
excessive resort to U. S. aapital markets by both

d.velo~4

and less developed countries.
Reduction and Removal of Tax Barriers to Trade and
A simple tax law .an nullify the most liberal trade -investment policy, and simple tax laws often do

80.

Tax• • •

one of the major non-tartff barriers to increasing the .c~
desirable exchange among aations of their goods and ••rv1o."
United States taxation of foreign inv•• tors is • major

- 24 -

Committee is to receive the reports early

nex~ear

sources of savings, the channels for their transfer into
productive investment and the use of savings, among the var10u
countries.
This is progress -- but at a disappointingly slow "01.
Every effort must be made to step up the pace and to insure
that appropriate recommendations are given attention at hip
levels of policy decisions so that they are translated
into action as promptly as possible.

Only then can we move,

as we should, boAlty into a Free World Where capital can
flow freely in international markets aGGaned to the needs of
today and tomorrow.

Those needs are both urgent and da •• ~

of attention.
Until there are great improvements in capital market.
abroad, the United States will be hampered in its effort. U

- 23 the attractiveness

~ investment here

attr_~

and increase the

ness of investment abroad, aggravating rather than improviJag
our balance of payments position.
But action the other way around could help, and we

8~1.

be gratified that some progress is being made.
The various efforts publicly made that I referred to
earlier ltere paralleled by efforts in Working Party 3 of the

OECD to get that organization to grip the problem and gi'" it
long de.erved attention.

We were gratified when the OICD

Ministers at their annual meeting in November 1964 agreed
that the organization should undertake to study the way.

which the OEeD could assist countries in increasing the
efficiency of their c,pital markets, and of reducing re.t~
Since then the problem has been under

r.~

by theee

of experts set up by the Committee on Invisib1es.

g~'
$

Thie

- 22 -

would be folly for us to try to staunch the flow of United
States funds abroad by restrictive monetary policies aimed
at raising interest rates in this country to the structured
e
high ltvels of the countries of Western Europe, and of

'-pm.

Foreign borrowers were not daunted by two rises in the
United States discount rate, in July 1963 and in November l'M.
Before the latest increase in the Reserve System's di.count
rate a few days ago the gap was as big, if not bigger,

it was previous to the 1963 rise in the U. S. discount

~at••

And it appears from current reports that rises in intereat
rates in Western Europe will rapidly wipe out any tempora%J
narrowing of the gap whith might have resulted from the
recent action of the Federal Reserve Board.

Long before

could level rates here and abroad through this process, we
would drive this country into a recession that would reduc.

- 21 spectacle of . . . one European government borrowing abroad to
cover a budgetary deficit when it had a balance of payment.
surplus that it was converting to gold at the expense of
United States reserves.

And we have also in recent time.

seen another government send representatives of its

natiODll~

industries, and of government agencies, to borrow in the
United States because they could not agree on how to rai.e
needed funds at home, although -- again in the case of

country -- the borrowing country had a balance of payment.
surplus

tr~t

it was converting to gold.

It was this structural imbalance

fore1gm.money

ma~U

that forced us in 1963 to apply an Interest Eqqaliaation

rax

on long term portfolio credit to foreil8ers in developed
countries.

And it is this structural imbalance that make. "

clear that whatever domestic reasons may justify them it

- 20 -

of observations that I will draw upon in some of the

follow1~

passages:
With rate exceptions foreign financial markets lack a
fluid and large short term money market, and long term bond
markets are even more restricted.

This means that for the

most part there is sLmply no means by which private borronn
and lenders, and even to a considerable extent, government.,
can readily raise -- or dispose of -- large sums of mon.y.
quickly, in open markets.

They are forced, in.tead, to

with their demands through the bottlenecks of a few big
inetitutions dealing with customers on a personalized ba.i••
These institutionalized markets are so insulated from the
short term money markets that they are relatively unre.poG.1.
to the actions of monetary authorities.
This deficiency can go so far •• to ,.avide u. with

- 19 Bankers Association meeting in Rome early in 1962 and
reemphasized it at the 13th Annual Monetary Conference of ~
ABA at Princeton this past March.

The Treasury submitted in

December 1963 a detailed des.ription and analysis of certatn
'9r-1-~t::

European capital markets . .' .thec:-...' .....onomic Committee of
the

:~ongress

as part of the record of hearings held by the

Joint Comaittee in July 1963.

In Atpil 1964, a Task roree

which I had the honor to chair submitted for the President.
report on Promoting Increased Foreign Investment in U. S.
Corporate Securities and Increased Foreign Financing for
U. S. Corporations Operating Abroad.

This also called

at~CU

to the obstacles, inadequacies and neeis in foreign capital
markets.

I would draw attention specifically to recommendaU.

36, 37, 38 and 39 of that report.
In his March, 1965 speech Secretary Dillon made

a:m~

- 18 the benefits of each are the source of gains for all.
SOME AREAS FOR IMPROVEMENT IN THE INTERESTS

SOUND AND RAPID FREE WORLD ECONOMIC GROWTH
The Reed for Freer and More Effective Capital Markets Abroad

One of the fi_st and most fruitful improvements that
could be envisioned in the workings of the Free World

ec~

as a whole would result from the creation in Europe and inodwr
advanced countries of a capital market with something 8"l'ouh1,
the freedom, flexibility, variety of options for the use of
funds, and variety of institutions for their placement that
exists in the United States.
The inadequacies, the obstacles and the need. exi.tbl
in capital markets abroad have been spelled out on annumber
of occasions over recent years.

My predecessor Secretary Dl~

called attention to this area in • speech before the Amer~

- 17 -

domestic demand, when and if they consider it appropriate to
do so."
We submitted to this Subcommittee, chat.ed by SenatorNuij
a country

py country analysis, and an analysis of the provl.1au

in our balance of fSyments program to protect the economic
progress of the less develope4 countries, from wh6ch

concluded that our program:

" .. .

has not damaged the economies of the advanced

or dinDned the prospect for flourishing world trade (and thaC)
direct investment in the less developed countries ia in

no~

discouraged. tI
I would like to tUIIn now to a brief examination of • •
areas for joint action within the OECD whereby we might
hasten the prospects of

sound, strongly growing and

in~

dependent Free World economy, beneficial to each becauae

- 16 aggravated more directly the economic positions of some
countries, particularly the United Kingdom, Canada and Japan.
Such concerns do not seem to ~

be justified by the facti.

"In most of the industrial countries -- more particularl,
those in Western Europe -- economic expansion continues and
the pressure of internal demand remiins steang.

These

relying on restrictive monetary policies to avoid

g~~

inflati~.

which I might say were inaugurated long before the PresUft,'1
balance of payments program, some in 1963 and some in 1964,
have welcomed our balance of payments measures for the
given to domestic restraints abroad.

With respect to the ••

countries -- broadly characterized by steong reserve

p08i~

and brisk domestic economic activity amidst varying degr••'~
inflationary pressure -- there is no basis for any conclu.U.
except that the tools and resources are at hand to

8tren£~

- 15 -

economic policies of the countries concerned, and they are
not results -- as has sometimes been alleged, chiefly here
in the United States -- of our efforts to restrain dollar
ourflows so as to eliminate our balance of payments deficit••
I set this forth in testimony to the Balance of Payments
Subcommittee of the Senate Committee on Banking and Currency
in August, in which I said:
"Some concern has been expressed that our program gn. .
might adversely affect liquidity in the international

pa~~

system, tend to impede growth of economies abroad, and

re'DI~

the desireable expansion of international trade.
rtNone of this concern has come from the countries coned
Most of the concern about what we are doing to other

countr~

seems to be here in the United States.
"It is sometimes suggested that the program has serioUl~

- 14 I do not know if such an examination would indicate that

,.,b

different~policy

mix -- one, perhaps, placing 1e.1

reliance on monetary restraint and more on the use of filcal
policy to balance supply and demand -- would have permitted
Europe to achieve the price stability it has sought but hal
not achieved over
growth potential.

th~Da8t

several years without sacrifice of

And of course it whould be kept in

that -- as the OEeD study just cited indicates --

mini

exper1~

has varied greatly among the various individual European
countries.
It is not appropriate for me to attempt such an ....U-U
at this time and place.

That is the function of the multi~

surveillance exercises of the OECD committees.

What I waul'

like to emphasize is that whatever the results have been ~
Europe in recent times, they must be attributed to the inta-

- 13 outlook has deteriorated and there is unlikely to be any
significant rise.

However, in the United States the growth

of GNP seems likely to be nearer 5 percent than the 4.5 perone
expected earlier.

Bigger gains are also expected in Canada.

"There aow may be no further slowing down in the aggrtpce
growth rate in 1966.

On present trends the year-to-year

.au

for the OEeD area as a whole may be in the 4 to 4.5 percent
range.

But big differences between different countries, and

in particular the divergence of trend between North America
and the rest of the ares, may well continue."
I do not know what a thoroughgoing examination of the
economic policy mix in use in Europe during the last few

would disclose with respect to the fact that Europe's

ec~

gr~

goal .-

expansion is apparently now .lipping below the
for the Decade of Growth.

- 12 ,·rage and l'rice deicision.
While the United States has eisen to a growth rate of
4.7 percent over the past four quarters ending September 1965 ..
well above the 4.1 percent annual average lIet as a target for
the Decade of Growth in 1961 -- Europe has been struggling to
stay above the target rate, and currently appears to be
below it.

f.l~

An assessment by OECD economic analysts, made publio

this week by The OECD Observer. a publication of the

ors~tl.

for Economic Cooperation and Development, gave this .....ry of
the current picture:
"In terms of real output, the growth in Gro •• National
Product for Europe in 1965 looks as if it will be around 3.5
percent, with Britain, France and Italy lagging behind, aDd
Germany and most of the small industrialized countri•• except
Belgium showing gains well above the average.

In Japan the

- 11 -

This is the fact that, at the earliest stages J emphasis
was given to increasing our capacity to produce and to

keePHl

our productive efficiency on the rise and our costs down.
~t

In part, this was accomplished through tax reductions
spurred investment by making investment more profitable.

part also, the early and sustained effort to keep the rise of
ourput in step with the increase of demand -- and thereby avoid
~

boom-bust situation -- took the form of ataacks upon

unemployment and upon low productivity through increased
.lnvestment 1.n enlarged and more efficient capacity and in the
M~mpm;rer

Retra ining Program.

The final element of the mix vas also supplied early in
the expansion:

tn the first months of 1962 the Council of

Ec~mic Advlsers issued wage-price guideposts that r~ve
3ssisted both business and labor in arriving at non-in.flatioll

- 10 past 12 months.

Thus, compared with earlier U.

expansion. 1M

the perfonnance of other countries, the record remains very ....
Contributing to this near stability is the faet that labor
have moved within the bounds of productivity growth.

Indeed, . .

labor costs in manufacturing during the third quarter of 196' . .
a bit lower than at the start of this expansion. in early 1961.
These policies resulted in an eoonomio expansion that hal
so well balanced the growth of demand with the growth of

c.~~

to produce and the increase of productivity that we have had
a very long period of economic growth and improv
inflation.

2tt without

This unusual combination of results was _de pe.l1bl.

by one of the cri.ical -- but too little noted -- element. of
the policy mix that underlies the current economic espan.u..

- 9 resulting from a rigorous program for the control of rederal
ppendin~

and redue,ion of government costs at

~ery

possible
(!.,

Under the combined effects of economy and efficienJy in
ment, and increased Federal revenues resulting from the

,.~

econ~o

flm.;rerHg that followed upon personal, business and excise tax
reductions, President Johnson was able to cut the Federal dlf1dt
from an expected $11.9 billion in Fiscal 1964 to an actual $8.2
billion in that year, and to $ 3. ~ billion inFiscal 1965. d••pit.
tax redictions in those years that totalled $20 billion at next
year's levels of income.
In the initial four years of the U. S. expansion,
prices remained virtually stable, while consumer price.

who1'd~
~

slowly upward, at a rate of 1.2 percent a year, mainly due CO
selective increases in the costs of services.

In the la8t 12 -

,.;holesale prices advanced 2.3 percent -- but the larger part of
this increase reflected temporary factors affecting food and !d
products.

Industrial prices have riti4m only 1.3 pen-.t ewer II

- :3 -

to what was needed.
I would like to draw your attention to the character of
the policy mix that produced this sustained profit rise for
bu.~ness,

sustained income growth for individuals and sustained

economic growth and improvement for the nation:

it is the

result of a mix of policies designed to attack problemg of
inadequate growth and excessive unemployment, at the same
building in protection against inflation

tu.

encouraging incr.....

Ln capacity to produce and productive efficiency, while we
also moved toward equilibrium in our balance of payments.
To these developments in the private sector was joined
a j ud ic ious program of Federal outlays for the improvement of
the quality of American life, most particularly for the
eapansion and improvement of education, and the reduction of
Doverty, paid for in a substantial part out of savings

- 7 -

__ a drop in unemployment from 6.9 percent of the

f.-

/Itff-

labor force in early 1961 to 4., percent thi.!

/nOlt t(,

'aU,
"-

We ask all to join with us in defending this enormoua
strengthening of the economic base of our national fife bee.utl
it is not something that just happened -- it has happened
because public policy in the past few years has been such as
to reward private economic enterppise -- business and persoMl
with dramatic new incentives that have infused a new dynamic
drive into our economy-.

Let me mention the main elements of

this economic policy mix:
During the past four years tax policy has lifted from

personal and business lives the oppressive burden of wartUM
rates of Federal taxation and excises that were imposed partly
~-lith

the object of restraining investment and consumption and

that had

bee~

allowed to persist long after they were

contra~

- 6 five year mark in an economic expansion that is awesome in it,
proportions, unprecedented for its balance and stability,
~mpressive

and

for the distribution of its benefits over all

parts of the economy.

Let me point out for you tust a few of

the highlights of the vast national economic improvement that
our country has enjoyed since 1961:
-- a 35 percent rise in our total national output;
a 32 percent rtse in consumer spending;
;; i,
).\---

percent rise in business investment in

'"
plant and equipment;
-- a 39 percent rise in manufacturing production;
-- an 84 percent rise in corporate profits after taJllt
-- a 3? percent rise in personal income;
p.~,... (". ~" fc..1
-- GNP increases averaging better "'t:him 5 percent a ,..

in constant 19 5()do1lars;

- 5 pa t r 0 n 1.·Z1.·ng
. ,.

Europe'~-

recent economic experience, in the Fall

of 1961, had been startlingly different -- and better -- than
ours.

From 1953 through 1960, the

grm~th

rate of the European

member countries of DEeD averaged 4.8 percent a year.
as you are no doubt aware, did even better.

Japan.

The European

consumer was well on the way to a revolutionary change for
the better in his living standard.

The successful

develo~nt

of the Common Market gave Western Europe as a whole a sense of
prideful unity.

And there was an added boon for Europe --

quite contrary to the classical picture of surging demand and
risln~

prices bringing on a balance of payments deficit,

Europe's cup was running over with a surplus of dollars.
The United States, on the contrary, had both the lag at
home and the sag abroad.
But things are very different now.

We are nearing the

- 4 import competition.

At the same time, a series of balance of

payme8as deficits -- averaging almost $4 billion a year for
three years, had made the dollar vulnerable and threatened
international monetary system based upon it.

This meant that

we faced the problenF fif encouraging domestic demand without
worsening, indeed while improving, our balance of payment.
position.

That required us to make only limited use of

policy.
It was against this background of economic slack at

and balance of payments deficit abroad that we proposed a
Decade of Grmlth for the Atlantic Community countries at an
average annual rate of 4.1 percent increase -- nearly twice.tlll
';Ve had averaged since 1953!
It

scarcely surprising that our cables home

indica~

- 3 -

degree of interdependence among the developed and the less
developed countries.
Admittedly, in 1961 these doubts were not without
foundation.

From 1953 to 1960 the economic growth rate of
f/)

the United States had been

(

Ml-~~li:loM;'A~ercent

8nDUAl

pos~lr

average.

The nation was just emerging from the fourth

reces~ion

-- disturbed by the fact that each of the three

prior recessions had been followed by shorter and weaker recoverJ
and that the previous recession had produced the largest
peacetime budget deficit in our history.
intolerably high.

Unemployment was

Business investment in new plant and

equipment -- its coattails gripped by an outdated tax
~vas

far less then

~.,e

st~tud'

needed to generate more vigorous economic

growth and a stronger eompetitive position in world market •.
Even our mm home market was becoming 'increasingly open to

- 2 bBckin~,

should be a Decade of Growth.

I was looking over our

cables to Hashington from that Conference the other day, and
what came out strongly

w~s

the doubt of the Europeans, at

that time, that the United States could stir itself out of
the economic lethargy into which it had dropped in the 19508
and match the vigor of Europe's economic stride in the 19608.
Let me diverge for just

a moment at this early point to

make a necessary clarification.

All that we say here tonight

about the Atlantic Community -- and I am certain that you will
agree, even if the rapid sweep of history has already

some~t

outdated your organizational focus -- all that I am saying
about the international matrix of sound economic growth
anplies to the Pacific as well as to the Atlantic side of
the Organization for Economic Cooperation and Development.
And you Tvill see that in my view there is also an important

RSMARKS OF TrE HONORABLE HENlY H. FO\-lLER
AT THE AMERICAN CONFERENCE
ON mE ATLANTIC COMMUNITY AND ECONOMIC GROWTH,
CONVENED BY THE ATLANTIC COUNCIL
AT CROTONVILLE, NEW YORK, DECEMBER 17, 1965

Expansion and Interdependence: The Basic Conditions for
Pro~ress in Achieving Atlantic Community Economic Growth
I

wa~

present in Paris in the Fall of 1961 at the first

Ministerial meeting of the then new Organization for Economic
Cooperation and Deve1op. .nt -- it had just been created out
of the finished works of the Marshall Plan's Organization for
European Economic Cooperation.
I look back with nride to the fact that I was a member
of the United States delegation that startled the meeting by
oroposing that the industrialized nations of the Atlantic
Community -- Japan was not then, but is now, a member of OECD··
adopt a common goal of 50 percent economic growth during the
196()s.

The 19608, 't,!e proposed with President Kennedy's solid

TREASURY DEPARTMENT
Washington
OR RELEASE A.M. NEWSPAPERS
ONDAY, DECEMBER 13, 1965
REMARKS OF THE HONORABLE HENRY H. FOWLER
AT THE AMERICAN CONFERENCE
ON THE ATLANTIC COMMUNITY AND ECONOMIC GROWTH
CONVENED BY THE ATLANTIC COUNCIL
CROTONVILLE, NEW YORK, SUNDAY,
DECEMBER 12, 1965, 6:30 P.M., EST
EXPANSION AND INTERDEPENDENCE: THE BASIC CONDITIONS FOR PROGRESS
IN ACHIEVING ATLANTIC COMMUNITY ECONOMIC GROWTH
I was present in Paris in the Fall of 1961 at the first
inisterial meeting of the then new Organization for Economic
ooperation and Development -- it had just been created out of
he finished works of the Marshall Plan's Organization for
lropean Economic Cooperation.
I look back with pride to the fact that I was a member of
1e United States delegation that startled the meeting by proposing
1at the industrialized nations of the Atlantic Community -- Japan
~s not then, but is now, a member of OECD -- adopt a common goal
f 50 percent economic growth during the 1960s.
The 1960s, we proposed with President Kennedy's solid backing,
lould be a Decade of Growth. I was looking over our cables to
lshington from that Conference the other day, and what came out
:rongly was the doubt of the Europeans, at that time, that the
lited States could stir itself out of the economic lethargy
Ito which it had dropped in the 1950s and match the vigor of Europe's
:onomic stride in the 1960s.
Let me diverge for just a moment at this early point to make
necessary clarification. All that we say here tonight about
le Atlantic Community -- and I am certain that you will agree,
'en if the rapid sweep of history has already somewhat outdated
~r organizational focus -- all that I am saying about the
lternational matrix of sound economic growth applies to the
cific as well as to the Atlantic side of the Organ:iz ation for
onomic Cooperation and Development. And you will see that in
view there is also an important degree of interdependence
ong the developed and the less developed countries.
302

Admittedly, in 1961 these doubts ~J\]ere not without foundation.
From 1953 to 1960 the economic gl:owth rate of the United States
had been a poor 2.1.,. percent annual ave:tage. The nation was just
emerging from the fourth postwar recession ~- disturbed by the
fact that each of the three prior" recessions had been followed by
shorter and weaker recoveries, and that the previous recession
had produced the largest peacetime budget deficit in our history.
Unemployment was intolerably high. Business investment in new plant
and equipment -- its coattails gripped by an outdated tax
structure -- was far less then we needed to generate more vigorous
economic growth and 8. stronger competitive position in world
markets. Even our own home market '\JIJas becoming increasingly open
to import competition," At thE same time, a series of balance
of payments deficits -~ averagin8 almost $4 billion a year for
three years, had mBde the dollar vulnerable and threatened the
international moneta~y system based upon it. This meant that
we faced the problems of encouraging domestic demand without
worsening, indeed while improving, our balance of payments position.
That required us to make only limited use of monetary policy.
It was against this background of economic slack at home and
balance of payments deficit abroad that we proposed a Decade of
Growth for the Atlantic Community countries at an average annual
rate of 401 percent increase. -- nearly tvlJice what we had averaged
since 1953~
It is scarcely surprlSlng that our cables home indicated that
the response of some of our European friends was somewhat
patronizing. Europe's recent economic experience, in the Fall of
1961, had been startlingly different -- and better -- than ourso
From 1953 through 1960~ the growth rate of the European member
countries of OEeD averaged 4.8 percent a year. Japan, as you are
no doubt aware ~ d:Ld even better. The European consumer was well
on the way to a revolutionary change for the better in his living
standard. The successful development of the Common Market gave
Western Europe as a whole a sense of prideful unity. And there
was an added boon for Europe -- quite contrary to the classical
picture of surging demand and rising prices bringing on a balance
of payments deficit, Europeis cup was running over with a
surplus of dollars.
The United States, on the contrary, had both the lag at home
and the sag abroa.d.
But things are very different nOVil. iFJe are nearing the
five year mark in an economic expansion that is awesome in its
proportions, unprecedented for its b21ance and stability, and
impressive for the distribution of its benefits over all parts

- 3 of the economy.
Let me point out for you just a few of the
highlights of the vast national economic improvement that our
country has enjoyed since 1961:
a 35 percent rise in our total national output;
a 32 percent rise in consumer spending;
a 56 percent rise in business investment in plant
and equipment;
a 39 percent rise in manufacturing production;
an 84 percent rise in corporate profits after taxes;
a 32 percent rise in personal income;
GNP increases averaging precisely 5 percent a year
in constant 1958 dollars;
a drop in unemployment from 6.9 percent of the
labor force in early 1961 to 4.2 percent last month.
We ask all to join with us in defending this enormous
strengthening of the economic base of our national life because
it is not something that just happened -- it has happened
because public policy in the past few years has been such as to
reward private economic enterprise -- business and personal -with dramatic new incentives that have infused a new dynamic
drive into our economy. Let me mention the main elements of this
economic policy mix:
During the past four years tax policy has lifted from
personal and business lives the oppressive burden of wartime
rates of Federal taxation and excises that were imposed partly
with the object of restraining investment and consumption and
that had been allowed to persist long after they were contrary to
what was needed.
I would like to draw your attention to the character of the
policy mix that produced this sustained profit rise for business,
sustained income growth for individuals and sustained economic
growth and improvement for the nation:
it is the result of a
mix of policies designed to attack problems of inadequate growth
and excessive unemployment, at the same time building in
protection against inflation by encouraging increases in capacity
to produce and productive efficiency, while we also moved toward
equilibrium in our balance of payments.

4 -

To these developments in the private sector was joined a
judicious program of Federal outlays for the improvement of the
quality of American life, most particularly for the expansion and
improvement of education, and the reduction of poverty, paid for
in a substantial part out of savings resulting from a rigorous
program for the control of Federal spending and reduction of
government costs at every possible point.
Under the combined effects of economy and efficiency in government, and increased Federal revenues resulting from the economic
flowering that followed upon personal, business and excise tax
reductions, President Johnson was able to cut the Federal deficit
from an expected $11.9 billion in Fiscal 1964 to an actual $8.2
billion that year, and to $3.4 billion in Fiscal 1965, despite tax
reductions in those years that totalled $20 billion at next year's
levels of income.
In the initial four years of the U. S. expansion, wholesale
prices remained virtually stable, while consumer prices moved
slowly upward, at a rate of 1.2 percent a year, mainly due to
selective increases in the costs of services.
In the last 12 months,
wholesale prices advanced 2.3 percent -- but the larger part of
this increase reflected temporary factors affecting food and farm
prodcuts.
Industrial prices have risen only 1.3 percent over the
past 12 months.
Thus, compared with earlier U. S. expansions and
the performance of other countries, the record remains very good.
Contributing to this near stability is the fact that labor costs
have moved within the bounds of productivity growth.
Indeed, unit
labor costs in manufacturing during the third quarter of 1965 were
a bit lower than at the start of this expansion, in early 1961.
These policies resulted in an economic expansion that has so
well balanced the growth of demand with the growth of capacity
to produce and the increase of productivity that we have had
a very long period of economic growth and improvement without
inflation.
This unusual combination of results was made possible
by one of the critical -- but too little noted -- elements of the
policy mix that underlies the current economic expansion.
This is the fact that, at the earliest stages, emphasis
was given to increasing our capacity to produce and to keeping
our productive efficiency on the rise and our costs down.
In part, this was accomplished through tax reductions that
Spurred investment by making investment more profitable.
In
part also, the early and sustained effort to keep the rise of
output in step with the increase of demand -- and thereby avoid
a boom-bust situation -- took the form of attacks upon

- 5 -

unemployment and upon low productivity through increased
investment in enlarged and more efficient capacity and in the
Manpower Retraining Program.
The final element of the mix was also supplied early in the
expansion: in the first months of 1962 the Council of Economic
Advisers issued wage-price guideposts that have assisted both
business and labor in arriving at non-inflationary wage and price
decision.
While the United States has risen to a growth rate of 4.7
percent over the past four quarters ending September 1965 __
well above the 4.1 percent annual average set as a target for
the Decade of Growth in 1961 -- Europe has been struggling to
stayroove the target rate, and currently appears to be falling
below it. An assessment by OEeD economic analysts, made public
this week bylhe OECD Observer, a publication of the Organization
for Economic Cooperation and Development, gave this summary of the
current picture:
"In terms of real output, the growth in Gross National
Product for Europe in 1965 looks as if it will be around 3.5
percent, with Britain, France and Italy lagging behind, and
Germany and most of the small industrialized countries except
Belgium showing gains well above the average. In Japan the
outlook has deteriorated and there is unlikely to be any
significant rise. However, in the United States the growth of
GNP seems likely to be nearer 5 percent than the 4.5 percent
expected earlier. Bigger gains are also expected in Canada.
"There now may be no further slowing down in the aggregate
growth rate in 1966. On present trends the year-to-year gain
for the OECD area as a whole may be in the 4 to 4.5 percent range.
But big differences between different countries, and in particular
the divergence of trend between North America and the rest of the
area, may well continue."
I do not know what a thoroughgoing examination of the
economic policy mix in use in Europe during the last few years
would disclose with respect to the fact that Europe's economic
expansion is apparently now slipping below the growth goal set
for the Decade of Growth.
I do not know if such an examination would indicate that
a different policy mix -- one, perhaps, placing less reliance
on monetary restraint and more on the use of fiscal policy to
balance supply and demand -- would have permitted Europe to achieve
the price stability it has sought but has not achieved over the

- 6 past several years without sacrifice of growth potential. And of
course it should be kept in mind that -- as the GECD study just cited
indicates -- experience has varied greatly among the various individua
European countries.
It is not appropriate for me to attempt such an examination at
this time and place. That is the function of the multilateral
surveillance exercises of the GECD committees. What I would like
to emphasize is that whatever the results have been in Europe in
recent times, they must be attributed to the internal economic
policies of the countries concerned, and they are not results -as has sometimes been alleged, chiefly here in the United States -of our efforts to restrain dollar outflows so as to eliminate our
balance of payments deficits. I set this forth in testimony to the
Balance of Payments Subcommittee of the Senate Committee on Banking
and Currency in August, in which I said:
"Some concern has been expressed that our program generally
might adversely affect liquidity in the international payments
system, tend to impede growth of economies abroad, and restrain
the desirable expansion of international trade.
"None of this concern has come from the countries concerned.
Most of the concern about what we are doing to other countries
seems to be here in the United States.
HIt is sometimes suggested that the program has seriously
aggravated more directly the economic positions of some countries,
particularly the United Kingdom, Canada and Japan. Such concerns
do not seem to me to be justified by the facts.
"In most of the industrial countries -- more particularly
those in Western Europe -- economic expansion continues and the
pressure of internal demand remains strong. These governments,
relying on restrictive monetary policies to avoid inflation,
which I might say were inaugurated long before the President's
balance of payments program, some in 1963 and some in 1964,
have welcomed our balance of payments measures for the support
given to domestic restrai~ abroad. With respect to these
countries -- broadly characterized by strong reserve positions
and brisk domestic economic activity amidst varying degrees of
inflationary pressure -- there is no basis for any conclusion
except that the tools and resources are at hand to strengthen
domestic demand, when and if they consider it appropriate to do
so."
We submitted to this Subcommittee, chaired by Senator Muskie,
a country by country analysis, and an analysis of the pr~visions
in our balance of payments program to protect the econom~c progress
of the less dev~loped cOUTtries, from which we concluded that our
program;

- 7 " .... has not damaged the economies of the advanced
countries, or dimmed the prospect for flourishing world
trade (and that) direct investment in the less developed
countries is in no way discouraged."
I would like to turn now to a brief examination of some
areas for joint action within the OECD whereby we might hasten
the prospects of a sound, strongly growing and interdependent
Free World economy, beneficial to each because the benefits of
each are the source of gains for all.
SOME AREAS FOR IMPROVEMENT IN THE INTERESTS OF SOUND AND
RAPID FREE WORLD ECONOMIC GROWTH
The Need for Freer and More Effective Capital Markets Abroad
One of the first and most fruitful improvements that could be
envisioned in the workings of the Free World economy as a whole
would result from the creation in Europe and in other advanced
countries of a capital market with something approaching the
freedom, flexibility, variety of options for the use of funds, and
variety of institutions for their placement that exists in the
United States.
The inadequacies, the obstacles and the needs existing in
capital markets abroad have been spelled out on a number of
occasions over recent years. My predecessor Secretary Dillon
called attention to this area in a speech before the American
Bankers Association meeting in Rome early in 1962 and
reemphasized it at the 13th Annual MDnetary Conference of the
ABA at Princeton this past March. The Treasury submitted in
December 1963 a detailed description and analysis of certain
European capital markets to the Joint Economic Committee of the
Congress as part of the record of hearings held by the Joint
Committee in July 1963. In April 1964, a Task Force which I
had the honor to chair submitted for the President a report on
Promoting Increased Foreign Investment in U. S. Corporate
Securities and Inreased Foreign Financing for U. S. Corporations
Operating Abroad. This also called attention to the obstacles,
inadequacies and needs in foreign capital markets. I would draw
attention specifically to recommendations 36, 37, 38 and 39 of
tha t report.
In his March, 1965 speech Secretary Dillon made a number
of observations that I will draw upon in some of the following
passages:

- 8 -

With rate exceptions foreign financial markets lack a
fluid and large short term money market, and long term bond
markets are even more restricted. This means that for the most
part there is simply no means by which private borrowers
and lenders, and even to a considerable extent, governments,
can readily raise -- or dispose of -- large sums of money,
quickly, in open markets. They are forced, instead, to move
with their demands through the bottlenecks of a few big
institutions dealing with customers on a personalized basis.
These institutionalized markets are so insulated from the short
term money markets that they are relatively unresponsive to the
actions of monetary authorities.
This deficiency can go so far as to provide us with the
spectacle of one European government borrowing abroad to
cover a budgetary deficit when it had a balance of payments
surplus that it was converting to gold at the expense of
United States reserves. And we have also in recent times seen
another government send representatives of its nationalized
industries, and of government agencies, to borrow in the
United States because they could not agree on how to raise
needed funds at home, although -- again in the case of this
country -- the borrowing country had a balance of payments surplus
that it was converting to gold.
It was this structural imbalance in foreign money markets
that forced us in 1963 to apply an Interest Equalization Tax
on long term portfolio credit to foreigners in developed
countries. And it is this structural imbalance that makes it
clear that whatever domestic reasons may justify them it
would be folly for us to try to staunch the flow of United
States funds abroad by restrictive monetary policies aimed at
raising interest rates in this country to the structured
high levels of the countries of Western Europe, and of
Japan. Foreign borrowers were not daunted by two rises in the
United States discount rate, in July 1963 and in November 1964.
Before the latest increase in the Reserve System's discount
rate a few days ago the gap was as big, if not bigger, than
it was previous to the 1963 rise in the U. S. discount rate.
And it appears from current reports that rises in interest
rates in Western Europe will rapidly wipe out any temporary
narrowing of the gap which might have resulted from the
recent action of the Federal Reserve Board. Long before we
could level rates here and abroad through this process, we
would drive this country into a recession that would reduce
the attractiveness of investment here and increase the attractiveness
of investment abroad, aggravating rather than improving our
balance of payments position.

- 9 But action the other way around could help, and we should
be gratified that some progress is being made.
The various efforts publicly made that I referred to
earlier were paralleled by efforts in Working Party 3 of the
DEeD to get that organization to grip the problem and give it
long deserved attention. We were gratified when the OECD
Ministers at their annual meeting in November 1964 agreed
that the organization should undertake to study the ways in
which the OEeD could assist countries in increasing the
efficiency of their capital markets, and of reducing
restrictions. Since then the problem has been under review by three
groups of experts set up by the Committee on Invisibles. This
Committee is to receive the reports early next year on sources
of savings, the channels for their transfer into productive
investment and the use of savings, among the various
countries.
This is progress -- but at a disappointingly slow pace.
Every effort must be made to step up the pace and to insure
that appropriate recommendations are given attention at high
levels of policy decisions so that they are translated into
action as promptly as possible. Only then can we move, as
we should, boldly into a Free World where capital can flow
freely in international markets attuned to the needs of today
and tomorrow. Those needs are both urgent and deserving of
attention.
Until there are great improvements in capit8.1 markets
abroad, the United States will be hampered in its efforts
to bring its foreign payments into sustainable equilibrium
without some interferences with the free flow of funds,
While U. S. private internalmoney markets are efficient and
relatively free of controls, and European markets are
controlled or inefficient ~= or both ~= there will be -lacking conscious restra"int on our part -~ a strong tendency
for the rigidities and insensitivities of Europeis capital
markets to impel excessive resort to U. S. capital markets
by both developed and less developed countries.

- 10 Reduction and Removal of Tax Barriers to Trade and Investment
A simple tax law can nullify the most liberal trade and
investment policy, and simple tax laws often do so. Taxes are one
of the major non-tariff barriers to increasing the economically
desirable exchange among nations of their goods and services.
United States taxation of foreign investors is a major restraint
on the flow of foreign investment funds to this country, and that
flow needs to be increased to help right our balance of payments.
A Free World looking to the growth of international trade and
of international investment as major factors promoting sound economic
srowth, and the improvement of living standards, needs to sweep
lway the tax barriers to trade and investment.
As I have already indicated, I was privileged to head a Task
Porce established by President Kennedy as part of his program for
)ringing our balance of payments deficits to an end, and continued
)y president Johnson. Our Task Force was charged with developing
)rograms to promote increased foreign investment in United States
~orporate securities and increased foreign financing for United
,tates corporations operating abroad. A major part of our
~ecornrnendations dealt with means for simplifying, reducing or
~liminating taxation, here and abroad, standing in the way of the
levelopment of a stronger and deeper Free World interdependent
~conomy.
As examples of the type of action needed to clear away the
larriers in this area let me cite our main conclusions.
The United States government should proceed unilaterally to
"educe or eliminate a number of tax obstacles to investment in the
mited States. We should not wait upon the negotiation of reciprocal
~ction by other countries on their impediments to the sale of dollar
ecurities abroad because this is a slow process and we need to get
:he balance of payments benefits quickly. We accompanied this with
series of seven recommendations for specific tax actions aimed at
~king foreign investment in United States corporate securities easier
nd more profitable.
Many of the improvements our Task Force recommended are embodied
n new income tax treaties the United States is now negotiating in
he course of an extensive revision of its income tax agreements with
eveloped countries, prompted by recent changes in the corporate tax
ystems of the European countries and the adoption in 1963 by the
ECD of a Model Income Tax Convention. The pattern emerging from
1ese negotiations provides a widened flexibility to international
rade and investment activities between the United States and Europe.

- 11 -

The elimination of all sorts of non-tariff barriers to trade ,
including elimination of tariffs disguised as taxes, is one of the
major objectives of United States negotiators in the current, Kennedy
Round, talks with our trade partners for world trade liberalization.
The Reduction of Barriers to the Freer Flow of International Trade
This Kennedy Round of trade talks now going on at Geneva -so called because the talks were made possible by new tariff reduction
authority granted by the Congress to the President at President
Kennedy's request -- is the boldest approach to multilateral
liberalization of barriers to international trade which the United
States has ever undertaken. We are firmly committed to bring this
historic effort to a successful conclusion.
Thus far in the negotiations we have exchanged offers for an
unprecedented 50 percent reduction in tariffs on a broad range of
industrial products. In agricultural products, initial offers were
exchanged in September of this year. The European Economic Community
was unable to join in this exchange, but the other participants
maintained the previously agreed schedule with the understanding that
the EEC would make its offers as soon as practicable.
One of our objectives in the Kennedy Round is to maXlmlze trade
benefits to the exports of the less developed countries, and we are
now actively engaged in talks for this purpose with more than 20
developing nations. I would like to state that there are wide
benefits for such countries in the offers which the United States
has put down.
In addition, we are conscious of the danger that the effect of
significant tariff reductions could be impaired or nullified by
non-tariff barriers. Such trade barriers, as I stated above, are
therefore an important sector of the negotiations.
If we hope to secure reduction of barriers to our exports,
we must be prepared to liberalize U. S. practices which our trading
partners view as barriers to their exports. Mutual concessions are
the key to the success of the Kennedy Round. And the success of the
Kennedy Round is a matter of highest importance to the continued
economic strength of the Free World.
At a time when centralized governmental planning and direction
of economic development is practised even in some of the industrialized
nations of the West, the winds of competition from international trade
become particularly important. In these circumstances, competitive
international trade is rapidly becoming not only the best, but in
a growing number of instances, it is almost the only reliable manner
Jf testing the costs of labor and capital, of measuring relative

- 12 ~fficiency,

and of indicating where investment is needed, where it
ls already sufficient or in surplus, and what movements are justified
In prices and wages.
Should the Kennedy Round aim of greatly reducing tariffs and
)ther impediments to international trade competition fall victim to
=conomic nationalism or regionalism, the Free World stands in danger
)f growing economic distortion and inefficiency perpetuated by an
lnward looking illusion that all is well. In these conditions, some
~conomic growth can, of course continue.
But judged by the standards
)f the rapidity of economic growth, and the stability and the wide;pread real benefits to be gained from growth taking place under
~ompetitive conditions, the advances under restrictive conditions
viII be niggling, the benefits will tend to be more illusory than
~eal due to disguised inflation, and, worst of all, the Free World
vi11 tend to pull apart into a congeries of closed units huddled up
~ach with its own protective system, each unaware that it is lagging
Ear behind its potential because it permits no comparisons.
If there are any here who take this as a flight of the imagination,
invite them to take a look at the nations -- each imprisoned with
~ts own central plan -- of the marxist persuasion, where the abolition
)f competition in all of its creative forms has worked precisely
iuch a miserable result as I have just been describing. It can
~ppen to the Free World, and it is not even necessary to be
~rxist -- the immense benefits of market competition can be lost
ust as easily without doctrine as with its guidance.
'he Need for New International Monetary Arrangements
The Free World can help to assure continuing economic growth
Iy reaching decisions at an early date that will provide for
reating a supplementary form of international reserve asset, to
nsure that there can be an adequate increase in world monetary
'eserves in the future.
World monetary reserves increased during the six years, 1958 to
964, by approximately $17 billion, and nearly $13 billion of
his amount was in the form of dollar reserves. Such a large
ddition to the official dollar holdings of foreign countries was
ade possible by our large balance of payments deficits.
As our balance of payments moves into equilibrium, we will no
onger supply the rest of the world with large annual additions to
eserve holdings. Without an alternative source for growth in world
eserves, the pace of the world's economic growth in the future
Ju1d be endangered.

- 13 Here again, as with international trade, unless we commit
ourselves to growing interdependence -- and look to interdependence
to insure our growth -- there are potential dangers of Free World
fragmentation. If the limited supplies of new gold production are
not supplemented by arrangements to create additional reserve assets,
countries finding that their reserves are not increasing -- while
the economic expectations of their people do increase -- may drift,
consciously or unconsciously, into restrictive domestic and external
policies.
To provide for continued economic growth in the Atlantic Community
we must find the feasible means of assuring that reserves or credits
will be available to deficit countries in amounts and on terms that
are consistent with the realities of the adjustment process in a
world of fixed parities where sharp deflation or "stop-go" patterns
of economic growth are not acceptable alternatives.
There is no simple statistical test for the adequacy of reserves.
However, it is worth noting that even the very large aggregate
additions to reserves of foreign countries, outside the United States,
during the past six years, did not avoid a moderate decline in the
ratio of reserves to the annual value of imports. Reserves stood
at 41 percent of trade value in 1958 but fell to 38 percent in 1964.
Representatives of what is known as the Group of Ten -- ten
leading industrial nations of the West -- are currently seeking a
basis of agreement on improvements needed in the international
monetary system, including arrangements for the future creation of
reserve assets and credits as and when needed. This work is going
forward on an accelerated schedule, and a report on the progress
made has been requested by the Ministers in the Spring of 1966. When
these major countries shall have found a basis for agreement, I have
urged -- and my colleagues in the Group have agreed -- that there
should be a second stage, to permit broader consideration of
questions that affect the world economy as a whole, including the
developing countries as well as the advanced countries.
President Johnson gave the Annual Meeting of the International
Monetary Fund in October, a thumbnail assessment of this situation
that is highly accurate for all its brevity. He said:
"This is not a matter of an immediate crisis, but it is a
matter on which we must begin to act -- now. We must begin now to
provide machinery for the creation of additional reserves. Gold
alone will not be enough to support the healthy growth the entire
world demands."

- 14 The Interdependence of the Developed and Less Developed Countries
The interdependence of the world in which we live is not a
simple two way street running among the developed nations. There are
many side streets, and they lead off from our well lit world glowing
with promise into dark precincts where poverty is the rule. The
developed countries are not independent from the less developed
world because, in the first place, the less developed world is part
Jf mankind, and so long as part of mankind is sick, we cannot count
)urselves completely well, or safe from the same sickness.
We are economically interdependent with this world because it
)rovides us with most of our raw materials, and because, as its
narkets grow, it will increasingly be an outlet for our ever
Lncreasing ability to produce goods and services.
And we are interdependent with this world because we want it to
open for the development of the ways of freedom that have made
1S strong and that offer the best hope for a future world strongly knit
:ogether, in peace, by shared economic and social progress.

~emain

But it is not enough simply to realize that we have compelling
'easons for assisting the less developed nations toward a better life,
o succeed in helping them.
For one thing, the task is so gigantic that we need a much
reater commitment to the sharing of the task among the developed
ations than we have had, if we can hope to make visible progress
ith it.
There have been many estimates of what is needed to support
dequate growth in the developing countries.
In 1964 some $6 billion
Q net disbursements of official aid went from the industrial to the
=veloping countries and the flow of private long term finance added
lother $2.9 billion. What of the future?
The annual Report of the World Bank gives a staff estimate
lat Some $3 to $4 billion a year more than present flows of
~velopment finance could be effectively used.
I am not going to
.ve or endorse any specific estimates, but the magnitude of the
.sk is, to say the least impressive.
So also is the magnitude of
:ternal debt problems. From $10 billion in 1956, outstanding
ternational debt of developing countries reached an estimated
3 billion. The amount of foreign exchange needed annually to
rvice this debt rose even faster -- from $800 million to $3.5
Ilion.
It can be expected to rise even more rapidly in the future.

- 15 I believe that one of the major advances in international
cooperation in development assistance is to be found in exploitation
of one of the facets of the international monetary situation we
have just been discussing.
I noted that there has been a vast outflow
of dollars in recent years, and that these dollars that have lodged
abroad represent our balance of payments deficits.
To a considerable extent, they show up in the accounts of other
countries as balance of payments surpluses.
I repeat now what we have suggested before:
one of the major
elements in a long term solution to the world payments problems lies
in finding better means of placing balance of payments surpluses back
into circulation. One of these better usages of payments surpluses,
I suggest, would be found in increased commitments by surplus
countries to development assistance.
There are many concrete channels for increased cooperation.
The International Development Association, for example, was brought
into being to meet some of the urgent needs I have described. On a
multilateral level, it mobilizes resources from the developed
countries to less developed and does so on the kind of easy repayment
terms that makes sense in providing means for development consistent
with the amounting burden of debt repayments by the less developed
countries. We have done, and hope to continue to do, our part in
this worthwhile, sound affiliate of the World Bank. We look for
others to share more in this endeavor and we are willing to consider
doing more provided that the burden sharing by others is forthcoming.
In the light of the realities of international finance, ways
and procedures should be found to reflect the willingness of the
developed countries to shoulder these larger co~nitments, subject to
the condition that when the time to fulfill them arrives, the
expanded obligations need not be performed by those developed
countries in serious balance of payments difficulties. This type of
arrangement, looking toward the acceptance of increased development
aid responsibilities by surplus countries, makes sense from both
international monetary and development standpoints.
There are other ways -- bilateral and through the regional
financial institutions -- in which needs can be met. Not one alone,
)r two -- but all those in a position should see how best to
~espond to the need and to share realistically in the response.
One of these responsibilities, and one, I may add that is
lot at present being adequately shared by the advanced countries of
[estern Europe, is presented by the Asian Development Bank. In
:anila on December 4, more than 20 Asian, American and European

- 16 founding nations signed the new Bank's Charter, but left the books
open until January 31 for other countries to become founding members,
and for those who have already signed to increase their subscriptions
so as to bring the capital of the Bank up to the full authorized
figure of $1 ~illion.
The Asian nations have accepted responsibility for $650 million
of the authorized capital, and are very near to that mark. Of this,
Japan has pledged $200 million. Of the remaining $350 million,
the United States has accepted responsibility for $200 million and
pledges have been made by Germany, Canada, the Netherlands, Italy,
the United Kingdom, Belgium and Denmark. However, these non-regional
pledges are not sufficient to fill out the $1 billion authorized
capital needed to launch this highly important new venture in EastWest interdependence with the funds it should have to start its work.
In sending the United States delegation to Manila to sign the
Charter of the Asian Development Bank, President Johnson said:
"I regard the organization of this great new institution as
one of the most hopeful events of our times because the Asian
Development Bank has been put together by Asians, and because they
themselves are contributing the greater part of its capital and will
direct its lending for development in Asia.
"Even so, I should note that the problems of Asia are of an
order and a diversity requiring the widest possible participation
in their solution by the economically better developed nations.
Consequently, it is my hope that the industrialized nations that
have not yet signified their support of the Asian Development Bank
will do so, and that other nations will carefully assess the
adequacy of their capital subscriptions."
I think that you will agree with me when I say that it is not
too much to expect that this hope will be fulfilled.
A Valuable Public Agent for Private Economic Growth in the Atlantic
Community -- the OECD
A good deal has been said in my remarks about the Organization
for Economic Cooperation and Development. What has been said reflects
the fact that this Organization fills an essential spot, and does
vital work, in the Atlantic Community and the Free World.
I think the OECD's work -- and its even greater potential as
we come ever closer to grips with the problems and possibilities of
interdependent Atlantic Communtiy and Free World development -- are

- 17 so important that we should be certain that it is as capable as we
can make it.
To this end, I am wondering if the time may not have
come for the member nations to take a new look at OECD , after the
passage of nearly five years, with the objective of making any
institutional changes that such an examination might suggest, and
also with the objective of giving the OECD new working instructions
fully in keeping with conditions and opportunities as they are now,
and as they seem to be developing.
A Valuable Private Agent of Interdependent Economic Development:
the Multinational Company
Let me close now by getting down to the working force that has
to accomplish most of the international interdependent economic
development -- among developed as well as among less developed countrie~
This is the multinational company.
If we place some restraints upon the dollar outflow of United
States multinational companies now, it is only because it is temporarily
necessary to do so in order that they may continue to function in a
safe and healthy world environment. Unless the dollar remains sound -and it cannot do so if great surplus pools of dollars develop around
the world as the result of chronic United States payments deficits -unless the dollar remains strong, American corporations cannot remain
strong. And unless we continue with the economic and military
assistance around the world that creates a better environment for all
of us to live and work and for private institutions to flourish,
the investments of our multinational companies cannot be regarded as
sound enterprises.
So the fact of life is, that the multinational
company, valuable as its contribution is, must be willing to moderate
its activities on a temporary basis sufficiently to help pay the
costs of maintaining a safe and sound world.
Today, we have all corne to a far greater appreciation of the
importance of the private sector in our nation's role as a leader in
world affairs -- especially of the importance of our multinational
companies.
It is difficult to overstate their importance to continued
growth in the Free World economy -- particularly among the less
developed nations.
The expansion of international trade, the freedom of money to
flow across national boundaries, the welcome extended to foreign
business units, the stimulating effect of broadened competition,
and the spread of technical and organizational knowledge -- these
hallmarks of multinational business have helped to bring an expanding,
mmE integrated and efficient structure to the West since World
War II.

- 18 And there is no doubt that, given these same conditions, plus
some reasonable assurance against state confiscation, state
competition and discrimination against foreign enterprise, the
multinational corporations can make significant contributions
to the emergence of viable and free economic societies in the
less developed countries.
But certain facts must be faced.
In many of the less
developed countries, the rising tide of nationalism mixed with
state intervention or discrimination in varying degrees has created
an uncongenial atmosphere for multinational private business.
Indeed, the same trend is evident in some of the developed countries
where multinational companies have become well established.
So today -- with multinational business at an all-time peak,
and the multinational corporations of the developed countries
who are members of the Organization for Economic Cooperation and
Development possessed of the greatest potential for international
economic development in history -- the dangers and opportunities
match each other in equal challenge.
I think this brings us to a good parting point.
We are interdependent, as countries, as developed and less
developed worlds, and as public and private sectors.
If we have learned anything about the solution of economic
problems, one of the great lessons is that lasting progress arises
out of expanded economic resources.
What we need for the development of a stronger Free World -including,at the very heart, a stronger Atlantic Community -- is
to put these lessons together. Let us develop our trade and our
investment policies, public and private, in ways that permit
the maximum sound economic expansion, as a growing pool of
economic resources for the use of each of us for the benefit of all
of us.
And let us, in realization of our interdependence, continue
that development of international cooperation and collaboration
that has become the hallmark of the Free World in the last few
decades, to the end that vle bind ourselves ever more firmly into
a matrix of peaceful progress and development, open to an
ever widening membership of countries willing to believe
that their maximum individual benefits will be found in the
maximum common gain.
000

- :3 ~x*,~mJ'3' dl ':

sale or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt

all taxation now or hereafter imposed on the principal or interest thereof by any State
~r

or any of the possessions of the United States, or by any local taxing authority.

purposes of taxation the amount of discount at which Treasury bills are originally sold
by th~ United States is considered to be interest.

Under Sections 454 (b) and 1221 (5)

of the Internal Revenue Code of 1954 the amount of discount at which bills issued here.
under are sold is not considered to accrue until such bills are sold, redeemed or otMr
wise disposed of, and such bills are excluded from consideration as capital assets.
Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include 1n his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent purchase, and the

&I!lOUII

actually received either upon sale or redemption at maturity during the taxable year
for which the return is made, as ordinary gain or 10s8.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe
the terms of the Treasury bills and govern the condItions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies of

- 2 -

printed forms and forwarded in the special envelopes which wlll be supplied by Feders
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pro.
vided the names of the customers are set forth in such tenders.

others than

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banke and trust companies
and from responsible and recognized dealers in investment securities.

Tenders fna

others must be accompanied by payment of 2 percent of the face amount of Treasury bU
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately af'ter the closing hour, tenders will be opened at the Federal Resern
Banks and Branches, following which public anouncement will be made by the Treasury
Department of the amount and price range of accepted bide.
will be advised of the acceptance or rejection thereof.

Those Bubmi tting tenders

The Secretary of the Treasur,

expressly reserves the right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final.

Subject to these

reBe~'

tions, noncompetitive tenders for each iSBue for $200,000 or leBs without stated
price from anyone bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the Federal
Reserve Bank on

December 23, 1965

kID

, in cash or other immediately available ~

or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

December 23, 1965

• Cash

ffii

Cash adjustments will be made for

differences between the par value of maturing bills accepted in exchange and the 1eBO
price of the new bills,
The income derived from Treasury bills, whether interest or gain from the 8a~o
other disposition of the bills, does not have any exemption, as Buch, and loss frCII~

TREASURY DEPARTMENT

Washington
roR IMMEDIATE RELEASE,

The Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount of $ 2,200,000,000 , or thereabouts, tor

cash and in exchange for Treasury bills maturing December 23 J 1965 , in the amount

of $ 2 !202~OOO , as follows:

91 -day bills (to maturity date) to be issued December 23, 1965

in the amount of $1,200,000,000 ,or thereabouts, represent-

XWX

ing an additional amount of bills dated _S_e_p_t_em_b_e...r"='"T2_3_,_19_6_5_,

XNtl

and to mature March 24, 1966

, originally issued in the

amount of $1,000,491,000 , the additional and original bills

C&X):
to be freely interchangeable.
182 -day bills, for $ 1,000,000,000

, or thereabouts, to be dated

X(QIi)5C

December 23, 1965 1 and to mature June 23, 1966
~
0Cd
The bills of both series will be issued on a discount basis under competitiw
and noncompetitive bidding as hereinafter provided, and at maturity their face
will be payable without interest.

They will,be issued in bearer form only, and 1n

Friday, December 17, 1965

• Tendel

(tDl
will not be received at the Treasury Department, Washington.

Each tender must be

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three decimSls,
e. g., 99.925.

Fractions may not be used.

It 1s urged that tenders be made ont~

TREASURY r:EPARTMENT

December 11.

]96~

[MMEDIATE RELEASE
TREASURY'S lvEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
~,200,OOO,OOO, or thereabouts, for cash and in exchange for
Treasury bills maturing December 23, 1965,in the amount of
~,202,105,OOO,' as follows:
91-day bills (to maturity date) to be issued December 23. 1965
in the amount of $1 ,2~O, 000, 000, or thereabouts, representing an
additional amount of bills dated September 23, 1965~nd to
mature March 24, 1966,
originally issued in the amount of
$ 1,OOO,491,OOO,the additional and original bills to be freely
interchangeable.
182 -day bills, for $ 1,010, noo. ono, or thereabouts, to be dated
December 23, 19()5,and to mature June 23, 1966.
The bills of both series will be issued on a discount basiS under
competitive and noncompetitive bidding as hereinafter f.r.Y.~ded) and at
maturity their face amount will be payable without inL2rest. They
\11111 be is sued in beare r form only, and in dE'n:::~lnations of $1,000,
$5,000, $10,000, $50,000,
$100,000, $500,000 and $1,000,000
(maturi ty value).
Tende rs wi 11 be rece i ved at !1'ederal Reserve Banks and Beane iles
one-thirty p.m., Eastern Standar~
time, Friday, December 17, 1965.
Tenders will not bE":.
received at the Treasury De~artment, Washington. Each ten,. [' must
)e for an even multiple of $1,000, and in the case of competitive
~enders the price offered must be expressed on the baSis ~f 100,
~ith not more than three decimals, e. g., 99.~25.
Fractions may not
)e used. It is urged that tenders be made on the printed forms and
'orwarded in the special envelopes which will be supplied by Federal
~eserve Banks or Branches on application therefor.

JP to the closing hOJr,

Banking institutions generally may submit tenders for account of
ustomers provided the names of the customers are set forth ~.n sllch
enders. Others than banking institutions will not be permitted to
ubmit tenders except for their own account. 'renders will be received
lthout deposit from incorporated banks and trust companies and from
esponsible and recognized dealers in investment securities. Tenders
rom others must be accompanied by payment of 2 percent of the face
mount of Treasury bills applied for, unless the tenders are
~companied by an express guaranty of payment by an incorporated bank
~ trust company.
F-303

- 2 Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted b~ds. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on December 21, 1965. in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing December 23, 1965. Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount" of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained fi~
any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT

lELEASE 6: 30 P.M.,
q, December 13, 1965.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two series of Treasury
3, one series to be an additional issue of the bills dated September 16 1965, and the
t
~ series to be dated December 16, 1965, which were offered on December tI, were opened
le Federal Reserve Banks on December 13.
Tenders were invited for $1 200,OOOt~, or
~ahouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 1~2-~ b s.
l.etails of the two series are as follows:
~

OF ACCEPTED
TITIVE BIDS:

High
Low

Average

91-day Treasury bills
:
maturin~ March 17 l. 1966
Approx. Equiv.
Price
Annual Rate
•
98.898 Y
4.360
98.884
4.415
:
98.890
4.391 Y

··
·

182-day Treasury bills
maturing June 16 J 1966
Approx. Equiv.
Annual Rate
Price
97.716 £/
4.518%
97 .685
4.579;~
97.698
4.553%

Excepting 2 tenders totaling $327,000; bl Excepting 3 tenders totaling $3,350,000
percent of the amount of 91-day bills btd for at tne low price was accepted
percent of the amount of 182-day bills bid for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

trict
ton
'York
lade1phia
veland

!pplied For
$
23,201,000
1,396,982,000
31,092,000
30,403,000
16,918,000
46,250,000
275,823,000
55,323,000
19,514,000
26,295,000
24,862,000
111,838,000

Accepted
:
Applied For
Accepted
$
23,201,000:
$
20,041,000 $
20,041,000
721,447,000 :
1,227,527,000
623,527,000
21,092,000 :
20,034,000
14,034,000
30,403,000 :
53,953,000
48,953,000
~
16,918,000 :
5,159,000
5,159,000
anta
38,700,000 I
32,229,000
32,029,000
cago
140,638,000 :
248,112,000
113,112,000
48,473,000 I
28,041,000
25,541,000
Louis
neapol1a
19,514,000 :
11,676,000
11,676,000
~:: City
25,295,000 I
15,385,000
15,185,000
12,716,000
9,716,000
16,862,000 I
Francisco
98,338,000 :
109,680,000
81,18~000
TOTALS
$2,~8~SOl,OOO
$1,200,881,000
,H, 784,.553,000
$1,000,153,000 ~
eludes $279,614,000 noncompetitive tenders accepted at the average price of 98.890
eludes $132,161,000 noncompetitive tenders accepted at the average price of 97.698
a coupon issue of the same length ann for the same amount invested, the return on
~se bills would provide y:telds of 4.5~, for the 91-day bUls, and 4.72%, for the
2-~ bills. Interest rates on bills are quoted in terms of bank discount with
~ return related to the face amount of the bills payable at maturity rather than
~ amount invested and their length in actual. IlUIUber of days related to a 360-day
ir. In contrast, yields on certificates, notes, and bonds are computed in terms
interest on the amount invested, and relate the number of days remaining in an
~ereBt p~t pe,riod to the actual number of days in the period, with semiannual
lpounding if' more than one coupon period is involved.

TREASURY DEPARTMENT

December 13, 19b5
FOR HlMED lATE

RELEASE

TREASURY ANNOUNCES SCHEDULE
FOR NEXT REGULAR WEEKLY BILL AUCTION

The Treasury announced today that its next regular
weekly bill auction will be held on Friday, December 17,
instead of the following Monday.

Delivery of the $1.2

billion of 3-month bills and $1. 0 billion of 6-month bills
\Vill be made on the normal day, Thursday, December 23.
The Treasury said the auction was advanced to assure
ample time between the auction and delivery during the
pre-holiday season.

000

F-30S

TREASURY DEPARTMENT

December 13, 190J
FOlZ H1NEDIA'IE LZELEASE

Tl~LASUKY

l\NNOUNCES SCHEDULE

FOl{ NEXT REGULARt.JEEKLY BILL AUCTION

'1'he Treasury Announced today ti1ai: its nexc re:;ulC1r
weekly bill auction will be neld on friday, December
instead of the followin~ Honday.

l~,

Delivery of tae ~l.2

billion of 3-mon~n bills and $1.0 billion of a-mooch bills
will be made on the normal day, Thursday, December 23.
The Treasury said the auction was advanced to assure
ample time between the auction and delivery durins tne
pre-holiday season.

000

F-305

-2-

COTTON WASTES
(In pounds)
COTTCN CARD STRIPS made from cotton havin~ a staple of less than 1-3/16 inches in length, OOMBm
WASTE, LAP WASTE, StiVER WASTE, AND ROVING WASTE, WHErHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VAllIE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the followin~ countries: United Kingdom, France, Netherlands,
Swi tzerland, Belgium, Germany, and Italy:
Mtaolrsnea--:- Total Imports --: Estaffished:
: TOTAL QUOTA
: Sept. 20, 1965, to
33-1/3% of :
:
: Dec. 13, 1965
: Total Quota:

~:.

Country of Origin

United Kin~dom............
Canada....................
France....................
India and Pakistan........
Netherlands...............
Switzerland...............
Belgium...................
Japan.....................

4,323,457
239,690
227,420
69,627
68,240
44,388
38,SS9
34l,S3S

China.....................

17,322
8,135

Egypt.....................
Cuba......................
Germany...................

Italy.....................
Other, includin~ the U.S ••

1/ Included

6,544

7S,807
22,747
14,796
12,8S3

76,329
21,263

2S,443
7,088

S,482, S09

1,S99,886

total imports, column 2.

Prepared in the Bureau of customs.
F-306

1,441,lS2

Imports

Sept. 20, 1965 to Dec. I], 1965

TREASURY DEPAR'IKrnT

Washington, D. C.

IMMED lATE RELEASE

WEDNESDAY, DECEMBER 15,1965

F-306

Preliminary data on imports for consumption of cotton ani cotton waste chargeable to the quotas established by
Presidential. Proclamation No. 2351 of September 5, 1939, as amenied, ani as modified. by the Tariff Schedules of the
United States which became effective August 31, 1963.
(The country designations in this press release are those specified in the appeIXiix to the Tariff Schedules of the
United States. There is no political connotation in the use of outmJded names.)

"
COl.Ultry of Origin

Egypt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
China ••••••••••••••••••••••
Mexico •••••••••••••••••••••
& . .11 •••••••••••••••••••••
Union or Sorlet
Socialist Republics ••••••
Ar~tina. •••••••••••••••••

Haiti ••••••••••••••••••••••

~or ••••••••••••••••••••

!/ Except

Country or Origin

Imports

Established Quota

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

1(',011

475,l24
5,203
237
9,333

~J
g

Established Quota

Honduras ••••••••••••••••••••
Par~ ••••••••••••••••••••

752

Colombia ••••••••••••••••••••

l24

871

Iraq ••••••••••••••••••••••••

195

British East Africa •••••••••
Indonesia and Netherlanis
New Guinea••••••••••••••••
British W. Indies •••••••••••
R1ger.La •••••••••••••••••••••
Britiah V. Africa. ••••••••••
other~ including the U.s ....

2,240

71,388
21,321

5,m

16,004.

Barbados, Benmia, Jamaica, Trinidad, aDi Toba80.

:Except Nigeria

Ghana.

Cotton 1-1ISn or more
Established Yearly Quota - 45.656.420 1bs.

ImPorts Auggt 1. 1965 - December 13. 1965
S tapl.e Length
1-3/Bn or more

Allocation
39,590,778

1.-5/32" or more an:l under
~-..3/8ft

1-:l./Sn_

(Tangu:l.a)

0 ....

~re

a:nd. under

~rts

36~ 2'3;974

1.500.000
4-565_6102

l7S,<;';)1 1
1- ,

-; 7< ) ,

~,,-j

!!!J!Orta

TJ'IiKIiI) I

TREASURY DEPAR'IHE2IT
Washington. D. C.

ATE REI..E:A.S E

I<.TEDNESDA Y, DECEMBER 15,1965

F-306

Prel.1mi.na.ry data on imports for consumption of cotton ani cotton vaste chargeable to the quotas established t::7t
Presidential Proclamation No. 2351 of September 5, 1939. as amemed, ani as modified by the Tariff Schedules of the
United States which became effective August 31, 1963.
(The country designations in this press release are those specified in the appeoiix to the Tariff Schedules of the
United states. There is no political connotation in the use of outmlded names.)

"
Country of Origin

Egypt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
Ch.illa ••••••••••••••••••••••

Mexico •••••••••••••••••••••
dru.il •••••••••••••••••••••
Union of Sonet
Socialist Republics ••••••
Argent~ •••••••••••••••••

Haiti ••••••••••••••••••••••
Ecuador ••••••••••••••••••••

1I Except
2/

Imports

Established Quota

783,816
247,952
2,003,483
1.370,791
8,883,259
618,723

COUDtr;y

18,011

475,l24
5,203
237
9.333

~J
~

Barbados, Berslda, Jamaica, Trinidad,
Except Nigeria and. Ghana.

Origin

Established Quota

Honduras ••••••••••••••••••••
Par~ ••••••••••••••••••••
Colombia••••••••••••••••••••

752
871

Iraq ••••••••••••••••••••••••

British East Africa •••••••••

195
2,240

Indonesia and NetherlaDls
Mew Guinea••••••••••••••••
British W. Indies •••••••••••

7l.J88
21,321

w1ser.La•••••••••••••••••••••

British
Atrica. ••••••••••
other. 1nc1wt1 ng the U.s ....

TobaAo.

Cotton 1-lISn or JIIOre
Established Yearly Quota - 45.656.429 Ibs.

Imports Auguat 1. 196$ - December 13. 1965
Stap1e Length
1-3/Btt or more

1-5/32" or

IIIDre

and UDder

1--)/~ (T~s)

Allocation

39. 590.Tl8

L'iOO_OOO

~rts
36,2j;974

1.24

5.m

16,cn.

1.slorls

COTTON WASTES

(In pounds)
CARD STRIPS made from cotton ha~ a staple of less than 1-3/16 inches in len~h, COMBER
",tASTE, LAP 'WASTE, SLIVER. WASTE, AND ROVING 'WASTE, WHEI'HER. OR NOT MANUFACTURED OR OTHERWISE

COTTON

ADVANCED IN VAIlJE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple le~th in the case of the foll~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:

Country of Origin

:
:

Established
TOTAL QUOTA

United Kin~dom ••••••••••••
Canada....................
France....................
India and Pakistan........
Netherlands...............
Switzerland...............
Belgium...................
Japan.....................
China.....................

Egypt.....................
Cuba......................
Germaqy...................

Italy.....................
Other, includin~ the U.S ••

Total Imports
s Established I
Imports
1/
Sept. 20, 1965, to:
33-1/3% of: Sept. 20, 1965 De~_____ l3 L J,.965
. : _Total Qu~t_a : . 'tP DeS.lJ, 1965

4,323,457
239,690
227,420
69,627
68,240
44,388
38,>59
341,>35
17,322
8,135

1,441,152

76,)29
21,263

25,443
7,088

5,482,509

1,599,886

6,544

!I Included in total imports, column 2.
Prepared in the Bureau of Customs.

F-306

75,807
22,747
14,796
12,853

...

-2-

Commodity

Period and Quantity

-unI t of : Imports as Of
Quantity: Dec. 4, 1965

\osolute Quotas:
Butter substitutes containing over L5% of butterfat,
and butter oil •.•••••••••

Calendar year

Fibers of cotton processed
but not spun ••••.•.••••••

12 mos. from
Sept. 11: 196)

Peanuts, shelled or not
shelled, blanched, or
otherwise prepareri or
preserved (e:<cept peanut
butter) ................ .

1,200,000

Pound

1,000

Pound

12 mos. from
August 1, 1965 1,709,000

Pound

----------~--------------------

Imports as of December 13, 1965.

F-307

Quota filled

TREASURY

D~PARTMENT

T'!ashington
IMM~JIATi

RELEASE

WEDNESDAY, DECEMBER 15, 1965

F-307

The Bureau of Customs announced today preliminary figures on imports for
consumption of the following commo~ities from the beginning of the respective
QUota periods through December u, 1965:

Commodity

Period and Quantity

: Unit of : Imports as of
Quantity: Dec. 4, 1965

Tariff-Rate Quotas:
Cream, fresh or sour

Calendar year

1,500 ,000

Gallon

1,088,532

1iThole Hilk, fresh or sour .••

Calendar year

3,000,000

Gallon

Cattle, 700 Ibs. or more each
(other than dairy COHS) •••

oct. 1, 1965 Dec. 31, 1965

1;?0,000

Head

37,79L

Cattle. less than ;?OO Ibs.
eac h ...•.•.•••••.•.•••.••.

12 mos. from
April 1, 1965

200,000

Head

66,oL2

fresh or frozen, filleted, etc., cod, haddock,
hal(e, pollock, cusk, and
rosefish •••••••••.•.•.••••

Calendar year

21i ,383,589

Pound

Quota filled

Calendar year

66,059,400

Pound

43,649,271

12 mos. from
11)4,000,000
Sept. 15, 1965 145,000,000

Pound
Pound

27,691,025

Nov. 1, 1965 Oct. 31, 1966

Pieces

~ish,

Tunrt

~ish

..••.•••••••••••.••

1',nite or Irish potatoes:
Certi t'ied seed •••.••••••••
Other .................... .
f'or~s, ann spoons
rNith stainless steel

3,459,430

rCni ves,

hand.les .................. .

69,000,000

Quota filled

TREASURY DEPARTMENT
Washington

IMMEDIATE RELEASE

WEDNESDAY, DECEMBER 15, 1965

F-307

The Bureau of Customs announced today preliminary figures on imports for
consumption of the following commodities from the beginning of the respective
quota periods through December 4, 1965:
PerlO,!
'~ an d Quan t't
Unit of : Imports as of
1 y
Cornmodl'ty
__________________________
~_____________________~~Qu~a~n~tl~'t~y~:~)ec. 4, 1965
Tariff-Rate Quotas:
Cream, fresh or sour

Calendar year

1,500 ,000

Gallon

1,088,532

Ilhole Milk, fresh or sour .••

Calendar year

3,000,000

Gallon

~attle,

700 lbs. or more each Oct. 1, 1965 (other than dairy cows) •.• Dec. 31, 1965

l~O,OOO

Head

37,794

less than 200 Ibs.
each ...•.•••••••.•.•.•.•..

12 mos. from
April 1, 1965

200,000

Head

66,042

i'ish, fresh or frozen, filleted, etc., cod, haddock,
hake, pollock, cusk, and
rosefish ••.••••.•.•.•.•••.

Calendar year

21! ,383,589

Pound

Quota filled

una Fish .•••.••.••••••.•.••

Calendar year

66,059,400

Pound

43,649,271

12 mo s. from
ll}"! , 000,000
Sept. 15, 1965 45,000,000

Pound
Pound

27,691,025
3,459,430

Nov. 1, 1965 Oct. 31, 1966

Pieces

~attle,

bite or Irish potatoes:
Certi fied seed .••••.•••••.
Other ..•............•.•...

nives, forks, and spoons
with stainless steel
handles ....•.....•........

69,000,000

Quota filled

-2-

Commo--lity

Period and Quantity

Uni t of : Imports as of
Quanti ty: Dec. L, 1965

\bsolnte I.,(uotas!
Butter substitutes containinf\ over )i Sfo 0 f butterf'at,
an '1 bu t te r 0 i 1 ....•••.•..

Caleniar year

Fihers of cotton processed
bu t not spun ...•••.••••.•
Peanuts, shpl1ed or not
shelled, blanched, or
otherwise prepared or
preserved (e :(cept peanu t
butter) •..•...••.•..••..

1,200,000

Pound

1? mos. from
Sept. 11. 1965

1,000

Pound

12 mos. from
~ugust 1, 1965

1,709,000

Pound

Quota filled

1,007 )33~/

------------_._---_._._1/

Imports as of Decenher 13, 1565.

F-307

TtI.2ASURY DEPARTHENT
" Tashington

WEDNESDAY, DECEMBER 15, 1965
F-30B

-, - -- ---- --,-----

The Bureau of' Customs has announced the follovring preliminary
figures shm,ring the iJrlports for consumption from January 1, 1965, to
T)ecember )', 1965, inclusive, oi' commorlities under quotas established
pursuant to thR Philippine Trade Agreement Revision Act of 1955:

---'----'---:--EStablished iU1nual
Unit of
Commodity
Quota Quanti ty ,_~~Q~u.-;:anti ty

-------- ---Buttons

510,000

Gross

Imports as of
Dec. h, 1965

h20,430

Cigars .••••••••••..

120,000,000

Number

COCO'nut oil ....... .

268,800,000

Pound

Quota filled

Cord are

6,000,000

Pound

5,330,719

TobaccO'

],900,000

Pound

3,831,221

8,287,L31

TREASURY DEPARTMENT
Vashington
INM!'~mATE

RELEASE

WEDNESDAY, DECEMBER 15, 1965
F-308

The Bureau of' Customs has announced the fo11m.ring preliminary
figures sho~~g the imports for consumption from January 1, 1965, to
December 11, 1965, inclusive, of commoriities under quotas estahlished
pursuant to the Philippine Trade Agreement Revision (-Lct of 1955:

---

Cormnodity

·...........
Cigars .............
Coconut oil ........
Cord ave ·. .........
Tohacco ·...........
Buttons

Establish-ed rmnual
Quota Quantity
510,000

Unit oT
Quantity
Gross

Imports as of
Jec. It , 1965
420,430

1?0,000,000

Number

268,800,000

Pound

Quota filled

6,000,000

Pound

5,33 0 ,719

3,900 ,000

Pound

3,8J1,221

8,287,431

TRUSURY DEP.uma:N'l'
WUhiDgtOll, D. C.

F - 30 9

DAa:DU'I'I: RJ:LI:.lSr;

WEDNESDAY, DECEMBER 15,1965
llAti

(Ill'

BY PRESIDEN'l'IAL

J»>ORTS ,<It CONSUIoCPTIOR or tJII&JIUrAC'f'URED Lun .AllD ZINC CIU..RGUllLt TO THl OUC1llS IS'llBLISHJ:D
NO. 3257 or S:IP'f'Da!ER 22, 1956, AS J.«)DIJ'l];I) BY ml TlRIn' SCHZruLtS OJ' 'l'1m
UNlTT.D SUDS, WHIaI BI&UlI ~ AUGUST 31, 1963 • .!I

PR~TICII

OUA.RTERLY QUO'fA PDUOD -

Ootob.r

1, 1965 -

December

31, 1965

DFCRrS - October 1, 1965 - Nov$mb8r 19, 1965 (or as noted)
l"rAf 925.01. Y

L.M-beariDC ore.
a.DIl . .hriala

c...try

PrMu.U.

I
I

••
• Z1.Jae.4,eariDC on. aM

u.r.~1"''''

lead ".. te &IIi .....

III&teriw

11,220,000

.b8tral.1a

ITDf 925.D2- Y

lDW 9ZSeOl. JJ

1l,220,000

I'I'Df 925.D4 e Y
f

:.• u.rrc~t

aiM (nMpt all.,.
of siDe ...... iDe tuat) ...
r
.lae .... te ........

•

9,455,2 05

22,s.>,OOO

Bel.t1-- ....

'u'f (total)

X.,.

5,040,000

531,962

13,440,000

Boliria
r...-.t ..

12,933, 01 9

15,920,000

66,480,000

Mexi..
16,leQ,OOO

P....

Co.,.

~ll• •f

4,559,2 19

37,840,000

.37,840,000

12,01l,477

36,880,000

25,660,352

70,.480,000

10,018, 289

6,320,000

5,12.3,5 05

12,880,000

6,522,771

35,120,000

173,427

3,760,000

1,899,44'

5.,440,000

5,163,2~

6,090,000

6,0110,000

the
t--.rly Be14i.aA C. . . )

• ..,.. So. i.tri_

14,880,000

.ll.l. other
OOUDtrie. (t.tal)

6,560,000

2,048,570

-See Part 2, i.ppeD41x to Tariff S&he4ul.ea e
"Republ.l0 of South Africa.
III TRlI: BURE&.U OF CUSTcaE

14,880,000

larla

PlUI:P~

7,520,000

3,~,OOO

ltal1'

T,....

....

15,760,000

7,767,626

6,000,000

6,080,000

n,840"OOO

!I
y

Terminated Ootober 22, 1965.

:JI

Terminated Neve.ber 21_ 1,65.

Quot.s terminated by

17,840,000

Presld_nti~l Preolam~~lon

Ne.

)68) .r October 22, 1965.

TRUSURY DJ:P~

"Uh1agtOll, D. C.

F ,. 309

DAW>Un RELUsE

WEDNESDAY, DECEHBER 15,1965

DAU (Ii JlII>ORTS r~ CONSl!WP'i'IiIJi Of tMaNUP'J.C'1'URED LfAD !!lD ZINC; CfliJ{GUBU~

'to

BY PRESIIlJ:N'1'IAL PRCCl..lMlTlClW NO. 32'51 OF SIF1'DtBr.R 22, 1958" AS MODD'II:D BY nll; TAIUTf S~'R'eru-LE3
UNI'ITJ) STAns, WHIC2I BlX::.UlI ~TIVl: L1JGOS'l' 31" 1%3< .!./
OUl.RTERLY QUO'U. PERIOD llF~ -

.,..u_

19~5

c:ct.:oOH· 1, 19'~':

D.c.ml;~f'

~- NI.ly,,",bsr

I'fD(

lAaA-beari~ OTU

aU _t$rial..

. ~=

;, /
:r.1'W 925 ..02"'::':
~~-='=~~""i~'~~""~----~~~-~-'-~- ."-~ _.~_o~

UDfT'*'Q(M lGa4 ,,\.(.~
le&4
&DIi e;;:"" ::,

wu"

.
1 /
1'.?Dt:"1:;>.£)o.')",·j
~. c·i-~' .~- ~--~.-~.~~ ---"~~--~

' .

Z~ett.TiriI ~1iI ~

t ~'t'o~t 1Z :.;;.'It t! ",~·;;iFt a.ll.,...
~ ~f dlW &!iL€ i?1.oo &tU;.t) . . .
,
d~'liffi.ltw ~.~

~.t,.riw

•lIi&i'iii'ly Oaou

• ~ Dlniable 1.M

I!Ipwta

ll,220-OOO

a
sbiiiii'Gi'iy QQi£i:
s Dllt1able leu
( pOQiiili )

{ POQiL )

.u.tral.1&

llp220 9 0GC

22,540,000

•

I~..,y QIwta

_.f5'vt. r

ZiDc

2-t..-t

=it&r.rt~J'~~'-~_o-

Iapsrtg}

_~_~~_. __ ~.

( Pound 5)

5,040,000

531f~62

13,+40,000

13~440,O('lJ

Bol1rla

9,455.205

15,920,000

12;933,()1~

66,480,000

66 8 4S0,UOO

7,520,000

4,559,21~

37,640,000

37,a 4 o.-tJoo

3,600,000

IUl.y

Warl..
16,leQ,OOO

~ll• • f

129011~477

36,880,000

25, 660~352

70,480,000

10,018,289

6.320,000

5,12',5 0 5

12,800,000

69 522,771

35,120,000

173,427

3,760,000

1,89~,449

5r440,000

5, 163,267

6,090,000

6,080,000

the ColIC-

(tOlWa"ly BelC1u C.,.)
So. J.frl. .

lA,qao,ooo

14,880,th)0

T-C Mlaria
.lll other

OOUDtrl •• (total)

6,560,000

2~04B,57°

.g •• Part 2. A.ppendu to Tariff Sehedul....

eeRepuh110 of South Africa.

PQW'PADW'n

1JIf-,,!

(PtiUiacU )

~v:'u~( total)

-4IIOa.

m~;

1%5 (~ .. ;;,s nrtcd)

19 p

925.03- " .

.. ~

31, 196')

:rI"Ai 925 ..01 $J

C.wab7

~tJbit'

.~." __

1'';2'' CU(1l"!S IS'rA.[1L;J.j~.f~D

'"fW' mnn!'ATT

""1'<:"'~

1'5,760,000

79767,626

6,OOO,()()()

6,C80pOOO

11,840,000

17,840,000

Quotas terminated by Presidential Preolamatton Neo )683

Terminated Ootober 22, 1965.

Terminated Nevember 21. 1965.

October 22, 1965.

- :5 -

m'c

exempt from aLL tD..'{ation now or hereafter imposcd on the prlnc:ipal or interest

Lhcrcof l)y My Sta.-I,e, or 8J1Y of the PO:3Gcssions of the United States, or by
]oco.l tuxJnr: auLhor.tty.

For purpoGcfJ oJ' b'xatJon the amount of discount at which

'l'l'encury [)il1s nre oric;innlly Gold by the United States is consit.'l.ered to be int.erest.

Under Section:;) 454, (b) and 1221 (5) of the Internal Revenue Code of l$f

the amount of discount at uhich bills lasued hereunder are sold is not considered
to accrue until such bills arc sold, redeemed or otherwise disposed of, and such

bills nl'C' e);.cltvkrj from conr..d(jf'rati.on

[u;

cr'.p t tal [J.-.;t;ct::;.

Accordingq, the owner

O.r 'l'rcuS\u-y b.Ll.Is (otherl.llnn Ii.·i'(, .inmu'ancc companies) issued here1Ulder need in..
clude ln hj.s income tax return only the difference betvleen the price paid for sud!
bills, uhether on oric;inal LnGuc or on I.:llbsequent purchase, and the amount

act~

received either upon sale or redemption at maturity durinG the taxable yeer for
",bich the return is made, as ordinary Genn or loss.
'l'reasury Department Circular No. 4:18 (current revision) ~d this notice, prt
scribe Lhe -GermG 01' the 'l'reasury bills and govern the conditions of their issue.
Copies of the circQlar may be obtained from any Federal Resel"'.re Bank or Branch.

'J
(~

Innkinc; insti tutiom: ,fLU not be perlll.L tLed Lo submit tenders except for their own
Tenders 'rill be recf'ivcu

lCC01ll1t.

lTi \,]\0111,

ueposit from Ineorporo.ted banlcs and

,rust companies ond from responsIble Dnd recoc:nized uca.lers in investment securities.
'enders from oLhers must be accompantcd by po..ymcnt of 2 percent of the face runoUnt
If Treo.sury bills applied for, unless the temlers o.re accoIrlpo.nied by an express

uuranty of payment by an incorporated bonli: or trust company.
Immediately after the closinc; hour, tenclerG will be opened at the Federal Recrve

Donl~s

and Branches, follmling "hlcb pubHc ;:umOllllcement will be made by the

rcasury Department of the amount and price ranGe of o.ccepted bIds.

inc

tenders vrill be o.dvised of the acceptance or rejec Lion thereof.

'l'ho~;e

submi t-

The Secretary

l' the 'l'reasury e;:prcssly rCGerves the riGht to accept or reject any or all tenders,

n \-Thole or in part, o.nd hiG action in any such respect sho.ll be final.

) these reservations, noncompetitive tenderG for :1; 200 / 000

600J

Subject

or less without

tated price from o.ny onc bidder vrill be accepted in full at the average price (in
1rce decimalc) of acccpted competitive biclG.
~eordance

Settlement for accepted tenders in

"rith the bids mUG t be macle or completed at the Federal Reserve

(lember 31, 1965
(n)

, in caoh or otber j.llUnediately available funds or in a like

tee amount of Treasury bills rnaturincDecember 31 1 1965

(U)

~nders

Bo.nl~

,rill receive equal treatment.

Cash and exchane;e

Cash adjustments will be made for differ-

Ices behleen the par value of maturill[; bills accepted in exchange and the issue
'lee of the nevT bi lls .
The income clerived from 'rreaGury bills, ,·mether interest or gain from the sale
other disposition of the bills, does not have nny exelilption, as s:uch, 8Ild loss
Olil

the sale or other disposition of Treasury bills cloes not have any special

entment, as such, uncleI' the Internal Revenue Code of 1%4.

The bills are subject

estate, inheritance, gift or other exciGe taxes, ",hether Federal or state, but

TREASURY DEPARTMENT
Washington

FOB INNIIDIATE RELEASE,

December 16, 1965

(t)

TREASURY RErtJ.Nm ONE-YEAR BnJS
The Treasury Department, by this public notice, invites tenders for

*1,000,000,000
~

,or thereabouts, of

in exchnnge for Treasury bills maturing
of

1,002,951,000

365-day Treasury bills, for cash and

--(~~~

Deeembm:

{at) ,

' in the amount

19i5

,to be issued on a discount basis under competitive and

(if)
noncompetitive bidding as hereinafter provided.
dated

December 31, 1965

The bills of this series will be

, and will mature

( ar)
the face amount will be payable without interest.

December 31, 1966

,when

it)
They will be issued in bearer

form only, and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000,

$500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve. Banks and Branches up to the
closing hour, one-thirty p.m., Eastern Standard time, Thursc:la\Y, December 23, 1965.
(~)

Tenders lTill not be received at the Treasury Department, Washington.

Each tender

must be for an even multiple of -~1,000, and in the case of competitive tenders tb,
price offered must be expressed on the basis of 100, with not more than three dec'
tmals, e. g., 99.925.

Fractions may not be used.

these bills will run for 365

(Notwithstanding the fact t~t

days, the discount rate will be computed on a '08lIl

(!:)
discount basis of 360 days, as is currently the practice on all issues of T~~
bills.)

It is urged that tenders be made on the printed forms and forwarded in

the special envelopes vmich ,nll be supplied by Federal Reserve Banks or Branche'
on application therefor.
Banking insti tut10ns generally may submit tenders for account of customers
provided the names of the customers are set for~ in such tenaers.

~--.Jlt

~hers t~

TREASURY DEPARTMENT

WASHINGTON, D.C.

~~.·e·
.
\

..•

December 16, 1965
fOR IMMEDJA TE RELEASE
TREASURY REFUNDS ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders
Eor $1,000,000,000, or thereabouts, of 365-day Treasury bills, for
:ash and in exchange for Treasury bills maturing December 31,1965, in
~he amount of $1,002,951,000, to be issued on a discount basis under
:ompetitive and noncompetitive bidding as hereinafter provided. The
)ills of this series will be dated December 31,1965, and will mature
)ecember 31,1966, when the face amount will be payable without
lnterest.
They will be issued in bearer form only, and in
lenominations of $1,000, $5,000, $10,000, $50,000, $100,000,
;500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches
lp to the closing hour, one-thirty p.m., Eastern Standard time,
.'hursday, December 23, 1965. Tenders will not be received at the
'reasury Department, Washington. Each tender must be for an even
ultiple of $1,000, and in the case of competitive tenders the price
ffered must be expressed on the basis of 100, with not more than
hree decimals, e. g., 99.925.
Fractions may not be used.
Notwithstanding the fact that these bills will run for 365 days,
he discount rate will be computed on a bank discount basis of
60 days, as is currently the practice on all issues of Treasury
ills.)
It is urged that tenders be made on the printed forms and
orwarded in the special envelopes which will be supplied by
ederal Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account
f customers provided the names of the customers are set forth
n such tenders.
Others than banking institutions will not be
2rmitted to submit tenders except for their own account.
2nders will be received without deposit from incorporated banks
1d trust companies and from responsible and recognized dealers
1 investment securities.
Tenders from others must be
:companied by payment of 2 percent of the face amount of Treasury
ills applied for, unless the tenders are accompanied by an
cpress guaranty of payment by an incorporated bank or trust
)mpany.
310

- 2 -

Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcemeUI
will be made by the Treasury Department of the amount and price range
of accepted bids. Those submitting tenders will be advised of the
acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $200,000 or
less without stated price from anyone bidder will be accepted in
full at the average price (in three decimals) of accepted competiti~
bids. Settlement for accepted tenders in accordance with the bids
must be made or completed at the Federal Reserve Bank on December 31,
1965, in cash or other immediately available funds or in a like face
amount of Treasury bills maturing December 31, 1965. Cash and
exchange tenders will receive equal treatment. Cash adjustments will
be made for differences between the par value of maturing bills
accepted in exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any ~xcmption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject
to estate, inheritance, gift or other excise taxes, whether Federal
or State, but are exempt from all taxation now or hereafter imposed
on the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference
between the price paid for such bills, whether on original iss~ or
on subsequent purchase, and the amount actually received either upoo
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thls
notice, prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtainedf~
any Federal Reserve Bank or Brancho

000

TREASURY DEPARTMENT

December 16, 1965
FOR IMMEDIATE RELEASE

BENJAMIN CAPIJI.N NAMED
DIREC'roR OF PLANNmG AND PROGRAM EVAWATION
Acting Secretary of the Treasury, Joseph W. Barr, today announced the
selection of Benjamin Caplan as Director of the Department's new Office of
Planning and Program Evaluation. Mr. Caplan will be under the policy direction
of the Secretary and Under Secretary, reporting through the Assistant Secret~
for Administration. He will be responsible for developing a positive and
systematic evaluation of all Treasury programs with a view to maximum cost
consciousness. The establishment of this Office within Treasury is in campliance with the President's directive for an integrated Planning-Progrwmrl~
Budgeting System in the Executive Branch.
Mr. Caplan was born in Canada on February 9, 1909. He earned his B.A. and
M.A. Degrees in Economics from McGill University, and his Ph.D. in Econmncs
from the University of Chicago.

He is currently serving as Director, Office of International Monet~
Affairs in the State Department. His previous Government service has been
as an Economist for the War Production Board, the Office of Price Administntion and the Council of Economic Advisors. He also served as Chief, Wartime
ReCluirements and Supply, Office of Defense Mobilization, and as an Internatlona
EconOmist, Office of Civil and Defense Mobilization.
Mr. Caplan I s non-government experience includes:

Instructor in EconomiCS
at Ohio State University; Assistant Director of Research and Statistics,
Schenley Industries, Inc., New York; Economic Consulting, Boni, Watkins,
Jason and Co., New York; Research Associate, Institute for Defense Analyses,
;';ashington, D. C.
Mr. Caplan is married and resides at 4201 Cathedral Avenue, N.W.,

Washington, D. C.

He is expected to enter on duty in January.

000

F-311

TREASURY DEPAR"TMENT
WASHINGTON.
December 16, 1965
FOR mMEDIATE RELEASE
BENJAMIN CAPLAN NAMED
DIREC'lDR OF PLANNING AND PROGRAM EVAI1JATION
Acting Secretary of the Treasury, Joseph W. Barr) today announced the
selection of Benjamin Caplan as Director of' the Department's new Office of
Planning and Program Evaluation. Mr. Caplan will be under the policy direction
of the Secretary and Under Secretary, reporting through the Assistant Secretary
for Administration. He will be responsible for developing a positive and
systematic evaluation of all Treasury programs with a view to maximum cost
consciousness. The establishment of this Office within Treasury is in compliance with the President's directive for an integrated Planning-Progr8.!IlJI).ingBudgeting System in the Executive Branch.
Mr. Caplan was born in Canada on February 9, 1909. He earned his BJL aLil
M.A. Degrees in Economics from McGill University, and his Ph.D. in F~onomics
from the University of Chicago.

He is currently serving as Director J Office of Inter(l.ational Monetary
Affairs in the State Department. His previous Govel'l:u:aent service has been
as an Economist for the War Production Board, the Office of Price Administration and the COUIic5.l of Economic Advisors. He also served as Chief, Wartime
Requirements and. SU'l::,ply) Off'ice of Defense Mobilization, and as an International
EconOmist, Office of Civil and Defense Mobilization.
Mr. Caplan IS non--government experience includes: InstructoI" in Econom=l~s
at Ohio S'cate University; Assistant Director of Research and Statistics,
Schenley Industries) Inc., New York; EconomJc Consulting, Boni .. Wa'~kins,
Jason and Co., New York.; Research Associate, Institute for Defense Analyses,
;,]ashington, D. C.

Mr. Caplan is married and resides at 4201 Cathedral Avc'1ue, N.W.,
Washington, D. C. He is expected to enter on duty in Januaryc

000

F-311

TREASURY DEPARTMENT

December 16, 1965
FOR IMMEDIATE RELEASE
ANTIDUMPING PROCEEDING ON
CERAMIC GLAZED WALL TILE
On December 9, 1965, the Commissioner of Customs received information in proper form pursuant to the provisions of section 14.6(b)
of the Customs Regulations indicating a possibility that ceramic
glazed wall tile imported from Japan is being, or likely to be, sold
at less than fair value within the meaning of the Antidumping Act,
lY2l, as amended.
In order to establish the validity of the information, the Bureau of Customs is instituting an inquiry pursuant to the prOVisions
of section l4.6(d)(1)(ii), (2) and (3) of the Customs Regulations.
The information was submitted by Howrey, Simon, Baker & Murchison,
Washington, D. C., on behalf of the Ceramic Tile Manufacturers of the
United States.
An "Antidumping Proceeding Notice" to this effect is being published in the Federal Register pursuant to section 14.6(d)(1)(i) of
the Customs Regulations.
Imports of the involved merchandise received during the year 1964
amounted to approximately $8,138,000.

TREASURY DEPARTMENT

December 16, 1965
FOR IMMEDIATE RELEASE

ANTIDUMPING PROCEEDING ON
CERAMIC GLAZED WALL TILE

On December 9, 1965, the Commissioner of Customs received information in proper form pursuant to the provisions of section 14.6(b)
of the Customs Regulations indicating a possibility that ceramic
glazed wall tile imported from Japan is being, or likely to be, sold
at less than fair value within the meaning of the Antidumping Act,
1921, as amended.
In order to establish the validity of the information, the Bureau of Customs is instituting an inquiry pursuant to the provisions
of section 14.6(d)(1)(ii), (2) and (3) of the Customs Regulations.
The information was submitted by Howrey, Simon, Baker & Murchison,
Washington, D. C., on behalf of the Ceramic Tile Manufacturers of the
United States.
An "Antidumping Proceeding Notice" to this effect is being pub-

lished in the Federal Register pursuant to section 14.6(d)(l)(i) of
the Customs Regulations.
Imports of the involved merchandise received during the year 1964
8JIlOunted to approximately $8,138,000.

c:::..' ,

WASHINGTO". D.C.
6.-0
.5 P .JM•• ,
~id~y, DGcember 17, 1965.

~~~
~v.::\. ~-7~'l.SR
Z'~
~

~':"t:< ·

RESULTS OF T?..Y.SURY'S HEEKLY BILL OFFERDJG

l'reasu1'Y fupart:::3nt 3...1Il0unced today th2.t tte tenders fo-.... two ~(;ri2s of Treasur,
cals, one series to be an additional issue of 'cl--;.e bills dD.t8d S2pteJ(x;~~ 23, 1965, and
,~ ...:,
-""~"
~ ,-,0 OG QaUc.a.
'0.,., - lJ,,;.;d,
T',","-~~-"~
23 j .;l -96r:'
,,'. P"'~,~ o'~·,~'·"-'a.'
on 'u'>c:>1,,,,... 1"' wen
\"./ ..... '-'
"...J V ..... ~.l.
......
~8v
...
: ; , ,,,'-':
~~ ..... ~", ... J. ~~I:;J. ""
_ ....
"t;;.lllJV"')1
.:; :,:;~~:.;d .:..t the Fec.eral Reserve Banks on fuC8:nber 17. Tende:cs >;:e::e invited for
,~.?2JJ,OOO,OOO, or thereabouts, of 91-c.ay bills "-TId for $1,000,000,000, or thel'eabouts,
of l'~2-Cay bills. The details of the t,-IO series are as folious:
l'h,;;

L',

r " '_ _

CO:·2S'l'ITIV2 BIDS:
I-ligh
LOH

Average

J-

t,.;..I ............... .:.

t".; ... '....

182-day Tr.:::asury bills
waturing June 23, 1966
L?proj:. Zquiv.
Price
Annu::l :13.te

91-day Treasury bills
I7laturin~ i-larch 2~,~ 1966
Ap::!r0x.-Equiv.
Price
~.ual Rate
98.875
98.857
98.861

97 o6~:,0

4.66s;rh.704%

970622 97 0 628

4.692% Jj

a/ Exceptin3 3 tender3 totaling $555~OOO
90 percent of the alnount of 91-ds.y bills bid for at the lOll price v;as accepted
58 percent of the amount of 182-day bills bid for at the 10\v price was accepted
7;::~lDZRS

APPLIED FOR AhTD ACCEPTED OY FEDEP...lJL RESER.VE DISTRICTS:
:Cis~::'ict
lrr,:rplied For
Acce'?ted
LDnlied For
Q
~::'S'':'O;!
19
~,... Q 0"'0
$
$
<jJ
2?;;268,O8~
:. ,.Lou,
v
49,188,000
,r .... _.... "_
1 , 4/7
"T
"'0'"
1,41~OJ182,C):)
'0 ,.5~.L:;0 J
725,091,000
?~lilc.::'.]l?hia
2'..!.,::>3~;l 0"'0
-. .:..():;)
/ ""'34 ,\oJ
C'"'0
12,535,000
v
2'o:J:.,j:~,:)Jv
,-, --'''0
C:"'2V.::1211d
79~307,C20
26,43L;)ocO
~::i~~"'.L710l:d
o '7~9 ~ '-''''0
5~013,CCO
vV
9,759;)000
1\ +-, ,.. ..... -:...,...
--7 7 ;,::>,
-."", 000
H:.~ 812, C':J
"),,
29,435,OCO
Ct.:.icc.:;o
3 8 0,967 11 080
37S;)5l0,000
180,800,000
32,719,C::O
St. Louis
L
h :J396,000
33,936,coo
9? 064, c:o
:,:iru:2apolis
15,772,000
12,622,000
15~922"C~O
:\c...l-'lSaS City
29,351,000
29,351,000
Dallas
23,276,000
1).j.,276,000
12,573,C:0
Sa."1 Francisco
95, 2),J.h ,000
")li1.,896,(:)0
77 , Oul~ ,00)

TO'nJ..

',- ." •

•• '- • J

_V.,L. ...

I /

..""';l.V_C- • .l.IJcJ,.

TOTALS

.cj

$2,201,591,000

z;1,200,471,000

$2.?379,257~COO

Accepted

11,268,00:
519,932,00
8,534,00:

38,)~77,oo:

5,013,000

27, 537,ifJJ
107, 667,f1/J

24,419,r:/JJ

5,064,f1/J

1l,956,~

6,173,00

2'~,.o56~QO
.,.,

VL",COO,096,OO

~ncludes ~212,150,00o noncompetitive tenders accepted at the ave~age price of 98.i
Ir.c1udes $112,448,000 nonco:;;petitive tenders accepted at the ave:.~age price of
C:: a coupon issue of the sar~.e length ~"1d for the sarr.3 &Ilount invested, the return
t:=.2se bills ,:ould provide yields of 4.62%, for the 91-day bills,and 4.67;~, for the
:',,:,2-d.::.y bills. Interest rates on bills are quoted in terms of ba.'!lk discount with
·':':.3 :..'<:::turn rela:c,ed to the face &'11ount of the bills payable at maturity rather than
'':'::':; <:':-::Oll.'1t i::rv6s'~3d and t~1eir length in actual mUTlber of days related to a 360-dal
:."2~/"f. In co:.:":~~';:~~, yields on certificates, note~, 2w.-"d bonds are co:n?uted in terms
0: :..,,-'.:,.;;:cest on t:.a G,;,:oun't. invested, and relate the number of days rerr.aining in an
i..'·::c.:;::~st pcS.~~::';;:-:::' p3::-:"cd to "c:-.e c:.ct'C;.a.l number of days in the period, with s~JDiaIlIl113l
cc::..~ounding if more t::<;I. one COUpOi1 period is involved.

97"

TREASURY DEPARTMENT
R RELEASE 6: 30 P.M.,
iday, December 17, 1965.
RESULTS OF TREASURY'S 'WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two series of Treasury
115, one series to be an additional issue of the bills dated September 23, 1965, and
e other series to be dated December 23, 1965, which were offer~d on December 13, were
ened at the Federal Reserve Banks on December 17. Tenders were invited for
,200,000,000, or thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts,
182-day bills. The details of the two series are as follows:
NGE OF ACCEPTED
H?ETITI1R BIDS:

91-day Treasury bills
l82-day Treasury bills
maturin~ March 242 1966
maturin~ June 23 2 1966
Approx. Equiv.
Approx. Equiv.
Price
Annual Rate
Price
Annual Rate
High
98.875
4.l.~5l%
4.668%
970640 a/
Low
ge.857
97.622 4.522%
4.7~%
Average
98.861
97 0 628
4.505%
4.692% y'
a/ Excepting 3 tenders totaling $535,000
90 percent of the amount of 91-day bills bid for at the low price was accepted
58 percent of the amount of lB2-day bills bid for at the low price was accepted

rAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
81eveland
Richmond
Ulanta
~hica~o

3t. Louis
~inneapolis

{ansas City
Dallas
3an Francisco
TOrALS

AEP1ied For
$ 49,188,000
1,467,391,000
24,535,000
26,434,000
9,759,000
37,735,000
378,510,000
44,396,000
15,772,000
29,351,000
23,276,000
95 ,21m. 000
$2,201,591,000

AcceEted
$
49,188,000
725,091,000
12,535,000
26,434,000
9,759,000
29,435,000
180,800,000
33,936,000
12,622,000
29,351,000
14,276,000
77.044,000
,n,200,47l,000

£/

Applied For
$
27,268,000
1,440,182,000
16,5.34,000
79,307,000
5,013,000
44,812,000
380,967,000
32,719,000
9,064,000
15,922,000
12,573,000
314.896.000
$2,379,257,000

AcceEted
$ 11,268,000
519,932,000
8,5.34,000
38,477,000
5,013,000
27,537,000
107,667,000
24,419,000
5,064,000
11,956,000
6,173,000
2J4t Q5.6,.000
n,000,096,ooO 9

Includes $212,150,000 noncompetitive tenders accepted at the average price of 98.861
Includes $112,448,000 noncompetitive tenders accepted at the average price of 97.628
On a coupnn issue of the same length and for the same amount invested, the return on
these bills would provide yields of 4.62%, for the 9l-day bills,and 4.87%, for the
182-day bills. Interest rates on bills are quoted in terms of bank discount with
the return related to the face amount of the bills payable at maturity rather than
the amount invested and their length in actual number of days related to a J60-day
year. In contrast, yields on certificates, notes, and bonds are computed in terms
of interest on the amount invested, and relate the number of days remaining in an
interest payment period to the actual number of days in the period, with semiannual
compounding if more than one coupon period is involved.
F-312

- 3 -

nm - lJOMP'IED
sale or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, girt or other excise taxes, whether Federal or State, but are exempt frat
all taxation now or hereafter imposed on the principal or interest thereot by stU' State,
~r

or any of the possessions of the United States, or by any local taxing authority.

purposes ot taxation the amount of discount at which Treasury bills are originaUJloU
by th~ United states is considered to be interest.

Under Sections 454 (b) and 1221 (5)

of the Internal Revenue Code of 1954 the amount of discount at which .bills issued here.
under are sold is not considered to accrue until such bills are sold, redeemed

or~m~

wise disposed of, and such bills are excluded from consideration as capital Bssets.
. Accordingly', the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent purchase, and the 81101IIII
actually received either upon sale or redemption at maturity during the taxable year
for which the return i8 made, as ordinary gain or 10s8.
Treasury Department Circular No. 418 (current reVision) and this notice, prescribe
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies

- 2 -

printed fonns and forwarded in the special envelopes which will be supplied by Fedeli
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers
vided the names of the customers are set forth in such tenders.

p~.

others than bank1q

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust compuUH
and from responsible and recognized dealers in investment securities.

Tenders

traa

others must be accompanied by payment of 2 percent of the face amount of Treasury b1J
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately af'ter the closing hour, tenders will be opened at the Federal Resel'!
Banks and Branches, following which public anouncement will be made by the
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Tnms~

Those submitting tenden

The Secretary of the Trealll

expressly reserves the right to accept or reject any or all tenders, in whole or 111
part, and his action in any such respect shall be final.

Subject to these resem·

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the Fedeft
Reserve Bank on

December 30, 1965

--------~~~~-----

, in cash or other immediately available fill

or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

Decemb~ 1965

• cash

Cash adjustments will be made tc

differences between the par value of maturing bills accepted in exchange and the 111
price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale
other dispoai tion of the bills, does not have any exemption, as such, and

loll

rrr-

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE,

December 20, 1965

Y t S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series

of ~asury bills to the aggregate amount of $ 2,200~0,000 , or thereabouts, tor
cash and in exchange for Treasury bills maturing

December 30, 1965, in the amount

of $ 2z200'i%&000 , as follows:
91

-day bills ( to maturity date) to be issued

December 50 J 1965

bJaX

hijC

in the amount of $1,200Q'000 , or thereabouts, representing an additional amount of bills dated
and to mature

March 5W966

March 5W965

, originally issued in the

amount of $ 1, 0 0 . , OOO£! the additional and original bills
(an additional $999,818,000 was issuedS~
to be freely interchangeable.
ber 50, 1965)
l82-day bills (to maturity date) to be issued December 50, 1965, in the ~~t
of $1,000,000,000, or thereabouts, representing an additional amount of bills dated
June 50, 1965, and to mature June 30, 1966, originally issued in the amount of
$1,000,647,000, the additional and original bills to be freely interchangeable.
The bills of both series will be issued on a discount basis under competitiw
and noncompetitive bidding as hereinafter provided, and at maturity their tace
will be payable without interest.

8III()IIIIt

They will, be issued in bearer torm only, and in

• Tender

J(lai6&
will not be received at the Treasury Department, Washington.

Each tender must be

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three dec1JDall,
e. g., 99.925.

Fractions may not be used.

It 1s urged that tenders be made

the

TREASURY CEPARTMENT

• •

~If'
•

WASHINGTON. D.C.' ' • • •
December ~o, 1965
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING

The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$ 2,200,000,000,or thereabouts, for cash and in exchange for
Treasury bIlls maturing December 30,1965, in the amount of
$ 2,200,007,000, as follows:
91-day bills (to maturity date) ID be issued December 30, 1965, in the
amount of $1,200,000,000, or thereabouts, representing an additional
amount of bills dated March 31, 1965, and to mature March 31,1966,
originally issued in the amount of $1,000,304,000 (an additional
$999,818,000 was issued September 30, 1965), the additional and original
bills to b~ freely interchangeable.
l82-day bills (to maturity date) to be issued December 30, 1965, in
the amount of $1,000,000,000, or thereabouts, representing an additional
amount of bills dated June 30, 1965, and to mature June 30, 1966,
originally issued in the amount of $1,000,647,000, the additional and
original bills to be freely interchangeable.
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Standard
time, Monday, December 27, 1965.
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are Bet forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-313

- 2 Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those sUbmitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on December 30,1965, in
cash or other immediately available funds or in a like face amount
of Treasury bills ma turing December eo, 1965. Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of- 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained frCXll
any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT

December 20, 1965
FOR DiMEDIATE RELEASE

TREASURY DEX::ISION ON FERROCHROMIUM
UNDER THE ANTIDUMPING ACT

The Treasury Department has determined that ferrochromium,
not containing over 3 percent by weight of carbon, from Norway,
is not being, nor likely to be, sold at less than fair value within
the meaning of the Antidumping Act, 1921, as amended.

A "Notice of

Tentative Determination," was published in the Federal Register on
October 26, 1965.
No written submissions or requests for an opportunity to present views in opposition to the tentative determination were presented within 30 days of the publication of the above-mentioned
notice in the Federal Register.
Imports of the involved merchandise received during the period
June 1, 1964, through September 30, 1965, amounted to approximately
$900,000.

TREASURY DEPARTMENT

December 20, 1965
FOR D1MEDIATE RlUEASE
TREASURY DEX:ISION ON FERROCHROMIUM
UNDER THE ANTIDUMPING ACT

The Treasury Department has determined that 1'errochromium,
not containing over 3 percent by weight of carbon, from Norway,

is not being, nor likely to be, sold at less than fair value within
the meaning of the Antidumping Act, 1921., as amended.

A "Notice of

Tentative Determination, II was published in the Federal Register on
October 26: 1965.
No written submissions or requests for an opportunity to present views in opposition to the tentative determination were presented wi thin 30 days of the publication of the above-mentioned
notice in the Federal Register.
ImPOrts of the involved merchandise received during the period
June 1, 19641 through September 30, 1965, amounted to a.pproximately

$900,000.

- 3 ~
.....
r_.

t.hc sa te or other <llspor:ltlon of Treasury bills does not have any special treatment
o.s
.
rouch, nmlcr the Internnl Revenue Code of 1954.

The bills are subject to estate, inhere

ttcU1ce, e;ift or other excise taxes, whether Federal or State I but are exempt from all
tn...mUon nml or hercafter imposed on the principal or interest thereof by any State, or
nny of the possessions of the United Statcs, or by any local "taxing authority.

For

purpoGCS of to.xation the amount of d'i,scount at which Treasury bills are originallJ' Gold
by the United Stater. is considered to be interest.

Under Sections 454 (b) and 1221 (5)

of the Internal Revenue Code of 1954 the amount of discount at which bills issued here.
under o.rc sold is not considered to accrue until such billa are sold,P redeemed or otherwiAe dispoced of, Gnd such bills are excluded from consideration as capital assets.
J\.ccordincly, the mmer of Treasury bills (other than life insurance companies) issued
hC"rcunder need include in his income tax return only the difference between the price
paId for such bills, whether on original issue or on subsequent pr'.lchase, and the amount
actually rccc 1ved either upon sale or redemption at maturi'ty during the taxable year
for which the return is made, as ordinary gain or

1080.

Treasury Department Circular No. 410 (current revision) and this notice, prcGcribe
the terms of the Treasury bills and govern the condItions of their issue.
the Circular may be obtained from any Federal Reserve Bank or Branch.

C~ies

- 2 -

Banking institutions generally may submit tenders for account of customers provided the names of the customers are set forth in such tenders.

others than

bank~g

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust companies
and from responsible and

recogni~ed

dealers in investment securities.

Tenders from

others must be accompanied by payment of 2 percent of the face amount of Treasury billa
applied for, unless the tenders are accompanied by an express guaranty of payment by

811

incorporated bank or trust company.
All bidders are required to agree not to purchase or to sell, or to make any agree.
additioDl
ments with respect to the purchase or sale or other disposition of any bills of this/
issue at a specific rate or price, until after one-thirty p.m., Eastern Standard time,
Wednesday, December 29, 1965

Immediately after the closing hour, tenders will be opened at the Federal Resene
Banks and Branches, following which public announcement will be made by the
Department of the amount and price range of accepted bids.
be advised of the acceptance or rejection thereof.

Treasu~

Those submitting tenders 1111

The Secretary of the Treasury ex-

pressly reserves the right to accept or reject any or all tenders, in whole or in
and his action in any such respect shall be final.
competitive tenders for $ 200,000

~rl,

Subject to these reservations, non-

or less without stated price from any one bidderrlll

6W)C

be accepted in full at the average price (in three decimals) of accepted competitive bid
Payment of accepted tenders at the prices offered must be made or completed at the h~I
Reserve Bank in cash or other immediately available funds on

January W66

provided, however, any qualified depositary will be pennitted to make payment by credit
in its Treasury tax and loan account for Treasury bills allotted to it for itself and
its customers up to any amount for which it shall be qualified in excess of

exiBti~

deposits when so notified by the Federal Reserve Bank of its District.
The income derived from Treasury bills, whether interest or gain from the Bale
or other disposition of the bills, does not have any exemption,

eueh, 6P.d 10BB f~

TREASURy DEPAiiWii1
Washington

December 22, 1965

FOR IMMEDIATE RELEASE

TREASURY OFFERS ADDITIONAL $1 BILLION IN JUNE TAX BlLIS

The Treasury Department, by this public notice, invites tenders for $l,OOO,OOO,OCQ
or thereabouts, of l68-day Treasury bills (to maturity date), to be issued Janmuys,
1966, on a discount basis under competitive and noncompetitive bidding as

provided.

herel~er

The bills of this series will be designated Tax Anticipation Series

&ndr~

resent an additional amount of bills dated October 11, 1965, to mature June 22,

19~,

originally issued in the amount of $1,002,548,000 (an additional $2,513,229,000 was is.
November 24, 1965).

The additional and original bills will be freely interchangeabl•.
They will be accepted at face value in

of income taxes due on

June

15~966

p8)'111

, and to the extent they are not presented

for this purpose the face amount of these bills will be payable without interest at
maturity.

Taxpayers desiring to apply these bills in payment of

June

1~1966

income taxes have the privilege of surrendering them to any Federal Reserve Bank or
Branch or to the Office of the Treasurer of the United States, Washington, not more till
fif'teen days before

June

1966

, and receiVing receipts therefor showing the

face amount of the bills so surrendered.
the bills on or before

June

~1966

These receipts may be submitted in lieu of
, to the District Director of Internal Re'l'

enue for the District in which such taxes are payable.

The bills will be issued in

bearer form only, and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000,

$500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closing
hour, one-thirty p.m., Eastern Standard time, Wednesday, December 29, 1965
will not be received at the Treasury Department, Washington.

• Tendel

tId

Each tender must be for

an even multiple of $1,000, and in the case of competitive tenders the price offe~
must be expressed on the basis of 100, with not more than three decimals, e. g., 99.92
Fractions may not be used.

It is urged that tenders be made on the printed fond~

forwarded in the special envelopes which will be supplied by Federal Reserve BankS Of
Branches on application therefor.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE
TREASURY OFFERS ADDITIONAL $1 BILLION IN JUNE TAX BILLS
The Treasury Department, by this public notice, invites tenders
for $1,000,000,000, or thereabouts, of l68-day Treasury bills (to
maturity date), to be issued January 5, 1966, on a discount basis
under competitive and noncompetitive bidding as hereinafter provided.
The bills of this series will be designated Tax Anticipation Series
and represent an additional amount of bills dated October 11, 1965,to
mature June 22, 1966, originally issued in the amount of $1,002,548,000
(an additional $2,513,229,000 was issued November 24,1965). The
additional and or~inal bills will be freely interchangeable. They
will be accepted at face value in payment of income taxes due on
June 15, 1966, and to the extent they are not presented for this
purpose the face amount of these bills will be payable without
interest at maturity. Taxpayers desiring to apply thesemlls in
payment of June 15, 1966, income taxes have the privilege of
surrendering them to any Federal Reserve Bank or Branch or to the
Office of the Treasurer of the United States, Washington, not more
than fifteen days before June 15, 1966, and receiving receipts
therefor showing the face amount of the bills so surrendered. These
receipts may be submitted in lieu of the bills on or before June 15,
1966, to the District Director of Internal Revenue for the District
in which such taxes are payable. The bills will be issued in bearer
form only, and in denominations of $1,000, $5,000, $10,000, $50,000,
S100,000, $500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Standard time,
Wednesday, December 29, 1965. Tenders will not be received at the
Treasury Department, Washington. Each tender must be for an even
mUltiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than
three decimals, e. g., 99.925. Fractions may not be used. It is
urged that tenders be made on the printed forms and forwarded in the
special envelopes which will be supplied by Federal Reserve Banks or
Branches on application therefor.
Banking institutions generally may submit tenders for account of
~ustomers provided the names of the customers are set forth in such
:enders. Others than banking institutions will not be permitted to
;ubmit tenders except for their own account. Tenders will be
eceived without deposit from incorporated banks and trust companies
nd from responsible and recognized dealers in investment securities.
-314

- 2 -

Tenders from others must be accompanied by payment of 2 percent of the
face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
All bidders are required to agree not to purchase or to sell, or
to make any agreements with respect to the purchase or sale or other
disposition of any bills of this additional issue at a specific rate
or price, until after one-thirty p.m., Eastern Standard time,
Wednesday, December 29, 1965.
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement
Nill be made by the Treasury Department of the amount and price range
of accepted bids. Those submitting tenders will be advised of the
~cceptance or rejection thereof.
The Secretary of the Treasury
2xpressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
$200,000 or less without stated price from anyone bidder will be
lccepted in full at the average price (in three decimals) of accepted
~ompetitive bids.
Payment of accepted tenders at the prices offered
rust be made or completed at the Federal Reserve Bank in cash or other
Lmmediately available funds on January 5, 1966, provided, however, any
lualified depositary will be permitted to make payment by credit in
Lts Treasury tax and loan account for Treasury bills allotted to it
:or itself and its customers up to any amount for which it shall be
~alified in excess of existing deposits when so notified by the
~deral Reserve Bank of its District.
The income derived from Treasury bills, whether interest or gain
:rom the sale or other disposition of the bills, does not have any
!xemption, as such, and loss from the sale or other disposition of
'reasury bills does not have any special treatment, as such, under the
:nternal Revenue Code of 1954. The bills are subject to estate,
.nheritance, gift or other excise taxes, whether Federal or State, but
.re exempt from all taxation now or hereafter imposed on the principal
~ interest thereof by any State, or any of the possessions of the
hited States, or by any local taxing authority. For purposes of
axation the amount of discount at which Treasury bills are
riginally sold by the United States is considered to be interest.
nder Sections 454 (b) and 1221 (5) of the Internal Revenue Code of
954 the amount of discount at which bills issued hereunder are sold
s not considered to accrue until such bills are sold, redeemed or
therwise disposed of, and such bills are excluded from consideration
s capital assets. Accordingly, the owner of Treasury bills (other
han life insurance companies) issued hereunder need include in his
ncome tax return only the difference between the price paid for such
ills, whether on original issue or on subsequent purchase, and the
nount actually received either upon sale or redemption at maturity

- 3 -

during the taxable year for which the return is made, as ordinary gain
or loss.
Treasury Department Circular No. 418 (current revision) and this
notice, prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.

000

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE

December

TREASURY ANNOUNCES FINANCING PLANS
The Treasury today announced the auction of an additional
$1 billion of tax anticipation bills due June 22, 1966, which
may be used at face value in payment of taxes due June 15, 1966.
The auction will be on December 29, 1965, for payment January 5,
1966, and commercial banks will be permitted to pay for the
bills through crediting of tax and loan accounts.

This

additional issue will increase the June 1966 tax anticipation
bills to $4.5 billion.
At the same time the Treasury said it plans to raise
additional cash by a $100 million increase in the $1.2 billion
regular weekly three-month bill issue, starting with the
auction on January 3, and probably running through a full
l3-week cycle.

The Treasury also indicated that it plans

to make another cash offering in January of about $1.5 billion
in the short-term area.

These borrowings will cover the bulk

of the Treasury's cash need for the second half of the current
fiscal year, estimated at about $5 billiono
This borrowing program, along with the pay-off of March
and June tax anticipation bills, will result in a net reduction
in the marketable debt between now and the end of the fiscal
.315 year.

TREASURY DEPARTMENT
(

FOR RELEASE 6 :30 P.M.,
Thursday, December 23, 1965.

rusULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
The Treasury Department announced today that the tenders for $1,000,000,000, or
thereabouts, ot 365-day Treasury bills to be dated December ~1, 1965, and to mature
December 31, 1966, 'Which were offered on December 16, were opened at the Federal Re.
serve Banks on December 23.
The details of this issue are as follows:
Total applied for Total accepted

$2,720,269,000
$1,000,834,000

(includes $52,299,000 entered on a
noncompetiti ve basis and accepted 1n
full at the average price shown below)

Range of accepted competitive bids: (Excepting 2 tenders totaling $900,000)
High
- 95.215 Equivalent rate of discount approx. 4. 7l9~ per
Low
- 95.197
"
""
"
" 4 . 737~ n
Average
- 95.203
"
""
"
" 4 . 73l~ n
(73 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

IUlII

Total
Total
Applied for
Accepted
$ 59,071,000
4>
11,771,000
1,878,509,000
716,615,000
17,904,000
2,904,000
68,843,000
62,173,000
3,183,000
3,183,000
52,343,000
11,149,000
420,172,000
115,633,000
31,498,000
18,421,000
6,855,000
1,855,000
2,744,000
2,744,000
16,950,000
1,950,000
162,197,000
52,436,000
TOTAL
$2,720,269,000
$1,000,834,000
On a coupon issue of the same length and for the same amount invested, the return
on these bills would provide a yield of 4.98%. Interest rates on bills are quote
in terms of bank discount with the return related to the face amount of the billJ.
payable at maturity rather than the amount invested and their length in actual
number of days related to a 360-day year. In contrast, yields on certificates, .
notes, and bonds are computed in terms of interest on the amount invested, and l'E
late the number of days remaining in an interest payment period to the actual .
number of days in the period, with semiannual compounding if more than one couPCt
period is involved.

TREASURY DEPARTMENT

)R RELEASE 6 :30 P.M.,
lursday, December 23, 1965.
RESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS

The Treasury Department announced today that the tenders for $1,000,000,000, or
lereabouts, of 365-day Treasury bills to be dated December 31, 1965, and to mature
~cember 31, 1966, which were offered on December 16, were opened at the Federal Re~rve Banks on December 23.
The details of this issue are as follows:
Tbtal applied for Tbtal accepted

$2,720,269,000
$1,000,834,000

(includes $52,299,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)

Range of accepted competitive bids: (Excepting 2 tenders totaling $900,000)
High
- 95.215 Equivalent rate of discount approx. 4.719~ per annum
Low
- 95.197
If
If
If
"
" 4 . 737rf,"
"
Average
- 95.203
"
If"
"
"4.731~""
(73 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. wuis
Minneapolis
Kansas City
Dallas
San Francisco

Total
Total
Applied for
Accepted
$ 59,071,000
$
11,771,000
1,878,509,000
716,615,000
17,904,000
2,904,000
68,843,000
62,173,000
3,183,000
3,183,000
52,343,000
11,149,000
420,172,000
115,633,000
31,498,000
18,421,000
6,855,000
1,855,000
2,744,000
2,744,000
16,950,000
1,950,000
162,197,000
52,436,000
TOTAL
$2,720,269,000
$1,000,834,000
On a coupon issue of the same length and for the same amount invested, the return
on these bills would provide a yield of 4.9810. Interest rates on bills are quoted
in tenns of bank. discount with the return related to the face amount of the bills
payable at maturity rather than the amount invested and their length in actual
number of days related to a 360-day year. In contrast, yields on certificates,
notes, and bonds are computed in tenns of interest on the amount invested, and relate the number of days remaining in an interest payment period to the actual
number of days in the period, with semiannual compounding if more than one coupon
period is involved.

TREASURY DEPARTMENT

)R RELEASE 6 :30 P.M.,
)nday, December 27, 1965.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING

The Treasury Department announced that tenders for the additional issue December 30
series of Treasury bills, one series dated March 31, 1965 (91 days to maturity)
ld the other series dated June 30, 1965 (182 days to maturity), which were offered on
~cember 20, were opened at the Federal Reserve Banks today.
Tenders were invited for
L,200,OOO,000, or thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts,
f 182-day bills. The details of the two series are as follows:

r two

OOE OF ACCEPTED
:)MPE'rITIVE BIOO:

High
Low
Average
23~
43~

91-day Treasury bills
maturing March 31, 1966
Approx. Equiv.
Price
Annual Rate
98.880
98.867
98.873

4.431~
4.482~

4.457~

182-day Treasury bills
maturing June 30, 1966
Approx. Equiv.
Price
Annual Rate
97.652
97.643
97.647

4.644~
4.662~

4.655'1>

of the amount of 91-day bills bid for at the low price was accepted
of the amount of 182-day bills bid for at the low price was accepted

JTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
~llas

San Francisco

I
I

A;E;Elied For
$ 12,840,000
1,339,258,000
25,565,000
31,496,000
17,242,000
39,468,000
250,636,000
36,607,000
18,548,000
37,602,000
31,391,000
99 z343 z000
$1,939,996,000

Acce12ted
12,840,000
$
753,508,000
13,565,000
31,496,000
17,242,000
33,544,000
131,109,000
36,607,000
18,548,000
37,602,000
24,891,000
89 z343 z000
$1,200,295,000 ~/

Acce;eted
A;I2;e1ied For
44,190,000
44,190,000 $
$
1,247,177,000
585,206,000
5,738,000
14,052,000
37,989,000
42,989,000
4,329,000
4,329,000
15,121,000
32,771,000
189,653,000
370,353,000
15,398,000
16,398,000
8,243,000
11,528,000
15,620,000
18,420,000
7,884,000
12,884,000
70 z870 z000
248 z480 z000
$2,063,571,000 $1,000,241,000 bl

TOTALS
Includes $259,067,000 noncompetitive tenders accepted at the average price of 98.873
Includes $125,762 / °°0 noncompetitive tenders accepted at the average price of 97.647
'l'hese rates are on a bank discount basis. The equivalent coupon issue yields are
4.57~ for the 91-day bills, and 4.83~ for the 182-day bills.

-317

tor f(d case Uecemb er 29

Assistant Treasury Secretary Rohert A. hallace announced that
hegi nning today one-cent an<.l five-cent coins \."i 11 he dated 1965 instead

of 1 ~)M

The 196"l <.late has been use<.l on pennies and nickels thusfar this

year to avoi<.l loJorsenlng shortages of these coins, nOl." largely overcome.
This I"ill permit coins of these uenominations to bear the same date as the
new <.limes, quarters

~lI1d

half dollars, authorized by the Coinage Act of 1965.

Penny anu nickel inventories are sufficient to permi t this move.
tlolVcver, supplies of dimes, quarters and half dollars are not yet adequate
to change the 19b5 date to 1966.

Coins of all denominations will resume

norlllal dating when there are enough in the pipelines to assure protection
against shortages.

TREASURY DEPARTMENT

December 28, 1965
FOR RELEASE: A.M. NEWSPAPERS
WEDNESDAY, DECEMBER 29, 1965
ONE AND FIVE CENT COINS
TO BE DATED 1965
Assistant Treasury Secretary Robert A. Wallace announced
that, beginning today, one-cent and five-cent coins will be
dated 1965 instead of 1964.
The 1964 date has been used on pennies and nickels thus
far this year to avoid worsening shortage'S of these coins,
now largely overcome.

This will permit coins of these

denominations to bear the same date as the new dimes, quarters
and half dollars, authorized by the Coinage Act of 1965.
Penny and
move.

nic~e1

inventories are sufficient to permit this

However, supplies of dimes, quarters and half dollars

are not yet adequate to change the 1965 date to 1966.
Coins of all denominations will resume normal dating when
there are enough in the pipelines to assure protection against
shortages.

000

F-318

- 4 The Coinage Act of 1965, which became law on July 23, 1965,
made no change in the penny, the nickel or the silver dollar.
There are no plans at present for minting of silver dollars.
Like the Kennedy half dollars dated 1964, those dated
1965 will not bear a mintmark.

The Coinage Act of 1965 specifies

that no mintmarks will be authorized until five years from
the date of initial issurance.

000

- 3 -

the past two months, over 400 million of the new quarters have
been placed in circulation.

The Philadelphia Mint has begun

minting of the new, non-silver dime -- also with cupronickel
faces clad on a core of pure copper.

Circulation of this

coin is also expected to begin early in the new year.
The new dimes, quarters and half dollars are three layer,
"clad" coins because this construction permits duplication in
a non-silver coin, or a coin with low silver content, of the
electrical properties of coins of 90 percent silver.

This

allows the new coins and the old; 90 percent silver coins, to
be used interchangeably in coin operated devices.
The switch to coins of lower silver content, or none,
was made necessary by a growing world silver shortage.
The silver coinage will continue to circulate, side-by-si~
with the new coinage.

- 2 -

All of the new half dollars will bear the date 1965
until the shortage of this denomination has been overcome.
Some 390 million 90 percent silver Kennedy half dollars made
during 1964 and 1965 all bear the date 1964.
The new half dollars will be placed in circulation early
next year.

They will be shipped to the Federal Reserve

Banks and branch banks and will be used by them in their
regular weekly coin shipments to supplement the supply of
circulating half dollars, through the medium of commercial
banks, throughout the country.
This was the procedure followed in issuing the first of
the three new coins -- the 25-cent piece -- authorized by the
Coinage Act of 1965.

Production of the new quarter, which

has cupronicke1 faces bonded to a core of pure copper, began
August 23, 1965 and circulation began November, 1965.

""fRMSH"R¥ A.mIOlJ~ ~tr1 FIRST STRIKING OF
HALF DOLLARS ~E FROM ~ NEW COINAGE MATERIAL
TO -~PtAGE AT T~ U. S. MINT AT DENVER ON
DECEMBER 3D,1,9.05~- l~OO A'.M., ,.M9'i'

Production of the new half dollar, authorized by the
Coinage Act of 1965, will start on Thursday, December 30, at
10:00 a.m. at the Denver Mint.
The new half dollar will continue to bear the Kennedy
design approved by the Congress two years ago.

Coin designs

are retained for 25 years unless the Congress directs an
earlier change.
The new half dollar will contain 40 percent silver
compared to the traditional 90 percent silver half dollars.
However, in appearance the new coin will be nearly identical
to the old half dollar as it will have outer layers of 80
silver.

perce~

The core will be 21 percent silver -- lowering total

silver content to 40 percent.

TREASURY DEPARTMENT

December 28, 1965
FOR RELEASE: P.M. NEWSPAPERS
WEDNESDAY, DECEMBER 29, 1965
FIRST STRIKING OF HALF DOLLARS FROM NEW
COINAGE MATERIAL AT U. S. MINT AT DENVER ON THURSDAY
Production of the new half dollar, authorized by the
Coinage Act of 1965, will start on Thursday, December 30, at
10:00 a.m. at the Denver Mint.
The new half dollar will continue to bear the Kennedy
design approved by the Congress two years ago. Coin designs
are retained for 25 years unless the Congress directs an
earlier change.
The new half dollar will contain 40 percent silver
compared to the traditional 90 percent silver half dollars.
However, in appearance the new coin will be nearly identical
to the old half dollar as it will have outer layers of 80
percent silver. The core will be 21 percent silver -- lowering
total silver content to 40 percent.
All of the new half dollars will bear the date 1965
until the shortage of this denomination has been overcome.
Some 390 million 90 percent silver Kennedy half dollars
made during 1964 and 1965 all bear the date 1964.
The new half dollars will be placed in circulation early
next year. They will be shipped to the Federal Reserve
Banks and branch banks and will be used by them in their
regular weekly coin shipments to supplement the supply of
circulating half dollars, through the medium of commercial
banks, throughout the country.
This was the procedure followed in issuing the first of
the three new coins -- the 25-cent piece -- authorized by the
Coinage Act of 1965. Production of the new quarter, which
(MORE)

F-3l9

- 2 has cupronickel faces bonded to a core of pure copper, began
August 23, 1965 and circulation began November, 1965. In
the past two months, over 400 million of the new quarters have
been placed in circulation. The Philadelphia Mint has begun
minting of the new, non-silver dime -- also with cupronicke1
faces clad on a core of pure copper. Circulation of this
coin is also expected to begin early in the new year.
The new dimes, quarters and half dollars are three layer,
"clad" coins because this construction permits duplication in
a non-silver coin, or a coin with low silver content, of the
electrical properties of coins of 90 percent silver. This
allows the new coins and the old; 90 percent silver coins, to
be used interchangeably in coin operated devices.
The switch to coins of lower silver content, or none,
was made necessary by a growing world silver shortage.
The silver coinage will continue to circulate, side-by-side
with the new coinage.
The Coinage Act of 1965, which became law on July 23, 1965,
made no change in the penny, the lickel or the silver dollar.
There are no plans at present for minting of silver dollars.
Like the Kennedy half dollars dated 1964, those dated
1965 will not bear a mintmark. The Coinage Act of 1965
specifies that no mintmarks will be authorized until five
years from the the date of initial issuance.

000

..)

sale or ot,lwr dbflositlon 0i" 'l'reaci_llY 0111s docs not huve any special treatment, 8S
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt from
all taxation no\ol or hereafter imposed on the principal or interest thereof by any Statt
or any of the possessions of the United states, or by any local taxing authority. fur
purposes of taxation the amount of discount at which Treasury bills are originally Boll
by the United States is considered to be interest.

Under Sections 454 (b) and 1221 (5

of the Internal Revenue Code of 1954 the amount of discount at which bills issued

he~

under are sold is not considered to accrue until such bills are sold, redeemed or othe
wise disposed of, and such bills are excluded from consideration as capital assets.
Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent purchase, and the

amo~

actually received either upon sale or redemption at maturity during the taxable year
for which the return is made J as ordinary gain or

lOS6.

Treasury Department Circular No. 418 (current revision) and this notice, prescrll
the tenns of the Treasury bills and govern the conditions of their issue.
the circular may be obtailled from any Federal Reserve Bank or Branch.

Copies of

- 2 -

printed fonns and forwarded in the special envelopes which will be supplied by Fedel\
Reserve Banks or Brfl.nchcs on application therefor.
Banking institutions generally may submit tenders for account of customers Provided the names of the customers are set forth in such tenders.

others than banking

institutions will not be pennitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust cOlDpanies
and from responsible and recognized dealers in investment securities.

Tenders

others must be accompanied by payment of 2 percent of the face amount of Treasury b1l
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal ReBer
Banks and Branches, following which public anouncement will be made by the
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Tre8sU~

Those submitting tenders

The Secretary of the

~aw

expressly reserves the right to accept or reject any or all tenders, in whole or in

part, and his action in any such respect shall be final.

Subject to these reserva-

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the Feden
Reserve Bank on _;;;.-<.'~:~,~. .:.;.:.c;;;;;",·';..,.';_'-j~~i
~l.,;;","';;:..'~'~~_ _ _ , in cash or other immediately available fill
or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

,J2':;

"c"r;"

WSGG

Cash

Cash adjustments will be made tl

differences between the par value of maturing bills accepted in exchange and the iii
price of the new bills.
Th.e income derived from Treasury bills, whether interest or gain from the s&lI
other disposition of the bills, does not have any exemption, as such, and loll t'tC'

rI'lUl\:~ln(Y

D~PARTMENT

\\':l [; h inl;ton

FOR IMMEDIATE REUJ\:,l':;;:

Tcr-CC'-C-CqTCCC~fq;q;c7-rT'nTf~~'s

HEEIU,Y

BILL OFFERING

The Treasul'J Depi1rtmcnt, by this pllblic notice, invites tenders for two series
of Treasury bills to the aggregate amullnt of $2,300~O,OOO
cash and in exchange for Treasury bills maturing
of $

;~,,~:U~)~~~:J,OOO

.)1

JunClar;v ~ 1966

, in the amount

, as follows:

-day bills (to maturity date) to be issued

, or thereabouts, for

JODuarw, 1966

in the amount of $ 1,300~O,000 , or thereabouts, representing an additional amount of bills dated
and. to mature

Aryi1 7~~G6

October~

1965

, originally issued in the

amount of $ 1, :]C)~'1, 000 , the additional and original bills
to be freely interchangeable.
-day bills, for $ 1,00~0,000 , or thereabouts, to be dated
J C'__ l' ~ar),

l::.:):~

,and to mature

The bills of both series will be issued on a discount basis under competltlw
and noncompetitive bidding as hereinafter provided, and at maturity their face
will be payable without interest.

They will·be issued in bearer form only, and

denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $l,OOO,~
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the cl.os1n.
hour, one-thirty p.m., Eastern Standard time,

'10- r_2~" "

J::;_:'-'}~3, 19[6

will not be received at the Treasury Department, Washington.

.~-

Each tender must be

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three dec1m81S,
e. g., 99.925.

Fractions may not be used.

It 15 urged that tenders be made on tile

TREASURY C~PARTMENT

fOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
or two series of Treasury bills to the aggregate amount of
12,300,000,000, or thereabouts, for cash and in exchange for
~reasury bills maturing January 6, 1966,
in the amount of
;2,202,223,000, as follows:
91-day bills (to maturity date) to be issued
n the amount of $1,300,000,000, or thereabouts,
~d1tional amount of bills dated October 7, 1965,
ature April 7, 1966
originally issued in the
1,001,464,000, the additional and original bills
nterchangeable.

January 6

representi~g

1966
an '

and to
amount of
to be freely

182-day bills, for ~,OOO,OOO,OOO, or thereabouts, to be dated
anuary 6, 1966,
and to mature July 7, 1966.
The bills of both series will be issued on a discount basis under
ompetitive and noncompetitive bidding as hereinafter provided, and at
aturity their face amount will be payable without interest. They
111 be issued in bearer form only, and in denominations of $1,000,
5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Standard
tme, Monday, January 3, 1966.
Tenders will not be
~celved at the Treasury De~artment, Washington.
Each tender must
~ for an even multiple of $1,000, and in the case of competitive
!nders the price offered must be expressed on the basis of 100,
th not more than three decimals, e. g., 99.925. Fractions may not
used. It is urged that tenders be made on the printed forms and
rwarded in the special envelopes which will be supplied by Federal
serve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
stomers provided the names of the customers are set forth in such
nders. Others than banking institutions will not be permitted to
bm1t tenders except for their own account. Tenders will be received
thout deposit from incorporated banks and trust companies and from
Sponsible and recognized dealers in investment securities. Tenders
om others must be accompanied by payment of 2 percent of the face
aunt of Treasury bills applied for, unless the tenders are
companied by an express guaranty of payment by an incorporated bank
trust company.
320

- 2 Immediatelv after the closing hour, tenders will be opened at the
Federal Reserve- Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasun
expressly reserves the right to accept or reject any or all tenders, .
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on January 6, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 6, 1966. Cash and exchange tender
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not co~sidered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lls are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained fr
any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT

oo.EASE 6 :30 P.M.,
lSday, December 29, 1965.
RESULTS OF 'ffiEASURY'S OFFER OF ADDITIONAL
$1 BILLION IN JUNE TAX BILLS

fhe Treasury Department announced that the tenders for an additional $1,000,000,000,
~reabouts, of the Tax Anticipation Series Treasury bills dated October 11, 1965,
o mature June 22, 1966, vere opened at the Federal Reserve Banks today. The addi1 amount of bills, which vere offered on December 22, vi11 be issued January 5,
(168 days tD maturity date).
fhe details of this issue are as follows:
Tbta1 applied for - $3,641,522,000
Tbtal accepted
1,000,706,000

Range of accepted competitive bids:

(includes $230,398,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
(Excepting two tenders totaling $200,000)

4.269% per annum
- 98.008 Equivalent rate of discount approx.
II
"
4.288% "
"
" "
"
- 97.999
Low
II
\I
"
.
"
L281%
"
"
- 98.002
Average
"
(54% of the amount bid for at the low price was accepted)
High

Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
L6.llas
San Francisco

1'ota1
Applied For
$ 163,615,000
1,479,540,000
168,180,000
250,895,000
75,015,000
178,678,000
402}377,000
163,225,000
147 , 4'5!'3 , 000
56,162,000
210,130,000
346,250,000_
TOTAL $3,641,522,OOC

s rate is on a bank discount basis.

Total
Accepted
$ 36,735,000
225,440,000
45,180,000
91,695,000
14,815,000
73,278,000
68,277,000
58,489,000
38,533,000
35,934,000
103,930,000
208,400,000

The equivalent coupon iss~r. yield is 4.43i·

"};/

TREASURY DEPARTMENT

FOR RELEASE 3:00 P.M., EST
DECEMBER 30, 1965

UNITED STATES AND MEXICO SIGN $75 MILLION
EXCHANGE STABILIZATION AGREEMENT
Secretary of the Treasury Henry H. Fowler, the Ambassador
of Mexico, Hugo B. Margain, and Ernesto Fernandez Hurtado,
Deputy Director of the Bank of Mexico, today signed a
$75 million Exchange Stabilization Agreement between the
United States Treasury, the Bank of Mexico, and the Government
of Mexico, replacing one for the same amount which expires at
the end of 1965.
The Agreement signed today represents an extension of
stabilization arrangements between the United States and Mexico
which have been in effect since 1941, and have proved beneficial
to the financial relationships between the two countries. For
the first time, the new agreement provides reciprocal swap
facilities available for use both by Mexico and by the United
Stdtes. The availability of the new swap facilities will further
strengthen the ability of the financial authorities to cooperate
effectively and to conduct such stabilization operations as may
be desirable from time to time to promote stable and orderly
conditions in the exchange markets.
The new Agreement will be effective during the two-year
period ending December 31, 1967.
000

F-322

TREASURY DEPARTMENT

ADVANCE FOR USE IN P~PERS
OF SUNDAY, JANUARY 2, 1966
NEW

~ffiDAL

OF PRESIDENT JOHNSON

~~DE

BY U. S. MINT

The Director of the Mint, Miss Eva Adams, announced
today the Hint has struck a net" medal of President Lyndon B.
Johnson.
This medal marks the beginning of the President's current
term in office, on January 20, 1965. On March 6, 1964,
the Mint issued a medal commemorating his succession to the
Presidency on the death of President John F. Kennedy, November
22, 1963.
The new Johnson medal bears a full face portrait in relief
of the Chief Executive, with the words Lyndon B. Johnson
around the top half. The earlier Johnson medal was a profile
portrait. On the reverse of the new medal is a quotation from
the president's January 20, 1965 Inaugural Address:
On this occasion the oath I have taken before you
and before God - is not mine alone but ours together.
We are one nation and one people . • .
Below the quotation is a small raised reproduction of the
seal of the President of the United States, the President's
signature in script, and the inaugural date. The reverse of
the previous Johnson medal reproduced the Presidential seal the
full size of the medal with the addition to the seal of the
date November 22, 1963. The new medal was made by Frank
Gasparro, Chief Engraver of the Mint.
The new, as well as the older Johnson medal can be ordered
from the Superintendent, U. S. Mint, Philadelphia, Pennsylvania
19130, for $3.00, including postage and insurance. The new medal
is designated Presidential List No. 137; the older medal is
Presidential List No. 136. Mail orders should bear the list
number and be paid by personal check or money order, not cash.
The Presidential series of Mint medals dates back to our
early colonial history when medals were presented by George II
and George III to Indian Chiefs in recognition of their fealty
F-323

to the British Crmvn.
After the Revolutionary War the United States
continued this practice, replacing the likeness of the British
Kin~ \vith that of the President of the United States.
Almost
without exception, these Indian Peace Medals were struck during
the Administration of each succeeding Chief Executive and
bore his likeness on the obverse with appropriate symbols of
peace and friendship on the reverse.
After cessation of
hostilities with the Indian tribes removed this need for
medals, the series ,vas continued as documentation of the
Presidency.
Production and sale of commemorative medals honoring,
besides the Presidents, Army and Navv heroes and outstanding
citi~ens, and memorializing events of national importance,
has been carried on at the Philadelphia Hint for over 100 years.

000

=
WASHINGTON,
:;'C::'

~~2:.~~

:·:~i..21j J

6: 30 P. :.~. )

Ja:11.;.3.~:,r

3 J 19 3:3 •

R:.3l.TL':23 01" ':E.EA.SURY T S HM..:a.,y BILL OFF:2.QE;G
'D~c

':'rC8.3U:::-Y vepartmen-;; Cii.L!J.OUncea. t::0.t tbe tenders for two series of Treasury
oe an a6.c...itiona1 issue of tDe bills dated October 7, 1965, and
"LLc uthe:' QOl.'ico -to 1:,q c4t.tGcl Jc.nu~:r7 6, 1~g6 J whiGn WGrG offered OIl DocombQr 29,
1:)G5, ve~e opened at tne ?ede~a1 Rese:-ve Banks today. Tenders \oJ'ere invited for
yl,:::OJ)OOJ,OGG) 0: t.~e:-eabo:.:.ts) of 91-day bills and for ;pl,OOO,OOO,OOO, or thereabouts, of 182-day bills. 7~1e d.etails of tDe two series are as follows:

c::":;":::;, one se~ies to

?J...l;G~ OF ACC2?':l:'..:.D
C01·:PZTITIVZ BIDS:

Eic;h
W'vl

lwe~aGe

£.!

182-day Treasury bills
maturing July 7, 1966
Approx. Equb
Price
Annual Rate
97.u::;,~':iJ
4.700~
97.608
4.731%
97.615
4.718~y

ell-day Tyeasury bi:l3
ii.;pc.'i1 7, 1900
;"pprox. :Lq,ui v.
Py:'ce
Ann'vlCil ?ate
90.GGO~
4.J10'1J
98.8';4
1.o.573~~
98.85~
4.532~f)~/
::-:at'~:::::'n6

Exce:ptinc one tenciel' 0-': ~20C) OOC; E../ :2xcepting tyro tenders totaling $310,000
cills bici for at tDe 1m.; p~ice was accepted
bilis bid for at t:ne low price was accepted

'~u~ of tl'lC a-;:.ow:t of 91-day
7~ of the aI;',ount of 1,S2-day

TO':2l..L

T~lmlBS

APPLI.2:) ?O:\

:Ji~-t~ict

I~n;)liecl
.., ....

ACCZPTlID BY F2:lZRAL R2SERVE DISTrtrCTS:

:?or

,',

2o:;to:-l
l~C'"

;:'~J

Yori\.

?~ilad.elphia

3";)770)000
't'
1,3:)(:,,21.9,000
30,:, . . 5) 000

Cleveland.
Ric:. . . . ;1ond

1/",) 363) 000

~tlJ.nta

4~)lC:',OOO

,., ..
",.i.lC8.GO
ot. wuis

~·:i.:lr.8apoli s

101D.S~S

City

::::elias
S3.n ?:-ancisco

':0'2.".U..S
,

2u)~S7,OCO

260)936,000
50,564,000
17 , Gi..:,~ ,000
26, ,:.13 ,000
2:2):::29)000
1,r
_.:.,IGO;Gvv
_r~

~'1"

~l)9:31)S4G,CCO

Acce....,-:;ed
34)770,000
~
727,6";9,000
24,685,000
20,237,000
l4}363,OGO
4/.. ) 101,000
1s:1,8Ss:,000
45,564,000

Applied For
~

3,7~0)000

28,187,000
235,964,000
2!.. , 211,000
11,078,000
13)749,000
14,065,000
2s,9 z221 z000

17,8~4)000

26,413)000
23,329,000
112,725,000
;;:1)3CO,19(,000

18,~~9,000

1,264,646,000
17,624,000
49)748)000

:::./

$1,930,685,000

Accented
$ "18, 222,O(
637,036,O!
9,624,O!'
49,748,()
3,740,()
15,397,0
1ll,314,O
14,746,0
10,070,0,
13,249,0
10,135,0
107 z382~
$1,OOO,671,C

£/. :'.::.:::::";.;.':"e s .;;250) S07 ,COO :::-.o::cc::lpeti t:::. ve ter.cieys accepted. at the average price of 98.
::•.::::':.:.d.es .)ll5,30";,OOO r:..or:..co::;petitive tend.ers accepted. at t1'.e avera,,:;e price of 97.
~
;;' 7.,csc :::-ates a~e on a ca:-.-L: d.isco~"G '':':'S:''3. Tne eq,uiva1ent coupon issue yields al'f.
, OJ,;
--,-I ~~O~
-...
9.1- -GfJ..;/
;; , '0-'1'
~
t'{'.e 1"'''
•...
~ • ...
"de
.... -'-s, ana.- 4. grJ
v;o lor
DG- da y '0'11
1.
s.

TREASURY DEPARTMENT

R RELEASE 6: 30 P.M.,
nday, January 3, 1966.
RESULTS OF TREASURY'S HEEKLY BILL OFFERING

The Treasury Department announced that the tenders for two series of Treasury
Lls, one series to be an additional issue of the bills dated October 7, 1965 and
= other series to be dated January 6, 1966, which were offered on December
35, were opened at the Federal Reserve Banks today. Tenders were invited for
,300,000,000, or thereabouts, of 91-day bills and for ~l,OOO,OOO,OOO, or there)uts, of lS2-day bills. The details of the two series are as follows:

29,

OF ACCbPTED
lPETITIVE BIDS:

~GB

High
Low
Average
~j
48~
7~

91-day Treasury bills
maturing April 7, 1966
Approx. Equi v.
Price
Annual Rate
98.860 il
4.51010
98.844
4.57Y/o
98.354
4.532%- ~/

182-day Treasury bills
maturing July 7, 1965
Approx. Equiv.
Annual Rate
Price
4.7000/0
97.024 '£1
97.508
4.731%
97.615
4. 71810 ~/

Exceptin,-:; one tendel' of ;p800, 000; 'E./ Excepting two tenders totalinG :.jJ310, 000
of the amount of 91-day bills bid for at the low price was accepted
of the anount of 182-day bills bid for at the low price was accepted

TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

.strict
)ston
~w York
lila delphia
.eveland
.chmond
lanta
.icago
. Louis
nneapolis
nsas City
lias
n Francisco

Applied For
;p 34,770,000
1,308,249,000
30,685,000
26,867,000
14,363,000
44,101,000
266,936,000
50,564,000
17,844,000
26,413,000
28,329,000
112,725,000

Accepted
$ 34,770,000
787,649,000
24,685,000
26,867,000
14,363,000
44,101,000
141,884,000
45,564,000
17,844,000
26,413,000
23,329,000
112,725,000

Applied For
$ 18,449,000
1,264,646,000
17,624,000
49,748,000
3,740,000
28,187,000
235,964,000
24,211,000
11,078,000
13,749,000
14,065,000
249,224,000

Accepted
4>
18,222,000
637,036,000
9,624,000
49,748,000
3,740,000
15,397,000
111,314,000
14,746,000
10,078,000
13,249,000
10,135,000
107,382,000

~1,000,671,000 ~/
$1,300,194,000 £/ $1,930,685,000
$1,961,846,000
lcludes $250 907 000 noncompetitive tenders accepted at the average price of 98.854
lcludes $115;304;000 noncompetitive tenders accepted at the aver~ge pri~e of 97.615
lese rates are on a bank discount basis. The equivalent coupon lssue Yle1ds are
65% for the 91-day bills, and 4.90% for the 182-day bills.

IDTALS

7 . /\t1. --I. U / ,J-:;,
:'>ccrc;tar;)- of the Treasury Henry H. Fowler today announced
a dra"lin 6 by thEe United .')tates on the International Monetary
I"und in t'1e a.r.1ount of

;~lOO

million.

The drawing was made in

Canadian dollars.

,J1 This dra'.'ling is the eighth in a series of what have been
termed "technical" drawings which began ).n--FebFul:lry 1964.
,.

The

currenc~' dravm

by the Uni ted

~s ~

sold for dollars to other Fund members
rep~yrnents

expected to be

f~~

use in making

to the Fund over the next several months.

Approve:
Disapprove:

TREASURY DEPARTMENT

January 4, 1966
IMMEDIATE RELEASE
u.S. MAKES I.M.F. DRAWING
Secretary of the Treasury Henry H. Fowler
today announced a drawing by the United States on
the International Monetary Fund in the amount of
$100 million.

The drawing was made in Canadian

dollars.
The currency drawn by the United States is
expected to be sold for dollars to other Fund
members for their use in making repayments to the
Fund over the next several months.
This drawing is the eighth in a series of what
have been termed" technical" drawings which began
in February 1964.

000

F-325

TREASURY DEPARTMENT
WASHINGTON.

January 4, 1966
FOR U1HEDIA TE RELI'J.SE

TREASURY DECISION ON STEEL JACKS
mIDER 'YrIE ANTIDUMPING ACT
The Treasury Department has completed its investigation with
respect to the possible dumping of steel jacks from Canada, manufactured by J. C. Hallman Hanufacturing Co., Ltd., Waterloo, Ontario,
Canada.

A notice of a tentative determination that this merchandise

is being, or is likely to be, sold at less than fair value within
the meaning of the Antidumping Act, 1921, as amended, will be published in an early issue of the Federal Register.
The merchandise under consideration consists of heavy-duty steel
jacks, from 36-inches to 64-inches high.

They are hand-operated

mechanisms for lifting cars, trucks, tractors, etc.
Appraisement of the above-described merchandise from Canada,
manufactured by J. C. Hallman Manufacturing Co., Ltd., Waterloo,
Ontario, Canada, has been withheld at this time.
Imports of the involved merchandise received during the period
July

1, 1964, through September 30, 1965, amounted to approximately

$167,000.

TREASURY DEPARTMENT

January 4, 1966
FOO IMMEDIATE RBLEASE

'ffiEASURY DECISION ON STEEL JACKB
UNDER THE ANTIDUMPING P£T

The Treasury Department has completed its investigation with
respect to the possible dumping of steel jacks from Canada, manufactured by J. C. HalLman Manufacturing Co., Ltd., Waterloo, Ontario,
Canada.

A notice of a tentative determination that this merchandise

is being, or is likely to be, sold at less than fair value wi thin
the meaning of the Antidumping Act, 1921, as amended, will be published in an early issue of the Federal Register.
The merchandise under consideration consists of heavy-duty steel
jacks, from 36-inches to 64-inches high.

They are hand-operated

$167,000.

A. BAYARD ANG LE, District Director-designate of Tampa
Customs District, was born on October 1, 1908 in Bartow, Fla.
He attended the University of Florida, was admitted to the Florida
Bar in 1933 and subsequently to the Federal District Court, 5th
Circuit Court of

Appeal~

and Customs Court.

Mr. Angle is a Captain in the U. S. Coast Guard Reserve,
designated as Port Security and Legal Officer.

He is an"active

member of the American Legion, the Elks Club, the American Bar
Association, and the Florida Bar Association
Mr. Angle was appointed Collector of Customs in

Jul~

1961 J

with supervisory responsibility for approximately 300 employees
throughout the Florida Customs District.
Mr. and Mrs. Angle reside at 4002 Bay-to··Bay Blvd., Tampa,
Fla.

***

(more)

HRS. RtrrH JONES, District Director-designate of the Virgin Islands
I
~
Custo;ns District, "Tas born in Hew York City.:iII iL~ -received ~ Bachelor
of Arts degree in business adrrdnistration at the College of the City of

aNew York in 1943 and ..-.r l1aster of Science degree in business administration
at CCNY in 1957.
~'lrs.

Jones served. the Internal Revenue Service for

an agent, reviei.,rer, 8nd instructor.

25 years as

On November 24, 1961)!,'u·s. Jones·

was appointed Collector of Gustoms in the Virgin Islands, with administrative
control of 39 Customs personnel at the ports of st.
Christiansted

St. Croix;

~ruz

Bay and Coral Bay

Thomas~

Frederiksted

St. John.

(END)

A~l

RAFAEL A. TORRENS, District Director-designate of the Puerto Rico
Customs District, was born on September 11, 1910 in Hato Rey, Puerto
Rico.

He was educated at the Santurce Central High School, P.R., and

attended

the Treasury Department Law Enforcement Officers Training

School.
He served in the Ue S. Army from 1940 to 1946, attended the
Artillery School at Fort Sill, Okla., and passed the basic and advanced courses for officers.
After a few years with the Royal Bank of Canada in San Juan
as an accountant, Mr. Torrens entered the federal service in San
Juan as a Customs guard in 1938.

Following his discharge from the

Army in 1946, he became a Customs inspector.

1950 he was trans-

ferred to New York City, and in 1952 entered the Customs Agency
Service as a criminal investigator.

Mr. Torrens was appointed Acting Collector of Customs in San
Juan in January 1965.
with subports at

He supervises the Puerto Rico Customs District

Mayague~,

POnce, and Fajardo, with a total work

force of approximately 180 persons.

Mr. and Mrs. Torrens reside at 657 Ponce de Leon Ave., Santurce,

(more)

ALFRED R. DeANGELUS, Distrut Director-designate of the
Wilmington, N. C. Customs pistrict, was born August 18, 1936J in
Cranston, R.1.

He holds a Bachelor of Science degree from

Providence Collegel in Providence, R.1., where he graduated
Magna Cum Laude in June 1957, ranking seventeen in a class of
275.

His special field was business administration (management).

He did post-graduate work at the American University in Washington
D. C. in 1958 and 1959 and is fluent in French, Italian and Spanish.
Mr. DeAngelus served in the Adjutant General's School, U. S.
Army, at Fort Harrison, Indiana, as a second lieutenant, with
responsibility for conducting troop information classes.

He entered

the government service at the Bureau of Accounts, Treasury Department in June 1958, transferring to the Customs Service in August 1959
as a Customs examiner in New York City.

In May 1961 Mr. DeAngelu8

transferred to Wilmington, N. C., as Customs line examiner, oecoming
appraiser there in 1963.
Mr. and Mrs. DeAngelus reside at 626 Pine Valley Drive,
Wilmington, N. C.

***

(more)

CARL H. VINING, District Director-designate of the Charleston,
S. C. Customs District, was born on June 16, 1915 at Kalamazoo,
Mich.

He was educated

the Kalamazoo public schools and served

with the U. oS. Army from 1933 to 1936 and in 1945-460
Mr. Vining, who has been Assistant Collector of Customs in
Charleston since November 1963, started his career in Detroit, Mich.,
with the Fruehauf Trailer Company in 1936.

In 1942 he entered the

Customs Service as a journeyman inspector in Detroit, and in 1958
he was named supervisory customs inspector in Charleston, S. C.
Mr. and Mrs. Vining reside at 2145 Westrivers Road, Charleston.

s.C.

***

(more)

MRS. MARION F. BAKER, District Director-designate of the
Savannah Customs District, was born at Camilla, Georgia, .........
.... r ";

Qii

Macon. Ga.

am}

received her education at Wesleyan College,

Her major field's of interest wee dramatics and public

speaking.
Mrs. Baker taught dramatics for a number of years and then
went into the department store business as a general manager and
buyer.
Mrs. Baker was appointed Collector of Customs in Savannah
in June 1962 and has supervised the work of 29 Customs personnel.

She is a member of the Chamber of Commerce in Savannah and ¥Me

./fA

pMsideftt of the Quota Club in that city.

Mrs. Baker resides with her husband Reginald Baker at 201 East
65th Street, Savannah, Ga.

***

BIOGRAPHICAL SKETCHES OF DISTRICT DIRECTORS

EVER2TT F. DE BRAND, District Director-designate of the
Miami Ci.4stoms District, was born on December 21,
Washington.

191~

in Everett.

He attended school in Savannah i Georgia. and was a

student at the Norfolk Business College at Norfolk, Va.

He also

took management training courses.
Mr. De Brand served with the U. S. Navy from 1931 to 1934.
He entered the Government service in 1936 as a messenger and clerk
with the National Advisory Committee for Aeronautics/and in 1938 he
transferred to the Office of the Collector of Customs in Norfolk. Va ••
where he served in the Entry and Liquidation Division.
Mr. De Brand rose through the ranks.

In 1946 he was promoted

to line examiner in Norfolki handling all classes of merchandise for
the appraiser's office.

He was promoted to the post of Appraiser of

Merchandise in 1950 in Norfolk and in 1952 was transferred to Miami.
Fla., in that same position.
Mr. and Mrs. De Brand reside at 9515 S. W. 48th St. t Miami,
Fla.

***

(more)

BIOGRAPHICAL SKETCH OF JAMES E. TOWNSEND
James E. Townsend, Assistant Regional Commissioner
(Administration) designate, was born in Atlanta, Georgia,
in 1926.

He attended Georgia Institute of Technology

and received a Bachelor of Science degree in textile
engineering there in 1950.

During World War II he served

as a sergeant in the U.S. Air Force.
Mr. Townsend joined the Customs Service in April/1950,
as a Customs examiner at Charleston, South Carolina.

was promoted to liaison officer in September, 1952, at the
Bureau of Customs in Washington, D.C.

In 1959, he was

transferred to Wilmington, N.C., where he served as Assistant
Collector of Customs.

He returned to the Bureau in Washington

as operations officer in March, 1965.
Mr. and Mrs. Townsend reside at 13511 Bartlett Street,
Rockville, Md. They have three children, James E., Jr., 13;
Geoffrey, 9; and Vi~toria, 5.
f

000

BIOGRAPHICAL SKETCH OF HARLON J. SPONHEIM
Harlon J. Sponheim, Assistant Regional Commissioner
(Operations) designate, was born in Minnesota in 1911 and
studied at Wayne University, Detroit.
Since 1956, Mr. Sponheim has been Assistant Collector
of Customs in Tampa, Fla.

For several years during this

period he has served in Tampa as Acting Collector of
Customs.

In his position as Assistant Collector in Tampa,

Mr. Sponheim has supervisory responsibility for approximately
300 employees in the District of Florida.
Mr. Sponheim started his government career as a clerk
N

in 1929 with the Customs Service in pe?bina, North Dakota,
transferring to Detroit, Michigan, in 1934.

During the

next two decades, Mr. Sponheim held several positions in the
Moneys and Accounts Division of the Bureau of Customs in
Detroit, and in 1954 he became Administrative Officer in
that division.

In 1955, he was appointed Acting Assistant

Collector in Detroit and placed in charge of entry and
liquidation operations.
Mr. and Mrs. Sponheim reside at 3401 San Jose, Tampa,
Florida.

2
Secret~ry

Former
~s

of the Treasury Douglas Dillon appointed

}~.

Stover

Project Leader of the Joint Treasury Department-Bureau of Customs ~ey

Group to evaluate the mission, oreanization, and man&ement of the U. S.
r:ustoms Service.

This study provided the basis for a mn.jor reorganization

of the l76-year-old Customs Service.

For his leadership in this project,

i'ir. ,t')tover received a Treasury Department Exceptional Serrlce Award in

1965.
~Ir.

Stover is active in civic and professional groups.

He has been

president of the East Falls Church Civic Association, chairman of the
Boy: Scout Troop Cormnittee, and president of the l·1emorial 3aptist iliurch
Brotherhood.

7{e has also served as chairman of the Arlington County,

Vireinia, Legislative Advisory Committee.
Nr. and HI'S. Stover reside at 9609 Clark Crossing Road, Vienna,
Virginia.

They have two children, HI's. Ann Patrick of Bailey's Cross-

roads, Vireinia, <'lnd Robert D. Stover of 4149 N. Henderson Rd., Arlington,
Vireinia.

# /I #

~ \

BIOGRAmICAL SKETCH OF JAriliS H. STOVER
James H. Stover was born in Forest Hill, West Virginia,

1911.

He eraduated from1ralcott District High School in West Virginia

and studied accountina and

night school.
~

•

QC'es1s..,~

commerci~l l~w

at Benjamin Franklin University

Later, as part of a Rockefeller Public Service Award, he

advanced m:tnRgement

~ourses

at Northwestern, Indiana, and tIarvard

Universities.
Hr. stover started his government career in 1935 as a clerk in the
Gentral Accounts Office of the Treasury Department.

He was promoted to

the position of Chief of the Operations Analysis Section and later moved
on to the Treasury Budeet Section, Bureau of Accounts, as
Chief.

Durine Horld

from second

~"ar

lieuten~mt

As~istant

II, Nr. Stover served in Army Finance and rose

to major before his discharge in 1946.

Returnine to the Treasury Department,

}~.

stover became assistant

to the Commissioner in the Bureau of Public Debt.

Subsequently he was

appointed chief of the Hanagement Analysis Division in the Office of the
Secretary.

Since April, 1963, he has been Director of the Office' of

11anagement and Organization in the Office of the Secretary of the
Treasur.r.
In 1959, !1r. Stover was- ti1El l'~ @iFlieat of a Rockefeller Public
Servi~e Aw~rd

for Distinguished Federal Service.

1963 he was

honored l;ith a Special Service Award "for note}Torthy contribution
to effective and efficient operation of the Treasury Department."

- 4 Chicago, Ill., March; Baltimore, Md., April; Houston, Tex.
and Boston, Mass., May; and New York City in June.
Offices of the Miami regional headquarters will be
located on the 16th floor of the Federal Office Building at 51 S.W
First Avenue, Miami, Fla.
United States Commissioner of Customs Lester D. Johnson
heads the Bureau of Customs, which is part of the Treasury
Department.

His office is in Washington, D.C.

(Biographies attached)

000

- 3 -

1965 , evaluated the mission, organization, and management of
the United States Customs Service.
group was released in March 1965.

The final report of the
One of its principal

recommendations was that the Customs Bureau be placed on a
career basis.
The Reorganization Plan, which went into effect on
May 25, 1965, provided for the elimination of 53 Customs
positions throughout the U.S. previously filled by Presidential
appointment.
Miami will be the third region to be activated in
accordance with a year-long timetable.

The San Francisco and

Los Angeles Regions were established November 1, 1965 and
January 1, 1966, respectively.
scheduled as follows:

The remaining six regions are

New Orleans, also in February;

- 2 -

activation of the new region.

Regiona1ization and the 1965

Presidential reorganization of the Bureau of Customs, which
placed the 176-year-01d Customs Service wholly on a career
basis, are major parts of a general modernization of the Bureau.
Selection of seven Customs District Directors for the
new region was also announced.

They are:

Miami Customs District - Everett F. De Brand
of Miami, Fla.
Savannah Customs District - Mrs. Marion F. Baker
of Savannah, Ga.
Charleston Customs District - Carl H. Vining
of Charleston, S.C.
Wilmington Customs District - Alfred R. DeAnge1us
of Wilmington, N.C.
San Juan Customs District - Rafael A. Torrens
of San Juan, P.R.
St. Thomas Customs District - Mrs. Ruth H. Jones
of St. Thomas, V.I.
Tampa Customs District - A. Bayard Angle
of Tampa, F1a o
Mr. Stover was the project leader of the Joint Treasury
Department-Bureau of Customs Survey Group which, from 1963 to

1/3/65

DRAF'[
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, JANUARY 5, 1966
REGIONAL COMMISSIONERS AND DISTRICT
APPOINTED FOR MIAMI REGION

DIRECTO~

Assistant Secretary of the Treasury True Davis today
announced the appointment of James H. Stover, Washington,
D.C., a career U.S. Treasury official, as Regional Commissioner
of Customs for the new Miami Customs Region IV.
Assistant Secretary Davis also announced the appointments
of Harlon J. Sponheim, Assistant Collector of Customs at
Tampa, Florida, as Assistant Regional Commissioner for
Operations in the new Miami Region and James E. Townsend,
operations officer in the Bureau of Customs, Washington, D.C.,
as Assistant Regional Commissioner for Administration.
The appointments, made in accordance with Civil Service
regulations, will become effective February 1 with the

TREASURY DEPARTMENT

January 4, 1966
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, JANUARY 5, 1966
REGIONAL COMMISSIONERS AND DISTRICT DIRECTORS
APPOINTED FOR MIAMI REGION
Assistant Secretary of the Treasury True Davis today
announced the appointment of James H. Stover, Washington, D.C.,
a career U. S. Treasury official, as Regional Commissioner of
Customs for the new Miami Customs Region IV.
Assistant Secretary Davis also announced the appointments
of Harlon J. Sponheim, Assistant Collector of Customs at
Tampa, Florida, as Assistant Regional Commissioner for
Operations in the new Miami Region and James E. Townsend,
operations officer in the Bureau of Customs, Washington, D.C.,
as Assistant Regional Commissioner for Administration.
The appointments, made in accordance with Civil Service
regulations, will become effective February 1 with the
activation of the new region. Regionalization and the 1965
Presidential reorganization of the Bureau of Customs, which
placed the l76-year-old Customs Service wholly on a career
basis, are major parts of a general modernization of the
Bureau.
Selection of seven Customs District Directors for the
new region was also announced. They are:
Miami Customs District - Everett F. De Brand
of Miami, Florida.
Savannah Customs District - Mrs. Marion F. Baker
of Savannah, Georgia.
Charleston Customs District - Carl H. Vining
of Charleston, South Carolina.
Wilmington Customs District - Alfred R. DeAngelus
of Wilmington, North Carolina.
San Juan Customs District - Rafael A. Torrens
of San Juan, P.R.
St. Thomas Customs District - Mrs. Ruth H. Jones
of St. Thomas, V. I.
Ta~pa Customs District - A. Bayard Angle of Tampa,
Florida.
F-326

- 2 Mr. Stover was the project leader of the Joint Treasury
Department-Bureau of Customs Survey Group which, from 1963 to
1965 , evaluated the mission, organization, and management of
the United States Customs Service. The final report of the
group was released in March 1965. One of its principal
recommendations was that the Customs Bureau be placed on a
career basis.
The Reorganization Plan, which went into effect on
May 25, 1965, provided for the elimination of 53 Customs
positions throughout the U. S. previously filled by
Presidential appointment.
Miami will be the third region to be activated in
accordance with a year-long timetable. The San Francisco and
Los Angeles Regions were established November 1, 1965, and
January 1, 1966, respectively. The remaining six regions are
scheduled as follows:
New Orleans, also in February;
Chicago, Illinois, March; Baltimore, Maryland, April; Houston,
Texas and Boston, Massachusetts, May; and New York City in
June.
Offices of the Miami regional headquarters will be
located on the 16th floor of the Federal Office Building at
51 S.W. First Avenue, Miami, Florida.
United States Commissioner of Customs Lester D. Johnson
heads the Bureau of Customs, which is part of the Treasury
Department. His office is in Washington, D. C.

(Biographies attached)

000

BIOGRAPHICAL SKETCH OF JAMES H. STOVER
James H. Stover was born in Forest Hill, West Virginia, in 1911. He
graduated from Talcott District High School in West Virginia and studied
accounting and commercial law at Benjamin Franklin University night school.
Later, as part of a Rockefeller Public Service Award, he attended advanced
management courses at Northwestern, Indiana, and Harvard Universities.
Mr. Stover started his government career in 1935 as a clerk in the Central
Accounts Office of the Treasury Department. He was promoted to the position
of Chief of the Operations Analysis Section and later moved on to the Treasury
Budget Section, Bureau of Accounts, as Assistant Chief. During World War II,
Mr. Stover served in Army Finance and rose from second lieutenant to major
before his discharge in 1946.
Returning to the Treasury Department, Mr. Stover became assistant to
the Commissioner in the Bureau of Public Debt. Subsequently he was appointed
chief of the Management Analysis Division in the Office of the Secretary.
Since April, 1963. he has been Director of the Office of Management and Organization
in the Office of the Secretary of the Treasury.
In 1959, Mr. Stover received a Rockefeller Public Service Award for
Distinguished Federal Service. In 1963 he was honored with a Special Service
Award "for noteworthy contribution to effective and efficient operation of the
Treasury Department. "
Former Secretary of the Treasury Douglas Dillon appointed Mr. Stover
as Project Leader of the Joint Treasury Department-Bureau of Customs Survey Group
to evaluate the mission, organization, and management of the U. S. Customs
Service. This study provided the basis for a major reorganization of the
176-year-old Customs Service. For his leadership in this project, Mr. Stover
received a Treasury Department Exceptional Service Award in 1965.
Mr. Stover is active in civic and professional groups. He has been
president of the East Falls Church Civic Association, chairman of the Boy Scout
Troop Committee, and president of the Memorial Baptist Church Brotherhood.
He has also served as chairman of the Arlington County, Virginia, Legislative
Advisory Committee.
Mr. and Mrs. Stover reside at 9609 Clark Crossing Road, Vienna, Virginia.
They have two children, Mrs. Ann Patrick of Bailey's Crossroads, Virginia,
and Robert B. Stover of 4149 N. Henderson Rd., Arlington, Virginia.
000

- 1 -

:nJGRAPHICAL SKETCH

()F

HARLON J. SPONHEH1

Yarl8~ J. 5por~eL~. Assistant Regional Commissioner (Operations) designate,
was C8rn in :1innesota in 19l1 and studied at 'o'layne University. Detroit.
~ince 1956. Hr. Sponheim has been Assistant Collector of Customs in Tampa,

Fla.

for several years during this period he has served in Tamoa as Acting
In his position as Assistant Collector in Tampa,
r.:r . .sponheim has supervisory responsibility for approximately 300 employees in
the District of Florida.
~ollector of ~ustoms.

~r.

Sponheim started his government career as a clerk in 1929 with the
Service in Penbina, North Dakota. transferring to Detroit, Hichigan, in
1')34. During the next two decades, Mr. Sponheirn held several positions in the
t.1oneys and AccclUnts Division of the Bureau of Customs in Detroit, and in 1954
he became Ad~inistrative Officer in that division. In 1955, he was appointed
Acting Assistant Collector in Detroit and placed in charge of entry and
liquidation operations.

eu sto:;'.s

l~r.

and !1rs. Sponheim reside at 3401 San Jose, Tampa, Florida.

000

BIOGRAPHICAL SKETCH OF

J~~1ES

E. TOWNSEND

James E. Townsend. Assistant Regional Commissioner (Administration)
desivnate. was born in Atlanta. Georgia, in 1926. He attended Georgia Institute
of Techno10r~.Y and received a Bachelor of Science degree in textile engineering
there in 1':50. Durinr ~lor1d War II he served as a sergeant in the U. S. Air Force
:':1'. Townsend joined the Customs Service in April, 1950, as a Customs
eX:l.miner at::har1eston, South Carolina. He was promoted to liaison officer
in ,leptember. 1952, at the Bureau of Customs in Washington, D. C. In 1959,
he was transferred to i'iilmington, N. C. , where he served as Assistant
Collector ()f Customs. He returned to the Bureau in \1ashington as operations
officer in March. 1965.

::r. and :·!rs. Townsend reside at 13511 Bartlett Street Rockville Md.
They have three children, James E. Jr., 13: Geoffrey, 9' a~d Victoria: 5.
oC)o

- 2 -

BIOGRAPHICAL SKETCHES OF DISTRICT DIRECTORS
EVERETT F. DE BRAND, District Director-designate of the Miami Customs
District, was born on December 21, 1914, in Everett, Washington. He
attended school in Savannah, Georgia, and was a student at the Norfolk Business
College at Norfolk, Va. He also took management training courses.
Mr. De Brand served with the U. S. Navy from 1931 to 193~. He entered the
Government service in 1936 as a messenger and clerk with the National Advisory
Committee for Aeronautics, and in 1938 he transferred to the Office of the
Collector of Customs in Norfolk, Va., where he served in the Entry and
Liquidation Division.
Mr. De
examiner in
office. He
Norfolk and

Brand rose through the ranks. In 1946 he was promoted to line
Norfolk, har.dling all classes of merchandise for the appraiser's
was promoLed to the post of Appraiser of Merchandise in 1950 in
in 1952 was transferred to Miami, Fla., in that same position.

Mr. and Mrs. De Brand reside at 9515 S.W. 48th St., Miami, Fla.
000

MRS. MARION F. BAKER, District Director-designate of the Savannah Customs
District, was born at Camilla, Georgia. She received her education at
Wesleyan College, Macon, Ga. Her major fields of interest were dramatics and
public speaking.
Mrs. Baker taught dramatics for a number of years and then went into the
department store business as a general manager and buyer.
Mrs. Baker was appointed Collector of Customs in Savannah in June 1962 and
has supervised the work of 29 Customs personnel. She is a member of the
Chamber of Commerce in Savannah and is Secretary of the Quota Club in that city.
Mrs. Baker resides with her husband, Reginald Baker, at 201 East 65th Street,
Savannah, Ga.
000

- 3 -

CARL H. VINING, District Director-designate of the Cha~leston, S. C.
;ustoms District, was born on June 16, 1915 at Kalamazoo, M1Ch. He was
educated in the Kalamazoo public schools and served with the U. S. Army from
1933 to 1936 and in 1945-46.
r'~r. Vining, who has been Assistant Collector of Customs in Charleston
since November 1963, started his career in Detroit, Mich., with the Fruehauf
'-'-:i1er Company in 1936. In 1942 he entered the Customs Service as a journeyman
inspector in Detroit, and in 1958 he was named supervisory customs inspector in
~har1eston. S. C.

Hr. and Mrs. Vining reside at 2145 Westrivers Road, Charleston, S. C.
000

ALFRED R. DeANGELUS, District Director-designate of the Wilmington, N. C.
Customs District. w~s born August 18, 1936, in Cranston, R.I. He holds a
Bachelor of Science degree from Providence College in Providence, R. I., where he
graduated Manum Cum Laude in June 1957, ranking seventeenth in a class
of 275. His special field was business administration (management). He did
post-graduate work at the American University in Washington, D. C. in 1958
and 1959 and is fluent in French, Italian and Spanish.
~1r. DeAngelus served in the Adjutant General's School, U. S. Army, at
Fort Harrison, Indiana, as a second lieutenant, with responsibility for
conducting troop information classes. He entered the government service at the
Bureau of Accounts, Treasury Department, in June 1958, transferring to the
Customs Service in August 1959 as a Customs examiner in New York City. In
~;ay 1961 Mr. DeAngelus transferred to Wilmington, N. C, as Customs line examiner,
becoming appraiser there in 1963.

Hr. and Mrs. DeAngelus reside at 626 Pine Valley Drive, Willmington, N. C.
000

- 4 -

- 5 -

RAFAEL A. TORRENS, District Director-designate of the Puerto Rico Customs
District. was born on September 11, 1910 in Hato Rey. Puerto Rico, He was
educated at the Santurce Central High School, P.R., and attended the Treasury
Department Law Enforcement Officers Training School.
.
He served in the U.S. Army from 1940 to 1946 attended the Artillery 3chool at
Fort Sill, Okla., and passed the basic and advanc~d courses for officers.
After a few years with the Royal Bank of Canada in San Juan as an accountant
Mr. Torrens entered the federal service in San Juan as a Customs guard in 1938. '
following his discharge from the Army in 1946, he became a Customs inspector. In
1950 he was transferred to New York City, and in 1952 he entered the Customs
Agency Service as a criminal investigator.
Mr. Torrens was appointed Acting Collector of Customs in San Juan in January
He supervises the Puerto Rico Customs District with subports at Mayaguez,
)once, and Fajardo, with a total work force of approximately 180 persons.
Mr. and Mrs. Torrens reside at 657 Ponce de Leon Ave., Santurce, P. R.

1965.

000

MRS. RUTH H. JONES, District Director-designate of the Virgin Islands
ustoms District. was born in New York City. She received a Bachelor of Arts
legree in business administration at the College of the City of New York in
943 and a Haster of Science degree in business administration at CCNY in

957.
Mrs. Jones served in the Internal Revenue Service for 25 years as an
gent, reviewer, and instructor. On November 24, 1961, Mrs. Jones was appointed
ollector of Customs in the Virgin Islands, with administrative control of
9 Customs personnel at the ports of St. Thomas; Frederiksted and Christiansted on
t. Croix' and Cruz Bay and Coral Bay on St. John.
000

A. BAYARD ANGLE, District Director-designate of Tampa Customs District, was
Jrn on October 1, 1908 in Bartow, Fla. After h~ attended the University of Florida,
9 was admitted to the Florida Bar in 1933 and subsequently to the Federal District
)urt, 5th Circuit Court of Appeals. and Customs Court.
Mr. Angle is a Captain in the U. S. Coast Guard Reserve, designated as Port
and Legal Officer. He is an active member of the American Legion, the Elks
Lub, the American Bar Association, and Florida Bar Association.

~curity

Mr. Angle was appointed Collector of Customs in July, 1961, with supervisory
lsponsibility for approximately 300 employees throughout the Florida Customs
.strict.
Mr. and Mrs. Angle reside at 4002 Bay-to-Bay Blvd., Tampa, Fla.
000

TREASURY DEPARTMENT

FOR IMMEDIATE REIEASE

TREASURY DECISION ON VINYL ASBESTOS FIOOR TILE
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation with respect to the possible dumping of vinyl asbestos floor tile from
Canada, manufactured by Building Products of Canada Limited, Montreal,
Canada.

A notice of a tentative determination that this merchandise

is being, or is

like~

to be, sold at less than fair value within the

meaning of the Antidumping Act, 1921, as amended, will be published
in an early issue of the Federal Register.
Appraisement of the above-described merchandise from Canada,
manufactured by Building Products of Canada Limited, Montreal, Canada,
has been withheld.
Imports of the involved merchandise received during the period
January 1, 19(5) through October 31, 1965, amounted to approximately
$270,000.

TREASURY DEPARTMENT

FOR IMMEDIATE REIEASE

TREASURY DECISION ON VINYL ASBESTOS FIDOR TIIE
UNDER THE ANTIDUMPING ACT
Tbe Treasury Uepartment has completed its investigation with respect to the

X'- ",sible

dumping of vinyl asbestos floor tile from

Canada, manufactured by Building Products of Canada Limited, Montreal,

Canada.

A notice of a tentative determination that this merchandise

is being, or is likely to be, sold at less than fair value within the
meaning of the Antidumping Act, 1921, as amended, will be published
in an early issue of the Federal Register.

Appraisement of the above-described merchandise from Canada,
manufactured by Building Products of Canada Limited, Montreal, Canada,
has been withheld.
Imports of the involved merchandise received during the period
January

1, 1965, through October 31, 1965) amounted to approximately

$270,000.

- 3 !m~

sale or other disposition of Treasury bills does not have any special treatment, 8S
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt

all taxation now or hereafter imposed on the principal or interest thereot by any state
~r

or any of the possessions of the United States, or by any local taxing authority.

purposes of taxation the amount of discount at Which Treasury bills are originally sold
by th~ United states is considered to be interest.

Under Sections 454 (b) and 1221 (5)

of the Internal Revenue Code ot 1954 the amount of discount at which bills issued here.
under are sold is not considered to accrue until such bills are sold, redeemed

or~~l

wise disposed of, and such bills are excluded from consideration as capital asset ••
Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent purchase, and the

8IIX)UI

actually received either upon sale or redemption at maturity during the taxable year
tor which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescrib
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies ot

- 2 -

printed forms and forwarded in the special envelopes which will be supplied by Fedeli
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pro.
vided the names of the customers are set forth in such tenders.

others than

bank1Ds

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust companies
and from responsible and recognized dealers in investment securities.

Tenders

rna

others must be accompanied by payment of 2 percent of the face amount of Treasury b1l
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Reser
Banks and Branches, following which public anouncement will be made by the TreasUI1
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Those submitting tenders

The Secretary of the r.rean

expressly reserves the right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final.

Subject to these reserva·

tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder vill be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.

Settlement for

accepted tenders in accordance with the bids' must be made or completed at the Feden
Reserve Bank on January 1 3 . 6

, in cash or other immediately available fill

or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

January &,[966

. cash

Cash adjustments will be made tl

differences between the par value of maturing bills accepted in exchange and the 1.
price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sal.e
other disposition of the bills, does not have any exemption, as such, and 1088

TREASURY DEPARTMENT

Washington
TREASURY I S WEEKLY BILL OFFERING
FOR IMMEDIA'l'E RELEASE,

January 5, 1966

*){)OOOOOOOOO{){~lm~eeeeeeeooeeeeect

The Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount of $ 2,300,000,000 , or thereabouts, for
.
X~
cash and in exchange for Treasury bills maturing January 13, 1966 , in the moo~t

xxrux

of $ 2,200,555,000 , as follows:

91_day bills (to maturity date) to be issued January

"""'xt=W=

1966

in the amount of $ 1,300,000,000 , or thereabouts, represent-

XffiX

ing an additional amount of bills dated

October~1965

, originally issued in the

and to mature April 14, 1966

XtIDJX

amount of $ 998,759,000

, the additional and original bills

tD»X

to be freely interchangeable.
182 -day bills, for $ 1,000,000,000 , or thereabouts, to be dated

xtmx

xtn¥

January 13, 1966 ,and to mature July 14, 1966
~
$i3X
The bills of both series will be issued on a discount basis under competitiw

and noncompetitive bidding as hereinafter provided, and at maturity their face ~
will be payable without interest.

They will, be issued in bearer fom only, and in

denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $l,~,~
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the clol1L.
hour, one-thirty p.m., Eastern Standard time,

Monday, Jam.10. 1966

will not be received at the Treasury Department, Washington.

• TeDdr

Each tender must be

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three dec~~,
e. g., 99.925.

Fractions may not be used.

It is urged that tenders be made on tb

TREASURY CEPARTMENT

January 5, 1966
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$2,300,000,000,or thereabouts, for cash and in exchange for
Treasury bills maturing January 13,1966, in the amount of
$2,200,555,000, as follows:
91-day bills (t~ maturity date) to be issued January 13, 1966,
in the amount of $l.,JOO ,000 ,000, or thereabouts, representing an
additional amount of bills dated October 14,1965, and to
mature April 14,1966,
originally issued in the amount of
$998,759,000, the additional and original bills to be freely
interchangeable.
182 -day bills, for $ 1,000 ,000 ,000, or thereabouts, to be dated
January 13,1966, and to mature July 14, 1966.
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the cloSing hour, one-thirty p.m., Eastern Standard
time, Monday, January 10, 1966.
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-327

- 2 -

Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on January 13, 1966, in
cash or other immedi8te1y available funds or in a like face amount
of Treasury bills rna turing January 13, 1966. Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have ~ny special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lIs are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revis ion) and thiS
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained fra
any Federal Reserve Bank or Branch.
000

- 4The amend..11ents made by the protocol do not affect the application
of the treaty to certain territories outside the United Kingdom to
Hhich the treaty previously has been extended by mutual agreement
between the two countries. In the case of such territories, the treaty
as iC1 effec t on December 31, 1965, including Article VI thereof, will
continue to apply.

by the recipient tllereci in the country from. ,.;hich Euch payrr,ents are
Hade. In tile case of dividendf~, tile protocol provide~; that the tax
0:1 dividends received by such a pernanent establishment shall not
ez.ceed 15 percent except in certain enur.1erated circumstances, notably
if tile profit on the sale of the 511areS on v-lhich the dividend is paid
1--!Ould be taxed as a trading receipt in the United Kingdom.
Tne exemption from tax applicable to interest and royal ties and the
reduced rate of tax applicable to eli vidends are not generally concJitioned on the recipient of the5e payments being subject to tax.
Suc;: a conci tion, .:hich does appear in the comparable provi~;ions of the
exi,ting treaty, .rill apply only in certain enumerated circumstances.
The protocol also contain::: provisions exer,1pting residents of
one of tne countrie5 from the capital gains tax of the other. However,
under thi~ provision in the protocol, tlle United States may apply its
capital gaim; tax if a ref'ident of the United Kingdom is present in
the U'1i ted States for leU oc.ys during the taxable year in which such
gain ie' realized. In the case of the United Kingdom, the exemption
from U. K. capital gains tax provided in the protocol applies with
respect to gains subject to SUCil tax for any year of assessment
beginni'1g on or after April 6, 1965. In the case of the United States,
the arnended prov"i.sion is applicable to gains realized on or after
the date of ratification of t:ne prctocol; until such date, the present
complete exerllption from U.S. capital gains tax provided in the existing
treaty vQll continue in effect.
Other provh:ions of the protocol include those relating to the
ta'Ca tion of business profits to eliminate the force of attraction
approach; the defiDi tion or "recognized stock exchange" for purposes
of tl1e U.K. tax laH; consultation between tne competent authorities
of the tHO governments to avoid double taxation, and nondiscrimination. The last mentioned provision provides that it shall not affect
the right of either country to levy tax on certain dividends at the
r2.te of 15 percent.
In general, tile proVlslons of the protocol become effective in
the case oi tile United States on January 1, 1966, and in the case of
the Uni teei Kingdom ti1e protocol becomes effective for purposes of
U. K. corporation tax and capital gains tax for all yearE to wDich
:=ucr, taxes apply) and for purposes of U.K. income tax and surtax
~;o~ all year:,- ~f as.'-;essmen-t b~ginning on or after April 6) 1966.
LC'V,ever. a.:: nOT,ed above, certain provisions become effective at
o tiler times.

- 2 -

In addition, the protocol provides that the 15-percent dividend
wi tt ihol ding rate will apply as a maximwn rate to dividends paid by a
U.K. corporation prior to April 6, 1966, if such dividends are regarded
by the Urn ted Kingdom as subject to income tax under Section 83 of
the Finance Act 1965 because sucn dividends are in excess of the
standard amount of dividends ordinarily paid by such U.K. corporation.
Another major change which the protocol makes in the treaty is to
provide that no credit shall be allmved by either country to its residents who receive a dividend from a corporation of the other country
for corporate tax paid by the corporation paying such dividend on the
profi ts out of vlhich such dividend is paid unless the recipient is a
corporation OwnL.'1g at leatit 10 percent of the voting pm,rer of the corporation paying the dividend. Under the existing treaty, a resident
of one of the countries receiving a dividend from a corporation of the
other was entitled to credit for corporate tax paid by such corporation.
Each country ..rill allow credit to its residents for tax withheld by
the other country on dividends paid to such residents by corporations
of such other country. These changes are effective in the case of
U.S. residents with respect to dividends paid by a U.K. corporation
on or after April 6, 1966, and in the case of U.K. residents with
respect to dividends payable by a U.S. corporation on or after the
date of ratification of the protocol or, for corporation tax purposes,
April 6, 1966, wilichever is later. Further consideration is being
given to the proper treatment governing the credit allowed for U.K.
tax to U.S. corporations receiving dividends prior t~ April 6, 1966,
Wl1ere the U.S. corporation receiving the dividend O-VffiS 10 percent or
more of the vo ting pOlfer of the U. K. corporation paying such dividend
and such dividend is paid, under U.S. tax law, out of profits which
have been subject to U.K. corporation tax.
In addition to the foregoing provi~ions, the protocol continues
an exenotion from tax for interest and royalties paid by residents
of one country to residents of the other.
The orotocol also provides that deductions for tax purposes shall
be allO\.Jed to corporations of one country for interest and royalties
paid to residents of the other (apart from royal ties and interest paid
by a U.K. corporation before April 6, 1966, for which the paying company ",Jill have had relief for income tax); but there are certain
exceptions, notably wnere the recipient corporation is controlled by
residents of the other country.
The provi2ions of the protocol exempting interest and royalty
payments from Hi tnholding tax only apply if such interest and royalties
arc no t effec ti v ely connec ted "In. til a permanent es tablishment maintained

It Ha:::; announced today that representatives of the United Kingdom
a..'10 the United States had agreed in principle on the terms of a
o:cotocol amending the income ta."'\: convention betHeen the two countries.
Amendment of tIle COlwcntion wa.s considered desirable because of changes
made in the tax laH of the United Kingdom by the Finance Act of 1965.
The folloiling is a brief outline of the more important provisions of
the protocol.
A major amenill~ent to the treaty made by the protocol provides
tna t the rate at which tal( will be withheld by the two countries on
dividef1.dc from a cor:)oration of one country received by residents of
the other "hall not exceed 15 percent.
Under the treaty as presently i:1 force, the United States may
Hitllhold ta."'{ at the rate of 15 percent on such dividends except where
the dividend is received by a U.K. corporation controlling at least
95 percent of the voting p01:J8r of the U.S. company paying the dividend,
in which event the maximum rate of withholding is 5 percent. The
only restriction in the existing treaty on the right of the U.K.
Government to tax dividend payments prohibits the levy of U.K. surtax
on sucn payments.
On June 30, 1965, the United State~ gave notice of termination
of tLese dividend provisions of the existing treaty, which termination is effective January 1, 1966, with respect to dividends from a
U.S. corporation, and April 6, 1966, with respect to dividends from
a U.K. corporation. Consequently, as of those dates the rate of
Hi thholding tax levied by the tHO countries on dividends from a
cOl~oration of one country received by residents of the other would
be, in the absence of the protocol, the statutory rate provided by
the laue of t~ne two countries, i. e., 30 percent in the case of the
United States and 41-1/4 percent in the case of the United Kingdom.
HOHever. the protocol provides that the 15 percent limit on the
'<fi tllholc.ing tax rate on dividends es tablished by it shall become
effective on the came dates on vrhich notice of termination of the
dividend provisions of the existing treaty becomes effective,
January 1, 1966, in the case of the United States and April 6, 1966,
in tile case of the United Kingdom. Dividends received on or after
such date.s and prior to the ratification of the Drotocol Tilill be
~ubject to vrithholding at the above statutory rates, but appropriate
refunds will be made Cifter ratification of the protocol. Such
refund~ 'dill be made by the persons wi thholding- the tax or, if such
tax l1a:'=: beeCl paid over to the re:=pective government, by such government.

TREASURY DEPARTMENT

January

5, 1966

HOLD FOR RELEASE AT 6:30 P.H. (EST)
1'rmNF'SDAY, JANUARY

5, 1966

(Simultaneous release in London)

AHEND1'1ENT 01'. . U.S.-U.K. TAX TREATY
The Treasury announced today that delegations from the United States
and the United Kingdom have agreed in principle on the terms of amendments

to the existing income tax treaty between the two countries.

The United

States delegation was led by Assistant Secretary of the Treasury
S. Surre,y and the United Kingdom delegation

qy Mr.

W. H. B. Johnson, a

Commissioner of Inland Revenue.
The purpose of such income tax treaties is to prevent double
taxation.

Amendment of the treaty is required because of changes

made in the tax law of the United Kingdom last year.
A sillllIl1ary of the terms of agreement is attached.

F-328

SUull~

TREASURY DEPARTMENT

Janua ry "

1966

HOLD FOR RELEASE AT 6:30 P.M. (EST)

WEDNESDAY, JANUARY" 1966
(Simultaneous release in London)

AUBNDMtNT OF U.S.-U.K. TAX TREATY
The Treasury announced today that delegations from the United States
and the United Kingdom have agreed in principle on the terms of amendments

to the existing income tax treaty between the two countries.

The United

States delegation was led by Assistant Secretary of the Treasury Stanley
S. Surrey and the United Kingdom delegation by Mr. W. H. B. Johnson, a
Commissioner of Inland Revenue.
The purpose of such income tax treaties is to prevent double
taxation.

Amendment of the treaty is required because of changes

made in the tax law of the United Kingdom last year.
A sununary of the terms of agreElllent is attached.

F-328

SUMMARY OF THE TERMS OF

AGR~T

It was announced today that representatives of the United Kingdom
and the United States had agreed in principle on the terms of a
protocol amending the income tax convention between the two countries.
Amendment of the convention was considered desirable because of changes
made in the tax law of the United Kingdom by the Finance Act of 1965.
'The following is a brief ouUine of the more important provisions of
the protocol.
A major amendment to the treaty made by the protocol provides
that the rate at which tax will be withheld by the two countries on
dividends from ~ corporation of one countr,y received by residents of
the other shall not exceed 15 percent.
Under the treaty as presently in force, the United States may
wi thhold tax at the rate of 15 percent on such dividends except where
the dividend is received by a U.K. corporation controlling at least
95 percent of the voting power of the U.S. company paying the dividend,
in which event the maximum rate of withholding is 5 percent. The
only restriction in the existing treaty on the right of the U.K.
Government to tax dividend payments prohibits the levy of U.K. surtax
on such p~ents.
On June 30, 1965, the United States gave notice of termination
of these dividend provisions of the existing treaty, which termination is effective January 1, 1966, with respect to dividends from a
U.S. corporation, and April 6, 1966, with respect to dividends from
a U.K. corporation. ConsequenUy, as of those dates the rate of
wi thholding tax levied by the two countries on dividends from a
corporation of one country received by residents of the other would
be, in the absence of the protocol, the statutory rate provided by
the laws of the two countries, i.e., 30 percent in the case of the
Uni ted States and LJ.-l/4 percent in the case of the United Kingdom.
However, the protocol provides that the 15 percent limit on the
withholding tax rate on dividends established by it shall become
effective on the same dates on which notice of termination of the
dividend provisions of the existing treaty becomes effective,
January 1, 1966, in the case of the United States and April 6, 1966,
in the case of the United Kingdom. Dividends received on or after
such dates and prior to the ratification of the protocol will be
subject to withholding at the above statutory rates, but appropriate
refunds will be made after ratification of the protocol. Such
refunds will be made by the persons withholding the tax or, if such
tax has been paid over to the respective government,b,y such government.

- 2 In addition, the protocol provides that the l5-percent dividend
wi thholding rate will apply as a maximum rate to dividends paid by a
U• K. corporation prior to April 6, 1966, i f such dividends are regarded
by the United Kingdom as subject to income tax under Section 83 of

the Finance Act 1965 because such dividends are in excess of the
standard amount of dividends ordinarily paid by such U.K. corporation.
Another major change which the protocol makes in the treaty is to
provide that no credit shall be allowed by either country to its residents who receive a dividend from a corporation of the other country
for corporate tax paid by the corporation paying such dividend on the
profits out of which duch dividend is paid unless the recipient is a
corporation owning at least 10 percent of the voting power of the corporation paying the dividend. Under the existing treaty, a resident
of one of the countries receiving a dividend from a corporation of the
other was enti tJ..ed to credit for corporate tax paid by such corporation.
Each country will allow credit to its residents for tax withheld by
the other country on dividends paid to such residents by corporations
of such other country. These changes are effective in the case of
U.S. residents with respect to dividends paid by a U.K. corporation
on or after April 6, 1966, and in the case of U.K. residents with
respect to dividends p~able by a U.S. corporation on or after the
date of ratification of the protocol or, for corporation tax purposes,
April 6, 1966, whichever is later. FUrther consideration is being
given to the proper treatment governing the credit allowed for U.K.
tax to U.S. corporations receiving dividends prior to April 6, 1966,
where the U.S. corporation receiving the dividend owns 10 percent or
more of the voting power of the U.K. corporation paying such dividend
and such dividend is paid, under U.S. tax law, out of profits which
have been subject to U.K. corporation tax.
In addition to the foregoing provisions, the protocol continues
an exsnption from tax for interest and royal ties paid by residents
of one country to residents of the other.
The protocol also provides that deductions for tax purposes shall
be allowed to corporations of one country for interest and royalties
paid to residents of the other (apart from royal ties and interest paid
by a U.K. corporation before April 6, 1966, for which the p~ company will have had relief for income tax); but there are certain
exceptions, notably where the reCipient corporation is controlled by
residents of the other country.
The provisions of the protocol 6XEIIlPting interest and royalty
payments from withholding tax only apply i f such interest and royalties
are not effectively connected with a pennanent establishment maintained

- J by the recipient thereof in the country from which ::ouch payments are
made. In the case of elividends, the pro tocol provide~i tiJa t the tax
on dividends received by such a permanent establiE;jTInent shall not
exceed lS percent except in certain enur,1era ted circumstances, notably
if tile profit on the sale 01' the silares on which the eli vidend is paid
would be taxed a~ a trading receipt in the United Kingdom.
The exemption from tax applicabl e to intere:::; t and royal ties and the
reduced rate of tax applicable to dividends are not generally condi tioned on the recipient of these payments being subject to tax.
Such a condition, v.;hich does appear in the comparable provi.::;ions of the
existing treaty, will apply only in certain enumerated circumstances.
The protocol also contain: provi:'5ions exer.tpting residents of
one of tne countries from the capi tal gains tax of the 0 ther. However,
under thh provision in the pro tocol, tile United States may apply its
capi tal gains tax if a resident of the United Kingdom L:; present in
the U:1i ted Sta te~ for 183 days during the taxable year in whicrl such
gain h realized. In the case of the United Kingdom, the exemption
from U. K. caDi tal gains tax provided in the protocol applies wi tll
respect to gain~ subject to SUC!l tax for arry year of assessment
beginning on or after ADril 6, 1965. In the case of the United States,
tile ~~ended prov~~ion is applicable to gains realized on or after
the date of ratification of the protocol; until such date, the present
complete exemption from U.S. capital gains tax provided in the existing
trea ty .rill continue in effect.
Other provh'ions of the protocol include those relating to the
taxrltion of busine~s profits to eliminate the force of attraction
approach; tne definition of "recognized stock exchange" for purposes
of the U.K. tax law; consultation between the competent authorities
of the two governments to avoid double taxation, and nondiscrimination. The last mentioned provision provides that it shall not affect
the righ t 0 f ei tiler C 01.ll1 try to 1 evy tax on c er tain dividends a t the •
rate of lS percent.
In general, tue pron~)lons of the protocol become effee tive in
the case oJ:.' the United State~; on January 1, 1966, and in the case of
the United Kingdom the protocol becomes effective for purposes of
U.K. corporation tax and capital gains tax for all year~ to which
:.,uch taxe~ apply, and for purpose;o of U. K. income tax and surtax
for all years of assessment beginning on or after April 6, 1966.
However, ae noted above, certain provisions become effective at
other time5.

- 4The am8ndments made by the protocol do not affect the application
of the treaty to certain territories outside the United Kingdom to
which the treat,y previously has been extended by mutual agreement
between the two countries. In the case of such territories, the treaty
as in effect on December 31, 1965, including Article VI thereof, will
continue to apply.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE

January 5, 1966

TREASURY ANNOUNCES $1.5 BILLION NEW CASH BORROWING
The Treasury Department announced today that it is offering for cash subscription $1.5 billion, or thereabouts, of 10-month 4-3/4~ Treasury Certificates
of Indebtedness of Series A-1966 at a price of 99.92 (to yield 4.85~). This
financing is part of the Treasury's estimated $5 billion cash need during the
second half of the current fiscal year as was stated in its financing announcement of December 22, 1965, at which time it was indicated that there would be
a $1.5 billion cash offering in the short term area in January.
The certificates will be dated January 19, 1966, will mature November 15,
1966, and will be issued in bearer form only. Interest will be payable on May
15 and November 15, 1966.
Subscriptions will be received for ~ day ~, ~ Monday, January 10.
Any subscription, with required deposit, addressed to a Federal Reserve Bank or
Branch, or to the Treasurer of the United States, Washington, D. C. 20220, and
placed in the mail before midnight January 10, 1966, will be considered as
timely.
Subscriptions from banking institutions for their own account, Federallyinsured savings and loan associations, States, political subdivisions or instrumentalities thereof, public pension and retirement and other public funds,
international organizations in which the United States holds membership, foreign
central banks and foreign States, dealers who make primary markets in Government
securities and report daily to the Federal Reserve Bank of New York their positions with respect to Government securities and borrowings thereon, and Government Investment Accounts will be received without deposit. Subscriptions from
all others must be accompanied by payment of 2 percent of the amount of certificates applied for, not subject to withdrawal until after allotment.
Subscriptions from commercial banks for their own account will be restricted
m each case to an amount not exceeding 50 percent of the combined capital (not
mcluding capital notes or debentures), surplus and undivided profits of the
subscribing banle.
The payment and delivery date for the certificates will be January 19, 1966.
'ayment may be made through credit to Treasury Tax and Loan Accounts.
The Secretary of the Treasury reserves the right to reject or reduce any
;ubscription, to allot less than the amount of certificates applied for, and to
lake different percentage allotments to various classes of subscribers. Allotlent notices will be sent out promptly upon allotment.
Commercial banks and other lenders are requested to refrain from making unecured loans, or loans collateralized in whole or in part by the certificates
ubscribed for, to cover the deposits required to be paid when subscriptions are
ntered, and banks will be required to make the usual certification to that effect.
All subscribers are required to agree not to purchase or to sell, or to make
agreements with respect to the purchase or sale or other disposition of the
ertificates subscribed for under this offering at a specific rate or price,
ntil after midnight January 10, 1966.

F-329

Unite

states - Trinidad and Tobago Income Tax Treaty
Terminated as of January 1, 1966

As a Y'?sult of notice given by the Government of Trinidad and
Toba,~o,

the income tax convention between the United States and the

Government of Trinidad and Tobago terminated as of January 1, 1966,
the Treasury Department announced today.

Consequently, as of that

date the United States 'wi thholding tax on interest, dividends and other
forms of "fixed or determinable ... incom2" flowing from the United
States to individuals and corporations of Trinidad and Tobago will
be the statutory rate of 30 percent in accordance with Sections 871
and 831 of the Internal R2venue Code.
Since the notice "lms given, several meetings have taken place,
both in the United States and in Trinidad, with a view to reaching a
nevi agreement that would be satisfactory to both parties.

It was

hoped that announcement could be made that agreement had been reached
on a nevI convention prior to the expiration of the one that has been
in effect.

However, v]hile a substantial measure of agreement has been

reached, several points are still under discussion.

- 2 Since the notice was given, several meetings have taken
place, both in the United States and in Trinidad, with a view
to reaching a new agreement that would be satisfactory to both
parties.

It was hoped that announcement could be made that

agreement had been reached on a new convention prior to the
expiration of the one that has been in effect.

However, while

a substantial measure of agreement has been reached, several
points are still under discussion.

January 6, 1966
RF:!LE:A-SE
FOR IMMEDIATE RELEASE

~it&66

INCOME TAX TREATY WITH TRINIDAD AND TOBAGO TERMINATED
The Treasury Department announced today that the income
tax convention between the United States and the Government of
Trinidad and Tobago was terminated as of January 1, 1966.
The action came as a result of notice given by the
Government of Trinidad and Tobago.
Consequently, as of January 1, 1966, the United States
withholding tax on interest, dividends and other forms of "fixed
or determinable

000

income" flowing from the United States to

individuals and cOf:'porations of Trinidad and Tobago will be the
statutory rate of 30 percent, in accordance with Sections 871
and 881 of the Internal Revenue Code.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE
INCOME TAX TREATY WITH TRINIDAD AND TOBAGO TERMINATED
The Treasury Department announced today that the income
tax convention between the United States and the Government of
Trinidad and Tobago was terminated as of January 1, 1966.
The action came as a result of notice given by the
Government of Trinidad and Tobago.
Consequently, as of January 1, 1966, the United States
withholding tax on interest, dividends and other forms of "fixed
or determinable . . . income" flowing from the United States to
individuals and corporations of Trinidad and Tobago will be the
statutory rate of 30 percent, in accordance with Sections 871
and 881 of the Internal Revenue Code.
Since the notice was given, several meetings have taken
place, both in the United States and in Trinidad, with a view
to reaching a new agreement that would be satisfactory to both
parties. It was hoped that announcement could be made that
agreement had been reached on a new convention prior to the
expiration of the one that has been in effect. However, while
a substantial measure of agreement has been reached, several
points are still under discussion.

000

F-330

- 2 -

Assistant General Counsel, serving in that capacity until 1964.

that year he was appointed Solicitor for the Federal Maritime Commission.

He comes to the Treasury directly from the Federal Maritime

Commission.

Mr. Miskovsky was awarded the Central Intelligence Agency's
Certificate of Merit in 1962 and Medal of Merit in 1964.
receive~

In 1965, he

the Federal Maritime Commission's superior performance award.

rtr. Miskovsky and his wife, the former Anne Grogan, have six
children.

They reside at 5500 Chevy Chase Parkway, N. W., Washington,

D. C.

000

FBS:mm -- 1/h/66 -- DRAFT
:'lI.h:'! ~. "ISi\('17S~~~~~Tj'IJT rE\fr~I:.AL CCunSEL
C~ "'q, 'J'fmA3'JRY ~

Treasury Secretary Henry H. Fowler today announced the appointment
of Milan Carl Miskovsky as an Assistant General Counsel of the Treasury
::Jepartment, effective January 10.

Mr. Miskovsky will be legal adviser to the Assistant Secretary
for International Affairs and in charge of a section of lawyers which
concerns itself with legal matters relating to the broad area of internat~onal

monetary, financial and trade affairs with which the Treasury

Department is concerned.

He succeeds in this position Mr. Roy T. Englert,

who has assumed the responsibilities of Assistant

r~neral

Counsel for

general supervision of legal work relating to the Bureausof Customs,
Narcotics, Engraving and Printing, and the Coast Guard, law enforcement
coordination, financial institutions, and non-tax litigation.

Mr. Miskovsky was born in Chicago, Illinois, on May 11, 1926. He
studied at public schools in Chicago and was graduated from the University of Michigan with a B.S.

de~ree

in 1948.

He continued his studies

at Michigan in economics and nat40nal resources and was awarded a
V~ster's

degree in 1949.

He was graduated from the George Washington

Uni versi ty Law School in 1956 with the degree of LL. B. and was admitted
to practice in the District of Columbia in 1957.

His law school

studies were interrupted by assignment abroad and military service.
In 1951, Mr. Miskovsky joined the Central Intelligence Agency and
served as an intelligence officer until 1957.

He was employed as an

attorney by that Agency from 1958 to 1960, when he was appointed

TREASURY DEPARTMENT

FOR RELEASE P.M. NEWSPAPERS
FRIDAY, JANUARY 7, 1966

WASHINGTON. D.C.

January 7, 196

MILAN C. MISKOVSKY NAMED
ASSISTANT GENERAL COUNSEL OF THE TREASURY
Treasury Secretary Henry H. Fowler today announced the appointment
of Milan Carl Miskovsky as an Assistant General Counsel of the
Treasury Department, effective January 10.
Mr. Miskovsky will be legal adviser to the Assistant Secretary
for International Affairs and in charge of a section of lawyers
which concerns itself with legal matters relating to the broad
area of international monetary, financial and trade affairs with
which the Treasury Department is concerned. He succeeds in this
position Mr. Roy T. Englert, who has assumed the responsibilities
of Assistant General Counsel for general supervision of legal work
relating to the Bureaus of Customs, Narcotics, Engraving and
Printing, and the Coast Guard, law enforcement coordination,
financial institutions, and non-tax litigation.
Mr. Miskovsky was born in Chicago, Illinois, on May 11, 1926.
He studied at public schools in Chicago and was graduated from the
University of Michigan with a B.S. degree in 1948. He continued
his studies at Michigan in economics and natural resources and was
awarded a Master's degree in 1949. He was graduated from the
George Washington University Law School in 1956 with the degree
of LL.B. and was admitted to practice in the District of Columbia
in 1957. His law school studies were interrupted by assignment
abroad and military service.
In 1951, Mr. Miskovsky joined the Central Intelligence Agency
and served as an intelligence officer until 1957. He was
employed as an attorney by that Agency from 1958 to 1960, when he
was appointed Assistant General Counsel, serving in that capacity
until 1964. In that year he was appointed Solicitor for the
Federal Maritime Commission. He comes to the Treasury directly
from the Federal Maritime Commission.
Mr. Miskovsky was awarded the Central Intelligence Agency's
Certificate of Merit in 1962 and Medal of Merit in 1964. In 1965,
he received the Federal Maritime Commission's superior performance
award.
Mr. Miskovsky and his wife, the former Anne Grogan, have six
hildren. They reside at 5500 Chevy Chase Parkway, N.W., Washington,

-331

TREASURY DEPARTMENT
RELEASE 6:30 P.M.,
day, January 10, 1966.

RESULTS OF TREASURY'S WEEKLY BILL OFFERING
Thi Treasury Department announced that the tenders for two series of Treasury
ls, one series to be an additional issue of the bills dated October 14, 1965,
the other series to be dated January 13, 1966, which were offered on January 5,
6, were opened at the Federal Reserve Banks today. Tenders were invited for
300,000,000, or thereabouts, of 91-day bills and for $1,000,000,000, or thereuts, of 182-day bills. The details of the two series are as follows:
GE OF ACCEPTED
91-day Treasury bills
PETITIVE BIDS: _--:..ma~tur.....:...;;in~g.....;;A.;;cp~r",:",il~1;;,;.:4~'...;1;;;.;9~6.....;;6-r
Approx. Equiv.
Price
Annual Rate
High
4.545%
98.851 !I
Low
4.601%
98.837
t\verage
98.841
4.585:;; y

182-day Treasury bills
maturing July 14, 1966
Approx. Equiv.
Price
Annual Rate

97.612 bl

97.602 97.605

4. 724~
4.743%

4.737%

I Excepting one tender of 340,000; bl Excepting one tender of iP300,OJO
2 %of the amount of 91-day bills bId for at the low price was accepted
~ %of the amount of 182-day bills bid for at the low price was accepted
~

TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

istrict
)ston
~w York
illade1phia
level and
ichmond

lnneap01is
lIlsas City
Ulas
in Francisco

Ap,:e1ied For
AcceEted
$ 30,632,000 $ 19,352,000
1,468,508,000
674,998,000
30,843,000
39,963,000
61,762,000
56,762,000
16,405,000
16,405,000
62,111,000
68,511,000
171,548,000
273,656,000
68,359,000
57,959,000
17,257,000
18,537,000
40,789,000
39,789,000
26,290,000
30,570,000
127.546.000
138.946.000

TOTALS

..p2,256,638,OOO $1,300,860,000

~lanta

1icago
~.

Louis

~cludes
~cludes

ApE1ied For
$ 25,896,000
1,350,389,000
24,623,000
69,619,000
6,695,000
37,960,000
250,048,000
33,393,000
11,861,000
16,090,000
20,157,000
157,249,000

AcceEted
$ 24,596,000
604,064,000
10,925,000
49,619,000
6,695,000
22,834,000
108,128,000
25,037,000
8,731,000
13,512,000
15,157,000

$2,00),980,000

$1,000,537,000

] 11,239,000

$307,695jDOnoncampetitiv8 tenders accepted at the average price of 98.841
$147,442,000 noncompetitive tenders accepted at the average price of 97.605
hese rates are on a bank discount basis. The equivalent coupon issue yields are
70% for the 91-day bills, and 4.92% for the 182-day billso

33?

TREASURY DEPARTMENT

January 11, 1966

FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN DECEMBER
During December 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net sales by the Treasury Department of
$1,920,500.00.

000

F-333

TREASURY DEPARTMENT

January 11, 1966

FOR D1MEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN DECEMBER
During December 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net sales by the Treasury Department of
$1,920,500.00.

000

F-333

-2COTTON WASTES
(In pounds)
COTTCN CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, COMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVnW WASTE, WHETHER OR NOT MANUFACTURED OR CYl'HERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the following countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
: EStablished
:
Total Imports
:
Country of Origin
: TCYI'AL QUOTA
: Sept. 20, 1965, to
_ _ _ _ _ _ _ _ _ _ _ _: _ _ _ _ _ _ _ _
: _J_an_. .10 I .1 CJ66
:

Established: --Imports
33-1/3% of: Sept. 20, 196::;'
Total Quota: to J <.:.n. 1.0. 1.')66

1,441,152

United Kingdom ••••••••••••

4,323,457

Canada ••••••••••••••••••••
France ••••••••••••••••••••

J apart •••••••••••••••••••••

239,690
227,420
69,627
68,24 0
44,388
38,559
341,535

China •••••••••••••••••••••

17,322

Egy'pt •••••••••••••••••••••

8,135
6,544
76,329
21,263

25,443
7,088

5,482,509

1,599,886

India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••

Belgium •••••••••••••••••••

Cuba ••••••••••••••••••••••
Ge rnlarJY' • • • • • • • • • • • • • • • • • • •
Italy ..••••••..••••.••..•.

75,807
22,747
11,796

12,853

...

Other, including the U.S ••

Included in total imports, column 2.

Prepared in the Bureau of CUstoms.

TREASURY DEPARnIDIT
Washington, D. C.

D4MFD lATE RELEASE

WEDNESDAY, JANUARY 12,1966

F-334

Preli.m:1.na.ry data on imports for consumption of cotton ani cotton waste chargeable to the quotas established by
Presidential Proclamation No. 2351 of September 5, 1939, as amenied, ani as JIM:Klified by the Tariff Schedules of the
United States which became effective August 31, 1963.
(The country designations in this press release are those specified in the appemix to the Tariff Schedules of the
United States. There is no political connotation in the use of ou'bmded names.)
COTTON (other than linters) (in poums)
Cotton umer 1-1/8 inches other than rough or harsh under
~rts~tember 20. _12 65 - Ja.rrua,ry 1U. 1lJ66
Countr;r of Origin
E,gJpt and Sudan••••••••••••

Peru •••••••••••••••••••••••
India and Pakistan •••••••••
ChiJ\a ••••••••••••••••••••••

Mexico •••••••••••••••••••••
Brasil •••••••••••••••••••••

Established Quota

783,816
247,952
2,003,483
1,370,791
8,883,259
618,723

Honiuras ••••••••••••••••••••

18,01.1

475,l24

••••••••••••••••••••

1/ IExcept Barbados, Benmia.
Y Except Nigeria and Ghana.

237
9,333

Colombia ••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa •••••••••

752
871
l24
195
2.240

lDionesia aDi Netherlanis
New Q J1 nea••••••••••••••••
British W. Indies •••••••••••

71,388
21,321

Par~ ••••••••••••••••••••

48,956

5,203
~or

Establ i shed Quota

Country of Origin

Imports

Union or Sorlet

, Socia11at Republics ••••••

314"

J/
~I
StI

B1ger.La •••••••••••••••••••••

Briti.ab V. Africa. ••••••••••
Other, 1 aclJJdi ng the U.s ....

Jamaica, Trinidad. ani Tobago.
Cotton 1-1/8" or IIIOre
Established Yearlr Quota - 45.656.420 Ibs.
Imports August 1. 1965 - .Ianllru:;y
stap}.. Length
1-318ft or more
1-5/32" or .,re and under
~-3/fJft (Tangu:1.a)

l..-l../a- or _roe . . . . UIId_

10 ,

1966

Al.lDcaUon
39.590.778

38,~1.~,~54

~.soo.ooo

.L';J5,43"/..

Ie "",. .. 64:?

Iwmnrts

".J

;;'-"""'_

~Q~

5,m

16.00It.

I!!Mrtg

TREASURY DEPA.R'IMFlIT
Washington, D. C.

l14MID lATE RELEASE

WEDNESDAY, JANUARY 12,1966

F-334

Prel.1a1.nary data on imports for consumption of cotton am cotton waste chargeab1e to the quotas establiShed b;r
Presidential. Proclamation No. 2351 of September 5, 1939, as amenled, ard as modified bY' the Tariff Schedldes of the
United States which became effective August 31, 1963.
(The country designations in this press release are those specified in the appemlix to the Tariff Schedules of the
United states. There is no political. connotation in the use of outDXied names.)
COTTON (other than linters) (in poUJJis)
Cotton un1er 1-1/8 inches other than rough or harsh under
Imports S eptellber 20. ~_ - J anuo.r~(J-" 1.:166
Country of Origin
Egypt and Sudan••••••••••••

Peru •••••••••••••••••••••••
India and Pakistan •••••••••
ChdJla ••••••••••••••••••••••

Mexico •••••••••••••••••••••
&as.U •••••••••••••••••••••
Union of Sonet

•••••••••••••••••
Haiti ••••••••••••••••••••••
Ecuador ••••••••••••••••••••
Argent~

Established Quota

783,816
247,952
2,003,483
1,.370,791
8,883,259
6l.8,723

Country of Origin

Imports

3/4"
Eetabl i shed Quota

48,956

Honduras ••••••••••••••••••••
Par~ ••••••••••••••••••••
Colombia ••••••••••••••••••••

18,01..l

Iraq ••••••••••••••••••••••••
British East Africa •••••••••
Inionesia ard Netherlao:is

475,l24
5,203
2.37
9,333

~J
g

New Guinea••••••••••••••••
British W. Indies •••••••••••
W1ger.1a •••••••••••••••••••••
Brit.iah V. A.trica. ••••••••••
Other. 1nc1Jldi ng the U.s ....

hcept Barbados, Benluda, Jamaica, Trinidad, ard Toba&O.
~cept Nigeria and Ghana.
Cotton 1-1/sn or IIIOre
Estab1ished Yearll Quota - 45.656.420 lbs.
Imports Auguat 1. 1965

.1 arlllary 10 ,

Staple Length

l-3/sn or more
1-5/32" or

ani under
1-)/8" (Tangu:is)

1966

Al.1ocation

Imports

)9.59011 778

J8,;~.L~,~54

1.500.000

.L '-}l). L..:'{;/

JlK)J"e

752
frll
l24

195
2.240

71._
2l.J21

5.m

16.~

I!I!ftt!?

-2-

COTTON WASTES

(In pounds)

COTT(}J CARD STRIPS made from cotton ha~ a staple of less than 1-3/16 inches in len«th, OOMBIR
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR O'l'HmwISE
ADVANCED IN VAI1JE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3116 inches or more
in staple le~th in the case of the followin~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
: Established
:
Total Imports
:
Country of Origin
: TCYl'AL QUOTA
: Sept. 20, 1965, to:
_____________:_ _ _ _ _ _ _:__.J_an_. 1.0, 1.'166
:
United

Kin~dom ••••••••••••

CaJ'lada. ••••••••••••••••••••

France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
J apaJ'l. •••••••••••••••••••••
China •••••••••••••••••••••

Egypt •••••••••••••••••••••
Cuba ••••••••••••••••••••••
Genn~ •••••••••••••••••••
Italy •••••••••••••••••••••
Other, inc1udin~ the U.S ••

4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,)22
8,135

6,544

1,441,152
75,801
22,147
14,796
12,853

76,329
21,26)

25,443
7,088

5,u82,509

1,599,886

Included in total imports, column 2.

Prepared in the Bureau of CUstoms.

F-334

Established:
33-1/3% of:
Total Quota:

t..,orts
i/
Sept. 20, 1965, to Jan. 1.0. 1.1)66

-~-

Period and QUantity

Cornrnodity

Uni t of : Imports as of
Quantity: Dec. 31, 1965

o.bsolute ('uotas:
;:rutter substitutes cO:1taininr, over )1);6 of butterfat,
and butter oil •••.••••.••

Calendar year 1965
Calendar year 1966

I·'tbers of cotton processed
but not spun •••••••••••••

12 mos. from
Sept. 11, 1965

1,000 Pound

Peanuts, shelled or not
shelled, blanched, or
otF-!enrise prepared or
preserved (except peanut
bu t te r ) .••••••••••••...••

12 mos. from
August 1, 1965

1,7 09,000 Pound

~/ Quota filled January 3, 1966.

3/ IPlports

F-335

as of January 10, 1966.

1,200,000 Pound
1,200,000 Pound

1,056,840-

Ti{z.';.SURY DEPA.rlTlvli:<:NT

viashington
Ij.},~DIATr:; R.~LSA.S3

WEDNESDAY, JANUARY 12, 1966

F-335

The Bureau of Customs announced today preliminary figures on imports for
consumption of the following commodities from the beginning of the respective
quotri periods through December 31, 1965:
:

Cormnodity

Period and Quantity

Dnl t of : Imports as of
Quantity: Dec. 31, 1965

Tari ff-llate Quotas:

........

Calendar year

1,500,000

Gallon

1,180,897

'C.TIole J;ilk, fresh or sour •••

Calendar year

3,000,000

Gallon

Cattle, 700 Ibs. or more each
(other than ciairy COVIS) •••

Oct. 1, 1965 Dec. 31, 1965

120,000

Head

49,809

Cattle, less than 200 Ibs.
each ••••••••••••••••••••••

12 mos. from
April 1, 1965

200,000

Head

69,708

Calendar year

24,383,589

Pound

Quota filled

Calenjar year

66,059,400

Pound

49,2 03,807

1.11i te or Irish potatoes:
Certified seed ••••••••••••
Other •••••••••••••••••••••

12 mos. from 114,000,000
Sept. 15, 1965 45,000,000

Pound
Pound

56,214,9 25
7,253,3 80

:J1i ves, forks, and spoons
\.:ri th stainless steel
handles •••••••••••••••••••

Nov. 1, 1965 Oct. 31, 1966

Pieces

70,87 1,85 6

Cream, fresh or srnlr

Fish, :resh or frozen, fil-

leted, etc., cod, haddock,
hake, polloc~, cusk, and
rosefish ••••••••••••••••••
~~na

Fish •••••••••••••••••••

~h,ooo,oOO

" Inc2'easec ':Jy President IS Procla."'1ation of January 7, 1966.

TREASURY DEPARTMENT
"';ashington
IMl1EDIATE RELEAS E

WEDNESDAY, JANUARY 12, 1966

F-335

The Bureau of Customs announced today preliminary figures on imports for
consumption of the following commodities from the beginning of the respective
quot~ periods through December 31, 1965:

Commodity

Period and Quantity

tJnlt of Imports as of
Quantity: Dec. 31, 1965

Tariff-Rate Quotas:

........

Calendar year

1,500,000

Gallon

1,180,897

;'mole I'1ilk, fresh or sour •••

Calendar year

3,000,000

Gallon

Cattle, 700 Ibs. or more each
(other than dairy COY-fS) •••

Oct. 1, 1965 Dec. 31, 1965

120,000

Head

49,809

Cattle, less than 200 Ibs.
each ••••••••••••••••••••••

12 mos. from
April 1, 1965

200,000

Head

69,708

Fish, fresh or frozen, filleted, etc., cod, haddock,
hake, pollock, cusk, and
rosefish ••••••••••••••••••

Calendar year

funa Fish •••••••••••••••••••

Calendar year

Cream, fresh or sour

Pound

Quota filled

66,059,400

Pound

49,2 03,807

'!hi te or Irish potatoes:
Certified seed ••••••••••••
Other •••••••••••••••••••••

12 mos. from 114,000,000
Sept. 15, 1965 45,000,000

Pound
Pound

56,214,925
7,253,380

fuives, forks, and spoons
with stainless steel
handles •••••••••••••••••••

Nov. 1, 1965 Oct. 31, 1966 .;t{)b,OOO,OOO

Pieces

70,871,858

Increased by President's Proclamation of January 7, 1966.

-t'-

Period and ruantity

Commodity

Uni t of : Imports as of
Quantity: Dec. 31, 1961

Absolute ruotas:
Butter substitutes co~tain
inr, over h S;'; of butterfat,
and butter oil ••.•••••.•.

Calendar year 1965
Calendar year 1966

Fibers of cotton processe~
but not spun •••••••••••••

12 mos. ~rom
Sept. 11, 1965

1,000 Pound

12 mos. :rom
August 1, 1965

1,709,000 ?ounrl

Peanuts, she11eo or not
she11e~, b1anc~eo, or
otherwise preparej or
preserve~ (except peanut
bu t ter) .•.•.......••.....

1:/
?:,./

Quota :i11e-'l Januar;:r ), 1966.
Imports as of Jan'Jary 1CJ, 1966.

F-335

1,200,000 Pound
1,200,000 Pound

Quota filled
Quota filleo!/

THL"SUB.Y DEP.Jl'IHSNT
~iCl.shington

WEDNESDAY, JANUARY 12, 1966

F-336

The Bureau of Custons has announced. the following preliminary
figUl'es showing the imports for consumption from January 1, 1965, to
December ;1, 1965, inclusive, of corrunodities under quotas established
pursuunt to the Philippine Trade ;l.greement Revision Act of 1955:

Annual
. Established
Quota Wuantity

Commodity

·• • • •
Cigars
··• ·• ·•
Coconut oil •
·•
Buttons

COi'dage • • • • • • •
Tob,."cco •

·• ·•

• •

510,000

Unit of
Imports as of
: Quantity: Dec. 31, 1965
Gross

456,887

1;~0 ,000 , 000

Number

,'268,800,000

Pound

Quota filled

6,000,000

Pound

5,896,381

3,900,000

Pound

3,831,~21

8,960,940

TREASURY DEP:.R'I'MENT

Washington
IHMEDli~ TE

RELEitSE

WEDNESDAY, JANUARY 12, 1966

F-336

The Bureau of Customs has armounced the following preliminary
figures showing the imports for consumption from January 1,1965, to
December 31, 1965, inclusive, of commodities under quotas established
pursuant to the Philippine Trade Agreement Revision Act of 1955:

Commodity
Buttons • • • • • • •

Established Annual
Quota Quantity
510,000

Unit of : Imports as of
Quantity: Dec. 31. 1962
Gross

456,887

• • • • • • •

1:20,000,000

Number

Coconut oil • • • • •

268,800,000

Pound

Quota filled

Cordage • • • • • • •

6,000,000

Pound

5,896,381

Tobacco • • • • • • •

3,900,000

Pound

3,831,:221

Cigars

8,9tJJ,940

- 3 -

ssle or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt fl'aD
all taxation now or hereafter imposed on the principal or interest thereof by any state
or any of the possessions of the United states, or by any local taxing authorIty.

purposes of taxation the amount of discount at which Treasury bills are orig1nally Bold
by thf7 United States is considered to be interest.

Under Sections 454 (b) and 1221 (5)

of the Internal Revenue Code of 1954 the amount of discount at which bills issued here.
under are sold is not considered to accrue until such bills are sold, redeemed or other
wise disposed of, and such bills are excluded from consideration as capital asset••
Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
pe.id for such bills, whether on original issue or on subsequent purchase, and the 8lII01I
actually received either upon sale or redemption at maturity during the taxable year
for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescr11J
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies ot

- 2 -

printed fonns and forwarded in the special envelopes which will be supplied by Federt
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pro.
vided the names of the customers are set forth in such tenders.

others than bank1q

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust companiel
and from responsible and recognized dealers in investment securities.

Tenders

others must be accompanied by payment of 2 percent of the face amount of Treasury bU
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Resert
Banks and Branches, following which public anouncement will be made by the Treasury
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Those submitting tenden

The Secretary of the

~an

expressly reserves the right to accept or reject any or all tenders, in whole or in

part, and his action in any such respect shall be final.

Subject to these reserva·

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the Feden
Reserve Bank on

January 20, 1966

-------(Mi~~~)--------

, in cash or other immediately available fill

or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

January 20, 1966

-------~{n~)----------

• Cash

Cash adjustments will be made tI

differences between the par value of maturing bills accepted in exchange and the

1.11

price of the new bills.
The income derived from Treasury bills, whether interest or gain from tbe sale
other dispoSition of the bills, does not have any exemption, as such, and

loll

rr-

TREASURY DEPARTMENT

Washington

January 12, 1966

FOR IMMEDIATE RELEASE,
XXXXXXXXXXXXXX~~XXXXXXXXXXXXXXXX~

i
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice , invites tenders for two series
of Treasury bills to the aggregate amount of $ 2,300~OOO~OOO , or thereabouts, for

r%)
cash and in exchange for Treasury bills maturing

January 20" 1966 , in the amount
(~)

of $ 2,205,082,000, as follows:

(. )
91 -day bills (to maturity date) to be issued

Jan~

(~)

20, 1966

:11)

in the amount of $1.300,000,000 , or thereabouts, represent-

(I )
ing an additional amount of bills dated
and to mature

April 21, 1966

(I)

October 21, 1965

<I>

, originally issued in the

amount of $ 1,002,628,000, the additional and original bills

(it)

to be freely interchangeable.

182 -day bills, for $1.000,000,000 , or thereabouts, to be dated
(n)
(n)
Janu.a;ry 20, 1966, and to mature
July 21~ 1966

(D)

--~~~(~D~)~-----------

The bills of both series will be issued on a discount basis under compet1t1ft
and noncompetitive bidding as hereinafter provided, and at maturity their face 8IIk)UIIt
will be payable without interest.

They will·be issued in bearer fom only, and in

Ja.nu.artin)11 ,

will not be received at the Treasury Department, Washington.

1966

• 'l'eD4Il

Each tender must be

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three dec:i.JD8ls,
e. g., 99.925.

Fractions may not be used.

It is urged that tenders be made on tbe

TREASURY

C~PARTMENT

January 12, 1966

FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$ 2,300,000,00qor thereabouts, for cash and in exchange for
Treasury bills maturing January 20,1966, in the amount of
$ 2,205,082,000, as follows:
91-day bills (to maturity date) to be issued January 20, 1966,
in the amount of $1,300,000,000, or thereabouts~ representing an
additional amount of bjlls dated October 21,196~, and to
mature April 21,1966,
originally issued in the amount of
~,002,628,000, the additional and original bills to be freely
interchangeable.
182 -day bills, for $1,000,000,000, or thereabouts, to be dated
January 20,1966, and to mature
July 21, 1966.
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Standard
time, Monday, January 17,1966.
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor'.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
~ithout deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
Jr trust company.
F-337

- 2 Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on January 20, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 20,1966.
Cash and exchange tender
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lls are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on- original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the ter~s of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained fro
any Federal Reserve Bank or Branch.
000

¥ElF:!

PRE,Se HELEA.SE

United States and Brazil to

DiSCuss~~Income

The United States and Brazil will,
u(

,:.,t.

(y• .r.

t,~ I 't):~

Tax Treaty

be~in di~~ussio~s shortly
i"~ / , ~.)J,-{.. •::,)

a proposed tax treaty to avoid double taxation and to foster trade
I~

and investment between the two countries.
The proposed treaty will be concerned with the tax treatment
of trading and other business enterprises, investment income and
income from services.

It is expected to follow the lines of the
~/.", ,I......

treati'2s Hith Thailand" Israel anrl
Senate ratification,'
lsi session.)1

BS3@

the Phili~~

Exccrrtive '11;

pers~ns ~nterested

nOH pending

Ennn F, B'9th, eongr~,

in a tax treaty with Brazil

-f""

Hish to consult these treaties and the statement by Assistant Secretary

The proposed treaty will be concerned with the tax
treatment of trading and other business enterprises,
inves tmen t inc ome and income from services.
U :ks .-rl..:) ,~h..;..-t.I)~
~xpected to follow the lines of the treaties with Thailand
and Is:-a:lf\now pending, Senat: ratificatio~dc.i;;Q! in0wae
~-oh __forca 7 percent-~1:twe&tment'c;red"1-t.
Persons
interested in a tax treaty with Brazil may wish to consult
these treaties and the statement by Assistant Secretary
of the Treasury Stanley S. Surrey contained in the
hearings on the treaty with Thailand before the
Subcommittee on Tax Treaties of the Senate Foreign
Relations Committee held in August 1965.

TREASURY DEPARTMENT
(

January 12, 1966
FOR IMMEDIATE RELEASE
UNITED STATES AND BRAZIL TO DISCUSS
INCOME TAX TREATY
The United States and Brazil will begin discussions
shortly of a proposed tax treaty designed, like other tax
treaties, to avoid double taxation and to foster trade and
investment between the two countries.
The proposed treaty will be concerned with the tax
treatment of trading and other business enterprises,
investment income and income from services. The
discussions will be based upon the treaties with Thailand,
Israel, and the Philippines, now pending in the Senate.
Persons interested in a tax treaty with Brazil may wish
to consult these treaties and the statement by
Assistant Secretary of the Treasury Stanley S. Surrey
contained in the hearings on the treaty with Thailand
before the Subcommittee on Tax Treaties of the Senate
Foreign Relations Committee held in August 1965.
Persons wishing to offer suggestions for consideration
in connection with the proposed treaty may send their
views to Assistant Secretary of the Treasury Stanley S.
Surrey before February '15, 1966.

000

F-338

TREASURY DEPARTMENT

FOR IMMEDIATE RF.I,EASE

January 12, 1966

RESULTS OF TREASURY'S CASH OFFERING

The TreasUIJr today announced a

14.5

percent allotment on subscrip-

tions in excess of $50,000 for the current cash offering of $1.5
billion, or thereabouts, of

4-3/4 percent Treasury Certificates of

Indebtedness of Series A-1966 due November 15, 1966 0
for $$0,000 or less will be allotted in full.

Subscriptions

Subscriptions for more

than $50,000 will be allotted not less than $50,000.
Reports received thus far from the Federal Reserve Banks show
that subscriptions for the certificates total about $10.1 billion,
of which about $9.2 billion were received frorrl commercial banks for
their own account and $0.9 billion from all others o
Details by Federal Reserve Districts as to subscriptions and
allotrents will be aIIDounced next week.

000

F-339

TREASURY DEPARTMENT

January 13, 1966

ADVANCE FOR MORNING NEWSPAPERS
FRIDAY, JANUARY 14, 1966
SECRETARY FOWLER SENDS PRESIDENT'S
TAX PROPOSALS TO CONGRESS
Treasury Secretary Henry H. Fowler today transmitted to
the Congress details of the tax program which President
Johnson announced in his State of the Union address Wednesday,
January 12.
The proposals were transmitted in a letter to Chairman
Wilbur Mills of the House Ways and Means Committee and
Senator Long of the Senate Finance Committee. They constitute
a four-point program which would have the effect of increasing
federal revenues in fiscal 1967 by about $4.8 billion.
The proposals (and their estimated effect on federal
revenues in 1967):

F-340

A speed-up in the acceleration of corporate
income tax payments. The 1964 Revenue Act
provided for acceleration of corporate income
tax payments to put corporations on a more
current payment basis. The new proposal
shortens the period over which this acceleration
would be carried out, completing it in 1967
rather than 19700 (Estimated 1967 revenue
effect $3.2 billion.)

A delay in the 1966 and later scheduled reductions
of automobile and telephone excise taxes. The
new proposal would delay the staged reduction of
both taxes by two years, and would restore both
taxes to the levels which were in effect at the
end of 1965. (Estimated 1967 revenue effect
$1.2 billion.)

- 2 -

Replacement of the present 14 percent flat rate
for income tax withholding on wages and salaries
by a graduated, six-rate scale, so that wages
withheld for income tax purposes would more
closely approximate actual tax liabilities at the
end of the taxable year. (Estimated 1967 revenue
effect $400 million.)

Quarterly payment of Social Security taxes by
self-employed taxpayers, to relieve them of the
present obligation of making such payments in
one lump sum after the end of the taxable year.
(This proposal will increase Fiscal 1967
revenue by about $100 million, but since these
payments go into the Social Security Trust
Fund this figure will not be reflected in
administrative budget receipts.)

In his letter, Secretary Fowler made clear that the
President's program does not change anyone's final income
tax liability, but instead is confined to rescheduling certain
excise tax reductions and modification of collection procedures
on existing taxes.
Secretary Fowler wrote in part:
"The President has asked me to present
the details of the tax program recommended in
his State of the Union Message, on which the
earliest feasible action would be desirable.
"The President indicated that increases
in expenditures in the fiscal years 1966 and
1967 for continuing operations in Southeast
Asia would be necessary. These increased
.defense costs come at a time when we are
reaping the benefits of prior tax reductions in
the form of higher levels of income and lower
unemployment. During the calendar year 1966,
unemployment should fall appreciably below what has
been our interim target of 4 percent.
"The present economic and financial situation
calls for avoiding additional stimulus to demand.
Therefore, the President recommends that:
(a) we reschedule the reductions in the
automobile and certain telephone excises; and,

- 3 (b) modify tax collection procedures, without
increasing income tax rates or changing anyone's
final income tax liabilities so that the time
for tax payments would be more closely linked
with the income and profits on which the tax
liabilities are based."
The remainder of the letter is a technical presentation
of the President's Program, covering the proposals described
in detail in the attachments to this release.

TAX PROGRAM - SUMMARY
The President's tax program involves four parts:
1.

Excise Taxes: A proposal to restore
the present 6 percent manufacturers'
on new passenger automobiles. (This
reduced from 10 percent to 7 percent
and was reduced again from 7 percent
on January 1, 1966.)

to 7 percent
excise tax
tax was
last year
to 6 percent

A proposal to restore the 10 percent excise tax
on local and long distance telephone service.
(This rate dropped from 10 percent to 3 percent
as of January 1, 1966.)
2.

Corporation Income Tax Payments Speed-Up:
A proposal to require larger corporations
(those with annual tax liabilities of $100,000
or more) to pay income taxes on a current basis
(in the year it is earned) by 1967, instead of
by 1970, as provided in the 1964 Revenue Act.
The proposal would not increase corporation
income tax rates or final tax liabilities.

Graduated Withholding for Individuals:
A proposal to replace the present 14 percent
flat withholding rate with a graduated
withholding system for individual income taxpayers.
This would result in more taxes being withheld
from some taxpayers; less from others -primarily to reduce under-withholding and, to
some extent, to reduce over-withholding of
income taxes on wages and salaries.

Quarterly Social Security Tax Payments for
Self-Employed Persons:
A proposal to require self-employed persons to
estimate their Social Security tax in advance
and pay it in current quarterly installments
with their income tax. Self-employed persons
now pay this tax in an annual lump sum after
the end of the taxable year.

ESTIMATED REVENUE EFFECTS OF PRESIDENT'S TAX PROPOSALS
(in millions of dollars)
(Assuming March 15, 1966 Enactment)
Receipts Increase
FY 1966 FY 1967
Excises:
Local and long distance
telephone, and teletypewriter
service (If effective April 1, 1966)
Automobiles
(If effective March 15, 1966)

$1,000

Graduated withholding system for
individual income taxes':
(If effective May 1, 1966)

Self-employment tax, social seourity,
quarterly payment (1)
(If effective June 15, 1966)

790

$ 420

Corporate income tax payment speed-up:
(If effective April 15, 1966)

TOTAL (Administrative Budget Effect)

$3,200

400

$1,155

$4,810

$ 100

100

Estimate re fers to effect upon cash budget receipts.

ffice of the Secretary of the Treasury
Office of Tax Analysis

January 1966

EXCISE TAXES
PROPOSAL:
The Treasury proposal involves suspending the reduction
in two excise taxes which took place January 1 -- involving
new passenger automobiles and telephone service -- and delaying
the further reductions of these two taxes scheduled for future
years.
(The schedule of reductions would be reinstated on
January 1, 1968.) The proposal would not affect other taxes
eliminated by the Excise Tax Reduction Act of 1965.
Automobiles: The excise tax on new passenger cars,
which was reduced from 7 percent to 6 percent on January 1,
would go back up to 7 percent on the day after the effective
date of the legislation. The 7 percent rate was in effect
from May 15 through December 31, 1965. The program would
have the effect of cancelling out the one percentage point
reduction scheduled for this year, but it would not restore
to 10 percent the excise tax rate on passenger cars which
was in effect before last May 15.
In addition, a 1 percent floor stock tax would be
imposed on new cars which dealers have on hand when the 7 percent
rate becomes effective. This would make the 7 percent tax
rate fully effective on all new cars delivered to customers
after the date of enactment.
The proposal postpones the remalnlng reductions of the
automobile tax scheduled under the 1965 Act by two years.
The 7 percent tax would remain in effect until January 1, 1968.
It would then fall again to 6 percent. On January 1, 1969,
it would be reduced to 4 percent; to 2 percent on January 1, 1970;
and to 1 percent on January 1, 1971, where it would remain.
Telephone Service: The tax on local and long distance
telephone service, which was reduced from 10 percent to 3
percent as of January 1, 1966,* would be restored to 10 percent
on April 1, assuming enactment by March 15, 1966. The 10 percent
rate would also be restored on teletypewriter service. This
proposal would not affect the other former taxes on communications services such as -- private communications systems,
telegraph service, and wire and equipment service -- which
were repealed by the 1965 Act.

Applies to bills sent to customers on or after this date.

- 2 The schedule for future reductions in the telephone tax
would also be postponed two years. The rate would drop again
to 3 percent on January 1, 1968; to 2 percent on January 1, 1969;
and to 1 percent on January 1, 1970. As of January 1, 1971,
it would be eliminated.
The automobile and telephone taxes lend themselves to
adjustment because:
1.

They involve substantial amounts of revenue.

Both these taxes are still in effect.

The impact of the readjustment would be
dispersed over a broad segment of the
public because of the widespread ownership
of automobiles and use of telephones.

These excises involve relatively minor
administrative and compliance problems
for the industries involved. Any
adjustments would not require reestablishing
tax accounting procedures.

Recent Background:
The automobile and telephone excise taxes originated in
World War II as revenue-raising and anti-inflationary fiscal
devices. They remained in force through the Korean conflict
and for more than a decade afterward, although the rates
were readjusted.
Under President Johnson's Excise Tax Reduction Act of
1965, a 'schedule was established for reducing the tax on
automobiles to one percent and eliminating the tax on phone
service. Following that schedule, the automobile tax dropped
from 10 percent to 7 percent last May 15 and from 7 percent
to 6 percent on January 1. The telephone tax fell from
10 percent to 3 percent on January 1.
According to the 1965 schedule, the automobile tax was
to have been reduced to 1 percent on January 1, 1969. The
telephone tax was to have been eliminated on the same date.
Under the new program, the schedule for reduction would
simply be postponed two years in each case.

- 3 -

Revenue Effect:
Restoration of the previous automobile tax rate would
provide an additional $60 million in revenue during fiscal
year 1966.
There would be no budget effect from the telephone tax
rate restoration during fiscal year 1966, since the normal
allowable time lag on collecting and actually paying the tax
would delay the effect of the higher rate until after June 30.
Excise tax revenues would increase by $1,210 million in
fiscal year 1967. Of that total, $420 million would be from
the automobile excise tax and $790 million from the telephone
tax. The increase would be due both to the full year of
applicability and to the suspension of the further reductions
scheduled for January 1, 1967.

- 4-

Comparison of Present and Proposed Excise Tax Rate
Schedules for Automobiles and Telephone Service
Automobile Excise Tax
Excise Tax Rate
Presen-r---- Proposed
Schedule
Schedule
Early 1966* - December 31, 1966

Calendar year 1967

Calendar year 1968

Calendar year 1969

Calendar year 1970

Calendar year 1971

Thereafter

Telephone Service Excise Tax

------~

Excise Tax Rate
Present
Proposed
Schedule
Schedule
Early 1966* - December 31, 1966

10%

Calendar year 1967

10%

Calendar year 1968

Calendar year 1969

CaJ.endar year 1970

Calendar year 1971

Thereafter

Office of the Secretary of the Treasury
Office of Tax Analysis

January, 1966

*Precise date depends on time of passage of proposed legislation.

SPEED UP IN CORPORATE INCOME TAX PAYMENTS
To put larger corporations on a more current payments
basis, the proposal would speed up the accelerated corporation
tax payments plan adopted by Congress in the 1964 Revenue Act.
About 16,000 corporations -- with tax liabilities in
excess of $100,000 each -- would be affected.
These corporations would be put on a basis of paying
income taxes in the year such income is earned, by 1967,
instead of by 1970.
The proposal does not call for an increase in the corporate
income tax rate, nor would it change "tolerance rules" now in
the tax code which prevent penalties for under-estimation if
certain requirements are met.
Present Law:
Under present law, and assuming that a corporation with
a fiscal year ending Dece~ber 31 estimated taxes (in excess
of $100,000) at the full amount, the corporation paid 4 percent
of estimated tax liabilities in April, and another 4 percent
in June, 1965.
These were followed by two payments of 25 percent in
September and December, 1965.
For this corporation, what would come next is two clean-up
payments of 1965 taxes of 21 percent each in March and June 1966,
to round the total out to 100 percent.
Also under present law, the corporation, in the example
above, would have its estimated payments step up to 9 percent
of calendar 1966 income in April and again in June 1966; to
14 percent each in April and June 1967 on estimated 1967 income;
to 19 percent each in April and June 1968 on 1968 income;
to 22 percent each in April and June 1969 on 1969 calendar
year income; and to 25 percent each in April and June 1970
on 1970 income.
As these April and June payments step up, the clean
up payments in the first half of the following year would
decline.

crT
- 2 The September and December instalments on estimated
current year tax liabilities (in exceSs of $100,000) would
remain at 25 percent throughout.
The Speed-Up Plan:
Starting in 1966 (that would be April 15, 1966 for a
corporation with a fiscal year ending December 31), larger
corporations would pay 12 percent (not 9 percent) of current
year tax liabilities in excess of $100,000 in April and again
in June this year.
Still assuming that the corporation estimates 100 percent
of its tax liabilities in excess of $100,000, the April and
June payments would be 25 percent each in 1967.
Thus, in 1967, the corporation in the example, would
pay 25 percent of its estimated tax in April, 25 percent
in June, 25 percent in September and 25 percent in December.
The proposal would not alter present "tolerance rules."
Under these rules, there is no penalty for underpayment of
the tax if the estimated tax payments are based upon:
1.

70 percent of the actual tax in excess of $100,000;

Last year's tax, in excess of $100,000;

3. The tax (in excess of $100,000) at current rates on
last year's income; or
4. 70 percent of the tax for the current year (in excess
of $100,000) computed on the basis of an annualization of the
year's income to date.
Revenue Effect:
The speed-up of the corporate income tax payments,
assuming it takes effect by April 15, 1966, would increase
collections by about $1 billion in fiscal 1966, and by $3.2
billion in fiscal 1967.
Tables: The following tables compare present and proposed
corporation income tax payment schedules, expressed as a percent
of calendar year tax liabllity, and assuming that a corporation
estimates 100 perQQnt o£ income. Table 1 gives the present
law; Te-hle 2, the proposed speed-up:

CIT

- Table One - (Present Law)

Calendar:
Current Taxable year
Following year
year
:Apri1 15: June 15 : Sept. 15: Dec 15: March 15 : June 15
1966 - 1971 Payment schedule under present law:
9
1966
14
1967
19
1968
22
1969
25
1970
25
1971
and
subsequent years.

9
14
19
22
25
25

25
25
25
25
25
25

16
11
6

(tax in excess of $100,000 and assuming 100 percent
estimation) .

CIT

- Table Two - (PROPOSAL)

llendar
Current taxable year
rear
:Apri1 15: June 15 : Sept. 15:
1966 - 1968
966
967
968

12
25
25

Dec. 15

Following year
March 15: June 15

Payment schedule under proposed law:

12
25
25

25
25
25

(tax in excess of $100,000 and assuming 100 percent
est imation).

GRADUATED INCOME TAX WITHHOLDING
FOR INDIVIDUALS
To reduce the problems created by the present 14 percent
flat-rate withholding system for individual taxpayers in
virtually all income groups, a new system of six graduated
income tax withholding rates is proposed, beginning on
May 1, 1966.
The new system would relieve many taxpayers of the
problem of having to pay large, and often unanticipated, lump
sum amounts on their income taxes. It also would reduce
over-withholding for many low-income taxpayers.
The new system would make withholding far more exact.
Under the graduated withholding system, 29 million wage
and salary earners will have their withholding come within
$10 of their actual tax liability. This compares to 12 million
taxpayers under the present system. (See Table 4.)
The proposal would use six rates to withhold taxes from
wages and salaries that are more closely related to the
actual amount of tax liability -- assuming that the taxpayer
claims deductions of about 10 percent of his income.
In addition, the proposed system would reflect the
minimum standard deduction (claimed primarily by lower income
taxpayers) where it exceeds the 10 percent standard deduction.
Here is how this would work:
(1)

No withholding would be required on
the first $200 of wages (less
exemptions) to reflect the basic
$200 minimum standard deduction
granted each taxpayer; and

(2)

For withholding schedules, the value
of each exemption would be increased
to reflect the $100 additional
minimum standard deduction allowed
for each exemption.

The graduated withholding rate schedule below (Table A)
illustrates how this would apply to a single person. A
head-of-household would use the schedule applicable to single
persons. A separate rate schedule (Table B) would apply to
married persons.

TWI

- 2 -

TABLE A
SINGLE
[£ the amount of wages and salaries

The amount of income tax
to be withheld is:

(in excess of $700 times the number
J£ personal exemptions) is
~ot

over $200

)ver $200 but not over $700

14% of wages and salaries in
excess of $200

Jver $700 but not over $1,200

$70 plus 15% of wages and
salaries in excess of $700

Jver $1,200 but not over $4,400

$145 plus 17% of wages and
salaries in excess of $1,200

Over $4,400 but not over $8,800

$689 plus 20% of wages and
salaries in excess of $4,400

Over $8,800 but not over $11,000

$1,569 plus 25% of wages and
salaries in excess of $8,800

Over $11,000

$2,119 plus 30% of wages and
salaries in excess of $11,000

TWI
- 3 -

TABLE B
MARRIED

If the amount of wages and salaries
(in excess of $700 times the number
of personal exemptions) is:

~ot

over $200

The amount of income tax
to be withheld is:

her $200 but not over $1,200

14% of wages and salaries in
excess of $200

~er

$1,200 but not over $4,400

$140 plus 15% of wages and
salaries in excess of $1,200

~er

$4,400 but not over $8,800

$620 plus 17% of wages and
salaries in excess of $4,400

~er

$8,800 but not over $17,700

$1,368 plus 20% of wages and
salaries in excess of $8,800

~er

$17,700 but not over $22,000

$3,148 plus 25% of wages and
salaries in excess of $17,700

)ver $22,000

$4,223 plus 30% of wages and
salaries in excess of $22,200

- 4 Recent Background:
Under present law, wages and salaries are subject to
withholding at a flat 14 percent rate, which is equivalent to
the average of the present first four tax bracket rates (14,15,
16 and 17 percent) adjusted for the 10 percent standard deduction.
However, annual tax liability for the individual taxpayer very
often is computed after accounting for itemized deductions or
a minimum standard deduction in excess of the 10 percent
standard deduction.
About 63.1 million individual taxpayers are affected by
income tax withholding (but do not make quarterly declaration
payments).
Approximately $36.5 billion is collected from these
63.1 million taxpayers
with $2.4"billion representing
under-withholding, and $6 billion of this total representing
over-withholding.
Revenue Effect:
If Congress approves the new system in time for it to take
effect by May 1, 1966, it would increase budget receipts from
withholding by $95 million in fiscal 1966 and by about
$400 million in fiscal 1967.
Effect on Withholding, Under-Withholding, and Over-Withholding:
1.

Total Withholding. The proposal would increase the
amount of withholding by $1,240 million, assuming a
full-year effect.

How It Will Effect Taxpayers: (See Attached Tables 1, 2, and 3)

TABLE 1
Tax

Hage
income

Li:lbility and tJithholding Under Present 14 Percent Withholding
and Graduated Withholding For SeJ.ccted Taxpayers 1/

:Ovenvithholdine (+) or
Tax
: Amount of \-lithholding
Change
: underwithholding (-)
liability:
Present : Graduated:
in
Present
Graduated
:14 percent ~:withholding:withholding :14 percent: withholding

~--

Single Individual

$ 1,000
2,000
3,000
5,000
7,500
10,000
12,500
15,000
20,000
25,000

14
161
329
671
1,168
1,742
2,398
3,154
4,918
6,982

47
187
327
607
957
1,307
1,657
2,006
2,707
3,407

14
162
332
672
1,169
1,694
2,359
3,109
4,609
6,109

-33
-25
+5
+65
+212
+387
+702
+1,103
+1,902
+2,702

+33
+26
-2
-64
-211
-435
-741
-1,148
-2,211
-3,575

$
+1
+3
+1
+1
-48
-39
-45
-309
-873

January, 1966
Office of the Secretary of the Treasury, Office of Tax Analysis

Assumes deductions equal to 10 percent of income or the minimum standard deduction,
whichever is larger.

'];./

Computed on an annual basis by the percentage method which may differ slightly from
withholding tables. Assumes employment is regular and all exemptions claimed for the
entire year for withholding purposes.

Tax Liability and Hithholding Under Present 14 Percent Hithholding
and Graduated Withholding For Selected Taxpayers 1/

...

--.. --- ._-----_._.-

:Oven~ithholding

(+) or
Tax
: Amount of \vithholding
Change
: underwithholding (-)
liability:
Present : Graduated:
in
: Present : Graduated
:14 percent t:withholding :tvithholding :14 percent : withholding

Wage
income

Married Couple, No Dependents

$ 3,000
5,000
7,500
10,000
12,500
15,000
20,000
25,000

200
501
914
1,342
1,831
2,335
3,484
4,796

233
513
863
1,213
1,563
1,913
2,613
3,313

200
500
909
1,334
1,828
2,328
3,373
4,703

- --- -----

----~

-33
-13
+46
+121
+265
+415
+760
+1,390

-~-

---- ---- -- ---

+33
'+12
-51
-129
~268

-422
-871
-1,483

$
-1
-5
-8
-3
-7
-111
-93

-------~anuary-T900

Office of the Secretary of Treasury, Office of Tax Analysis

Ass . . unes deductions equal to 10 percent of income or the minimum standard deduction,
whichever is largero

Computed on an annual basis by the percentage method ~vhich may differ slightly from withholding tables
Assumes C[l1P lOYI11cnt is regular and all exemptions claimed [or the entire
YULr f01" Nithho1ding pLlt"pcscso
0

Table 3
Tax Liability and Withholding Under Present 14 Percent Withholding
and Graduated Withholding For Selected Taxpayers 11

Wage
income

.•
:

.•

:
Tax
: Amount of withholding: Change
Liability:
Present
Graduated:
in
:14 percent 2/ withholding ~withho1ding

:Overwithholding (+) or
: underwithholding (-)
: Present
Graduated
:14 percent
withholding

Married Couple, Two Dependents

$ 3,000
5,000
7,500
10,000
12,500
15,000
20,000
25-,000

0
290
686
1,114
1,567
2,062
3,160
4,412

46
326
676
1,026
1,376
1,726
2,426
3,126

0
290
671
1,096
1,548
2,048
3,048
4,283,

-46
-36
-5
+70
+172
+322
+622
+1,157

+46
+36
-10
-88
-191
-336
-734
-1,286

$
-15
-18
-19
-14
-112
-129

January 1966
Office of the Secretary of Treasury, Office of Tax Analysis

11 Assumes deductions equal to 10 percent of income or the minimum standard deduction,
whichever is larger.

Computed on an annual basis by the percentage method which may differ slightly from withholding tables. Assumes employment is regular and all exemptions claimed for the entire
year for wit~ho1ding purposes.

TABlE

TWI

Effect of Proposed Graduated Withholding
On Present Law Withholding (1966 Levels) !/
.'

Present
.' 14 percent
: withholding

Net change • Proposed
from
.' graduated
present law withholding

.1 returns

Number of returns (millions)
1. Overwithholding •.......••••••••
2. Underwithholding •..•........•••
3. Breakevens y ................. .

4..

Total •...•....•..•..••.•....•••

Amount ($ millions)
1. Overwithholding •..•.••...••••••
2. Underwithholding •.•.•••.•••••.•
3. Total withholding •......••.•.••
der $5,000 AGI' (Adjusted Gross lDcane)
A. Number of returns (millions)
1. Overwithholding ••.••....•.•••••
2. Underwithholding •.•.••••.••••••
3. Breakevens y ................. .

Total •.......••

•••••••••••••••

36.9
14.2
12.0

b3.I
6,000
2,400
36,500
19·3
2,8
9·3

3l.4

Amount ($ millions)
1,872
1. Overwithholding •..•....•.••.•••
2. Underwithholding •..•.•..•.•.•••
233
5,600
3. Total withholding •.••.•••..••••
,000 - $10,000 AGI (AQjusted Gross Incane)
A.. Number of returns (millions)
14.7
1. Overwithholding •....••.••.•••••
2. Underwithholding •.•••.••••••.••
5·7
2.3
3. Breakevens 2/ ••.•.•.•...•.•••••
22.7
4. Total ..... -:-......•...........••
3. Amount ($ millions)
3,510
1. Overwithholding ••......•...••••
798
2. Underwithholding •..••.•.••.••.•
3. Total withholding •....•..•.•.•• 18,000
),000 and over AGI (A<i1usted G~OS8 Inccme)
1. Number of returns (millions)
2.9
1. Overwithholding •......•.•••.•••
2. Underwithholding •...•..•.•..•••
5·7
0.4
3. Breakevens 2/ ••...•.•.•...•..••

Total •.... :-..•••...•..•.......•

9.0

Amount ($ millions)
1. Overwithholding •..••....••...••
2. Underwithholding •...•....•.....
3. Total withholding •....•..•...••

618
1,369
12,900

4.
I.

23.8
10.4
28.9
b3.1

-13.1
-3.8
+16.9
+50
-1,190
+1,240

6,0'50
1,210
37,740

-12.6
-0·3
+12·9

6.7
2.5
22.2
31:4

-500

1,372
233
5,100

-500

12.1
4.5
6.1

-2.6
-1.2

+3.8

22.7

-20
-250
+230

3,49 0
548
18,230

+2.1
-2.3

5·0
3.4
0.6
9·0

+0.2

+570
-940
+1,510

1,188
429
14,410

January, 1966
Office of Tax Analysis
Based on taxable and nontaxable returns with salaries and wages and no
declaration payments.

Treasury Department, Office of the :; ecretary

Breakeven defined as within $10 of the tax liability.

SELF-EMPLOYMENT TAX
The program includes a proposal to bring the payment of
Social Security taxes by self-employed persons to an
approximately current basis. (in effect, "Pay-As-You-Go.")
Persons who are employed by others have their Social
Security tax payments deducted from their wages or salaries
on a current basis, along with their federal income taxes.
Self-employed persons pay their federal income taxes on a
current basis by means of the declaration and quarterly
payment of their estimated tax. But they pay their Social
Security tax in one lump sum on April 15 each year.
The proposal is that self-employed persons should
include their Social Security tax in the estimated tax
declaration and pay it in quarterly installments along with
their income tax payments. This would have two major
advantages:
1.

It would put self-employed persons on a more
current footing and a more equal footing with
other taxpayers, who are required to be
current in their Social Security tax payments
through payroll deductions.

It would eliminate the burden of a large annual
lump-sum for self-employed persons. Many
self-employed taxpayers have been finding
it increasingly difficult to meet their Social
Security tax liability when it comes due
in a lump sum. With the increases in the level
of Social Security taxes and benefits in recent
years, the self-employment tax has come to
involve a substantial sum. This year, the
maximum tax will be $405.90, the amount which
must be paid by anyone with earnings of $6,600
or more subject to the self-employment tax.
Such an amount is often a real burden when
added to a substantial income tax payment. It
may be even more burdensome to self-employed
persons whose taxable income is not large
enough to require an income tax payment, but
who are nevertheless liable for the lump-sum
Social Security tax payment on April 15.

- 2 -

Under the proposal, self-employed persons would shift
their Social Security tax payments to a current quarterly
schedule. They would become nearly current in 1966 by
adding to the declaration of estimated income tax an estimate
of three-fourths of the Social Security tax they would owe
for this year, and paying that amount in three installments.
These would be due on June 15 and September 15 of 1966 and
January 15, 1967. They would become fully current in
1967 by estimating the entire self-employment tax and paying
it in four quarterly installments with their quarterly income
tax payments.
No estimate or quarterly payment would be required if
the combined estimated income tax and self-employment tax
totalled $40 or less. Farmers and fishermen, who are not
required to make quarterly payments of estimated income tax,
would pay their Social Security tax in the same way they
pay their income tax under present law.
This proposal would result in an increase of $100
million annually in Social Security tax collections for
both fiscal year 1966 and 1967. It would require about one
million additional taxpayers to file declarations.
The attached tables show the growth in self-employment
tax liability since 1951.
Attachment

SET
- 3 Table 1
Growth in Maximum Dollar Amount of
Self-Employment Tax for Individuals

Net earnings base ~

Year

Tax rate

: Maximum contribution per person

$ 81.00

1951 - 53

$3,600

195 4

3,600

3. 0

108.00

1955 - 56

4,200

3. 0

126.00

1957 - 58

4,200

3· 3'r5

141. 75

1959

4,800

3·75

180.00

1960 - 61

4,800

4.5

216.00

1962

4,800

4.7

224.60

1963 - 65

4,800

5.4

259·20

1966

6,600

6.15

1967 - 68

6,600

6.40

2.25%

Office of the Secretary of the Treasury
Office of Tax Analysis

405.9 0
422.40
January, 1966

~ The minimum net earnings subject to the self-employment rate has been

$400 since 1951.

Includes OASDI tax rates and HI tax rate for 1966 and all following
years.

Note:

Further scheduled increases will raise the maximum contribution
per person to $514.80 in 1987.

- 4 -

SET

Table 2

Growth In Self-Employment Tax Liability

Year

Self-emplOyment tax
Number of income
:Amount of self-: Average tax
tax returns reporting :employment tax per return
self-employment tax
(In millions)
($ Millions)
!

1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962

4.4
4.1
4.2
4.2
6.6
7.4
7.0
7.0
7.0
6.9
6.7
6.7

1963

6.5

1964 (prelim.)
1965 (est.)
1966 (est.)

6.3
6.2
6.1

Office of the Secretary of the Treasury
Office of Tax Analysis

$ 211.3
217.5
226.6
301.5
463.2
533.1
581.2
589.2
701.5
833.5
840.1
887.2
1,002.2
1,009.0
1,050.0
1,500.0

$ 51.90
53.60
53.70
71.60
69.70
72.50
83.10
84.00
99.70
121.00
124.50
132.90

154.60
160.00
169.00
246.00

January 1966

TREASURY DEPARTMENT

January 14, 1966

FOR IMMEDIATE REIEASE

TREASURY DECISION ON VELVET FLOOR COVERINGS
UNDER THE ANTIDUMPnm ACT

The Treasury Department has completed its investigation with
respect to the possible dumping of velvet floor coverings from
Great Britain, manufactured by Carpet Trades Limited, Kidderminster,
Great Britain.

A notice of a tentative determination that this

merchandise is not being, nor likely to be, sold at less than fair
value within the meaning of the Antidumping Act, 1921, as amended,
will be published in an early issue of the Federal Register.
Appraisement of the above-described merchandise from Great
Britain, manufactured by Carpet Trades Limited, Kidderminster,
Great Britain, has not been withheld at this time.
Imports of the involved merchandise received during the period
October 1, 1964, through September 30,
mately $42,000.

1965, amounted to approxi-

TREASURY

~
II'~
. ! '.\

DEPART:~ENT

\~.~/)
WASHINGTON, D.C.

~2/

Jalluary 14, 1966

~'OR

H1Hl';DIATE REIEASE
TREASG~Y

DECISION ON VELVET FLOOR COVERINGS
UNDER THE ANTIDUMPING ACT

Tile 'l'-.ccCtsury Department has completed its investigation with
respect to the possible dwrrping of velvet floor coverings from
Great Bi'i tain, manufactured by Carpet Trades Limited, KidderrrLi.nster,
Great Britain.

A notice of a tentative determination that this

mcrch::U1,Li.sc is not being, nor likely to be, sold at less thar: fair

will

Lie

p~b":"'isbed

in an earJ,y issue of the Fede;'D.l Ee'L":

App:·o.isement of the above-described m<.:rt.:1l.s.odise .from Great
Britain, rr:unufactured by Carpet Trades Limited; Kldderminster,
(;re:lt r"r: t rLiL. Las not been withheld

a~,

tnistin~~.

Irnpcrts of the involved merchandise

OctoLJcr 1, 1C)6Lt, through September 30,

rec\~i.ved

du."lnc the pel") Cjd

1965, amounted to

appY::lxi·

TREASURY DEPARTMENT
WASHINGTON,

January 17, 1966
FOR UJME.DIATE REIEASE

TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING ACT
The Treasury Department has determined that titanium dioxide,
pigment grade, from \-/est Germany} manufactured by Farbenfabriken
Bayer A.G., Leverkusen, Germany, is being, or is like~ to be, sold
at less than fair value within the meaning of the Antidumping Act,
1921, as amended. This action is being taken pursuant to a "Notice
of Tentative Determination," published in the Federal Register on
November 18, 1965·
There are under consideration two types of pigment grade titanium dioxide, anatase and rutile. Anatase titanium dioxide is
a low-energy crystal form used in paper manufacture and in the production of paints where chalking tendencies are desired, while
rutile, a higher-energy crystal form, is used in paints where higher
opacity per unit of weight is desired.
All submissions received in opposition to the tentative determination were given full consideration.
Accordingly, this case is being referred to the United States
Tariff Commission for an injury determination.
Notice of the determination and of the reference of the case
to the Tariff Commission ~ill be published in the Federal Register.
Imports of the involved merchandise received during the period
July 1, 1964, through October 31, 1965, amounted to approximately

$3,95 0 ,000.

TREASURY DEPARTMENT

January 17,1966
FOR IMMEDIATE REIEASE
TREASURY DECISION ON TITANIUM DIOXIDE
UN1ER THE ANTIDUMPING ACT

The Treasury Department has determined that titanium. dioxide,
pigment grade, from West Germany, manufactured by Farbenfabriken
Bs\Yer A.G., I.everkusen, Germany, is being, or is likely to be, sold
at less than fair value within the meaning of the Antidumping Act,
1921, as amended. This action is being taken pursuant to a "Notice
of Tentative Determination," published in the Federal Register on
November 18, 1965.
There are under consideration two types of pigment grade titanium dioxide, anatase and rutile. Anatase titanium dioxide is
a low-energy crystal form used in paper manufacture and in the production of paints where chalking tendencies are desired, while
rutile, a higher-energy crystal form, is used in paints where higher
opacity per unit of weight is desired.
All submiSSions received in opposition to the tentative determination were given full consideration.
Accordingly, this case is being referred to the United States
Tariff Commission for an injury determination.
Notice of the determination and of the reference of the case
to the Tariff Commission will be published in the Federal Register.
Imports of the involved merchandise received during the period
July 1, 1964, through October 31, 1965, amounted to approximately
$3,950,000.

TREASURY DEPARTMENT
Washington
REMARKS OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT THE SWEARING-IN OF DR. BENJAMIN CAPLAN AS
DIRECTOR, OFFICE OF PLANNING AND PROGRAM EVALUATION
ON MONDAY, JANUARY 17, 1966 AT 12:00 NOON
IN ROOM 4121 MAIN TREASURY BUILDING
Our action today installing Dr. Benjamin Caplan in his
newly created post reflects the President's desire to establish
throughout government a new planning-programming-budgeting
system. The object of such a system is to apply the most
modern management tools to the task of reducing operating
expenses.
We in the Treasury have always been cost-conscious, just
as we have always been keenly aware of the necessity for
intelligent planning. The constructive changes that we have
initiated during the past few years, changes that have touched
almost every facet of our operations, reflect our concern for
getting the most out of every tax dollar we spend, improving
our services to the public, and effectively utilizing the
creative abilities of all Treasury employees.
As the first Director of the new Office of Planning and
Program Evaluation, Dr. Caplan will be the key factor in
bringing an integrated planning-programming-budgeting system
into being in the Treasury Department. It will be his
responsibility to see that the Treasury does everything within its
power to carry out President Johnson's and my desires not only
to introduce this new system effectively throughout Treasury,
but also to initiate both short and long-range analytical
studies and develop plans of major significance to the future
direction of Treasury operations. In this respect, Dr. Caplan,
I can assure you that you will have the support and good
counsel of the heads of Treasury Bureaus and Offices -- in
fact, of every Treasury employee -- in effectively carrying out
your assignment.
It is particularly fitting and fortunate that we should
have in this new job a man of Dr. Caplan's proved administrative
and executive talents. He has extensive experience both in
government and private industry. For the past three years

(MORE)

- 2 Dr. Caplan has been Director of the Office of International
Affairs in the State Department where he has been concerned
with balance of payments programs, measures dealing with
international liquidity changes in exchange rates, and
stabilization programs of foreign countries. Previously,
Dr. Caplan was with the Institute for Defense Analysis and the
Office of Civil and Defense Mobilization. In these positions
he was directly concerned with the application of systems
analysis to numerous economic problems affecting our national
security, and with the evaluation of the effectiveness of
mobilization programs. A former university instructor in
economics at Ohio State University, Dr. Caplan is also the
author of many articles on economics and the investment flaw
of capital.
We are happy indeed to welcome Dr. Benjamin Caplan into
the Treasury.

000

TREASURY DEPARTMENT

RELEASE 6:30 P.M.,

mday, January 17, 1966.

RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
11s, one series to be an additional issue of the bills dated October 21, 1965,
d the other series to be dated January 20, 1966, which were offered on January 12,
66, were opened at the Federal Reserve Banks today. Tenders were invited for
,300,000,000, or thereabouts, of 9l-day bills and for $1,000,000,000, or thereouts, of 182-day bills. The details of the two series are as follows:
NGE OF ACCEPTED
91-day Treasury bills
:
182-day Treasury bills
MPETITlVE BIDS:
maturing April 21, 1966
maturing July 21, 1966
Approx. Equiv.
Approx. Equiv.
Price
Annual Rate
Price
Annual Rate
High
98.822
4.660~
97.593 !I
4.761
ww
4.680~
97.586
4.775
98.817
Average
4.673~ !/
97.589
4.770 Y
98.819

!I
74~
50~

Excepting one tender of $1,000
of the amount of 91-day bills bid for at the low price was accepted
of the amount of 182-day bills bid for at the low price was accepted

t'AL TENDlmS APPLIED FOR AND ACCEP'.rED BY FEDERAL RE:3ERVE DIS1,IlUCTS:

)istrict
3oston
iew York
'hiladelphia
:leveland
tichmond
.tlanta
~cago

:t. wuis
linneapo1is
ilnsae City
alias
an Francisco
TOTALS

Al?E1ied For
26,423,000
$
1,549,658,000
27,670,000
28,294,000
14,916,000
40,197,000
350,912,000
63,627,000
19,722,000
31,238,000
28,270,000
1141. 862 1.°°0
$2,295,789,000

Accepted
15,085,000
$
856,718,000
15,644,000
28,294,000
13,916,000
24,293,000
201,986,000
40,663,000
13,592,000
28,238,000
20,010,000
42,407,000
$1,300,846,000

··

Applied For
$ 29,862,000
1,373,706,000
22,674,000
98,888,000
5,834,000
50,746,000
335,384,000
29,950,000
9,798,000
14,667,000
13,463,000
180,618,000
£/ $2,165,590,000

·
·

··

Accepted
9,762,000
$
593,916,000
7,174,000
56,438,000
5,827,000
13,857,000
174,134,000
14,450,000
7,048,000
13,792,000
8,463,000
96 z208 z000
$1,001,069,000£1

Includes $260,883,000 noncompetitive tenders accepted at the average price of 98.819
Includes $127,635,000 noncompetitive tenders accepted at the average price of 97.589
rhese rates are on a bank discount basis. The equivalent coupon issue yields are
4.79~ for the 91-day bills, and 4.96~ for the 182-day bills.

341

TREASURY DEPARTMENT
Washington
FOR RELEASE AT 12:30 P.M., EST
TUESDAY, JANUARY 18, 1966
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE NEW YORK STATE INDUSTRIAL PAYROLL
SAVINGS COMMITTEE LUNCHEON-MEETING
AT THE NEW YORK HILTON HOTEL, NEW YORK, NEW YORK
TUESDAY, JANUARY 18, 1966,12:30 P.M., E.S.T.
We meet on behalf of a program whose symbol -- the
Minuteman of Concord -- could not be more appropriate or more
pertinent than it is today.
For the Minutemen of Concord took up arms to win, not
only for themselves but for all the unborn generations of
Americans to come, the freedom to live their own lives and
pursue their dream of a Great Society in whose abundant life
every man could share to the fullest measure of his ability and
his desire.
Today, in Southeast Asia, we take up arms to help others
in their struggle for survival as a free and independent
nation -- and at home we labor to build for all Americans a
society worthy to be called great.
There are those, as you know, who have felt that we must
forego the effort in Vietnam -- just as there are those who
have felt that, because of Vietnam, we must forego our efforts
here a thorne.
Last Wednesday, in his Message on the State of the Union,
President Johnson made abundantly clear that we need not, and
will not, forego either effort. At the same time, he stressed,
the war in Vietnam means that, at home, "we cannot do all we
should, or all we would like to do" -- although we must, and
will, continue to do all that we can.
Because of Vietnam, therefore, we must proceed at a slower
speed and on a smaller scale toward meeting our needs at home -but proceed we can and proceed we must.
We can do so because our economic policies and programs in
recent years have met with such signal success.
F-342

- 2 We can do so because our economy has flourished under a
fiscal program designed to encourage strong and stable growth
in the private economy through a combination of massive
reductions in Federal tax rates and suitable restraints upon
the growth of Federal expenditures.
Let us reflect for a moment on these three sources of
strength and confidence -- a flexible fiscal program, a dynamic
private economy growing at a stable and healthy rate, and a
disciplined restraint on the growth of Federal expenditures.
Increases in private investment and consumption have flowed
from the investment tax credit of 1962 and its improvement in
1964, the liberalization of depreciation in 1962 and 1965, the
record cut in personal and corporate income tax rates in the
Revenue Act of 1964, and the broad program to abolish most
Federal excise taxes adopted and begun in 1965. This year wage
earners and investors are receiving tax reductions of around
$20 billion as a result of these measures.
This fiscal po~icy was a major contributing factor to the
resurgent economic performance of the last five years. Our
gross national product has increased from a rate of $504 billion
in the first quarter of 1961 to a $695 billion rate in the
fourth quarter of 1965. This increase in our national
output in less than five years -- this icing on the cake -surpasses the total annual output of any other nation of the
Free World and continues to widen the already enormous gap
between productive capacity of the Soviet Union and our own.
Our expansion represents a rate of growth of about 5~ percent in
constant dollars -- more than double the rate of the preceding
years that followed the termination of the Korean War -comparing favorably with that of Western Europe, wnich last
year averaged around 3~ percent.
This rising economic activity
rising incomes and
profits, rising sales and jobs, and rising investment and
productivity -- has meant rising revenues for our Federal,
state and local governments.
According to our estimates, administrative budget receipts
under present law would be about $21 billion greater in fiscal
1966 than five years ago -- more than double the increases in
the previous half decade when there were no significant tax
reductions.
But what about Federal expenditures -- the third element?

- 3 -

President Johnson's unrelenting insistence, in his words,
that "every dollar is spent with the thrift and with the
common sense which recognizes haw hard the taxpayer worked in
order to earn it" has amounted toa new policy of expenditure
control. Here are some of the results:
1.

The original estimated expenditure level of $98.8 billion
in the 1964 budget was reduced $1.1 billion to an
actual $97.7 billion.

An estimated $97.9 billion expenditures for fiscal
1965, ending last June 30, were reduced $1.4
billion to an actual $96.5 billion.

These actual expenditures for fiscal 1965 were $1.2
billion less than those in fiscal 1964 and $2.3
billion less than those originally projected for
fiscal 1964.

The expenditure target for fiscal 1966 was fixed
last January at $99.7 billion. Some $4.7 billion
of additional expenditures resulting from
accelerated military activity in Vietnam were unavoidable.
Some $2 billion of uncontrollable or legislated
expenditures also could not be avoided. These
included $740 million of military and civilian pay
increases voted by Congress in excess of
Presidential recommendations, and additional $500
million increase in veterans pensions, a $500 million
increase in interest charges on the debt and a half
billion each of payments required by law under the
space and agricultural commodity programs. They more
than wiped out economies realized since the original
estimate.

In summary, had it not been for these unavoidable cost
increases in Vietnam and the uncontrollable increases cited, the
President in nearly three years in office would have held
expenditures in the administrative budget to an average annual
increase of less than $1 billion more than the amount estimated
for the fiscal year in which he assumed office. This should
be compared with the average increase of $3 billion per year
over the previous ten years.
And yet during the same recent period, this stringent emphasis
On cost reduction and program evaluation paid huge dividends by

- 4 enabling the nation to afford urgent new programs through savings
on those of lesser urgency and through greater productivity in
existing programs.
The national strength, confidence, and flexibility which the
results of this fiscal program now provide enable us to carryon
the fight for freedom in South Vietnam without abandoning the
effort for the Great Society at home. This was the striking
feature of the President's announcement of Wednesday night that
the enactment of all his recommendations will entail a deficit
in the administrative budget for fiscal 1967 of only $1.8
billion -- the smallest in seven years -- and will give us a surplus
of $500 million in the cash budget.
This will be true despite an increase in special costs
of Vietnam of $10.4 billion in fiscal 1967 over the 1965 fiscal
year level -- a $5.8 billion increase in fiscal 1967 on top of
an increase of $4.6 billion in fiscal 1966.
But the new budget represents more than a reflection -however bright -- of past success. Above all, it represents a
full recognition of , and an effective response to, the present
need for fiscal responsibility if -- at a time of increasing
defense expenditures and active military operations added on
top of a burgeoning private economy -- we are to maintain
strong and stable growth in an economy where the gap between
demand and efficient production and supply has markedly
narrowed.
The new program is based as before, on fiscal flexibility,
a healthy economy, and a disciplined application of sound
expenditure control policies.
The fiscal dividends in the form of increased revenues
derived from a projected expansion of the economy in
calendar 1966 to a gross national product slightly in exess
of $720 billion -- from a level of $675.6 billion in
calendar 1965 -- will be applied to the increased requirements
of South Vietnam.

- 5 A disciplined restraint in expenditures in the budget
apart from special Vietnam costs is equally necessary. The
answer -- all other expenditures put together in the entire
federal budget are projected by the President to rise this
coming fiscal year only $600 million -- even though some
segments of the budget in the field of education, health and
the war on poverty will be substantially increased. How?
Because of stringent economies in the other less urgent areas
of the budget.
But even these fiscal features are not enough. Even the
application of the fiscal dividends from growth and from
holding down the increases in the budget in the areas other
than Vietnam operations will still leave a sizeable deficit
at a time when the economic and financial situation calls for
avoiding additional stimulus to demand.
Fiscal flexibility is called for. It takes the form
of a tax program that will increase federal revenues in the
administrative budget for fiscal 1966 by $1.2 billion and
in fiscal 1967 by an additional $3.6 billion, for a total in
fiscal 1967 of $4.8 billion -- enough to bring the administrative
deficit down to a tolerable figure ($1.8 billion) and produce
a cash surplus of $500 million.
This program -- summarized in the President's State
of the Union Message last Wednesday and spelled out in detail
in my letter the following day to the Chairmen of the
tax writing committees -- would (a) modify income tax
collection procedures, without increasing income tax rates
or changing anyone's final income tax liabilities and
(b) temporarily postpone the scheduled excise tax reductions
on two items.
More specifically the program includes:

A speed-up in the acceleration of
corporate tax payments -- which would simply
telescope the accederation timetable established
by the Revenue Act of 1964 and move the
completion date up from 1970 to 1967;
2. A delay in the 1966 and later scheduled
reductions of automobile and telephone excise
taxes -- postponing for two years the staged
reduction of these taxes and restoring them in
the interim to the levels in effect at the end
of 1965;

- 6 -

3. Replacement of the present 14 percent
flat rate for income tax withholding on wages
and salaries by a graduated, six-rate scale, so
that wages withheld for income tax purposes would
more closely approximate actual tax liabilities
at the end of the taxable year;
4. Quarterly payment of Social Security
taxes by self-employed taxpayers, to relieve them
of the present obligation of making such payment
in one lump sum after the end of the taxable year
(which goes into the Trust Fund and does not affect
the administrative budget).
The economic and financial effect of these measures, over
the near term, would be to diminish the inflationary potential
in the economy and raise federal revenues to a point where we
can project a near balanced budget in a near full employment
economy.
These measures, we believe, should furnish some restraining
influence against any potential excessive economic exuberance
without harming the continued healthy growth of our economy -and we must, in our zeal to avoid the onslaught of inflation,
take care that in trying to prevent the disease we do not
imperil the patient. At the same time, we all recognize that
the most present danger before us -- whose avoidance will
require our most wary and watchful vigilance -- is the danger
of economic excess, not economic deficiency.
The President has, time and again, declared his
determination to use every resource available to him to
maintain our economic momentum free of inflation. He made
plain last Wednesday, that -- and I quote -- "if the
necessities of Vietnam require it, I will not hesitate to
return to the Congress for additional appropriations, or
additional revenues if they are needed."
Today, therefore, in clear contrast to the situation at
any time over the past five years, the economic realities call
for increased restraint on the part of us all -- for continued
cooperation between both the public and private sectors in
adapting their plans and programs to current economic
circumstances.
In particular, let me stress the fact that, while the
government can do a great deal to create a cltmate to

- 7 encourage non-inflationary growth, it is upon the shoulders
of our businesses and our unions that the responsibility
squarely rests for pursuing non-inflationary price and wage
policies. And today -- when we fight a brutal war in Vietnam
it is imperative that wage and price increases remain
within the guideposts set by the President's Council of
Economic Advisers -- or we run the grave risk of squandering
the gains for which we have all worked so hard and so long and
of undermining the economic strength which must support, not
only the struggle in Vietnam, but our efforts elsewhere in
the world and here at horne.
In the days and months ahead, therefore, all of us
in government and in the private sector -- must bear an
extra burden of responsibility in a national effort to
keep a sure and steady economic footing while we continue to
move ahead. And there is a special sense in which you here
today can help in that effort -- for now more than ever it is
essential that we finance our debt without inflation, and now
more than ever it is essential that we do all we can to
encourage greater savings throughout our economy.
Through the payroll savings program -- on whose behalf
we meet today -- we accomplish both these ends at once.
The first principle of debt management is, of course, to
keep the debt from growing to an unmanageable size -- and
nowhere is10ur success in doing that better illustrated than
in the budgets President Johnson has presented and carried out,
and most particularly in the budget he will shortly present
for fiscal 1967.
Let me simply cite the record: The 1964 budget submitted
three years ago forecast a deficit of $11.9 billion premised
in part on major tax reduction. This was reduced in the final
outcome to $8.2 billion for the fiscal year 1964.
Last year's budget c~ned an estimated deficit for
fiscal 1965 of $6.3 billion. This was trDnmed down to $3 4
billion.
0

The budget submitted last January projected a $5.3
billion deficit for fiscal 1966. As of June 30, this estimate
has been cut to $4.2 billion. Had it not been for the
additional defense needs resulting from Vie~nam, the higher
revenues that are flowing from our vigorous expansion since

- 8 -

June 30 would have produced a still smaller estimated deficit
in the current fiscal year.
Had it not, in fact, been for the increases projected for
Vietnam expenditures in fiscal 1966 and fiscal 1967 since
the 1966 budget was originally submitted last January, we
could have used the fiscal dividends of this continued
expansion to balance the budget in fiscal 1967 and still had
room for some incre£ses in civilian expenditures or additional
tax reduction.
As a result of this record of expenditure control,
Treasury demands on our capital markets have not been -- and
will not be -- as great as many have expected. And, in the
future as in the past, we will continue -- consistent with
minimum cost and other aebt management objectives -- to place
our aeB~ in the most non-inflationary manner possible.
Our entire tleb~ increase in calendar 1965 was financed
outside the banking system -- despite the sharp step-up in
spending for Vietnam. Indeed, commercial bank holdings of
Treasury issues steadily declined by several billions of dollars
during the last year.
The Savings Bonds program, as you know, is vital to the
success of our aeot management policy -- and in the months
ahead it could prove one of our most valuable weapons in
averting inflation.
The fact that E and H Bonds outstanding now account for
some 23 percent -- or $49 billion -- of the entire publicly
held Federal debt is an abundant indication both of the
importance of Savings Bonds to Federal debt management and
of the tremendous job done by the corps of volunteers -- whose
dedication and abilities are not better exemplified than they
are here today -- who have advanced the Savings Bonds program.
Each of you, by your leadership in one of America's great
industries, is making a substantial contribution to the stability
and strength of our economy_ By your presence here today
by your willingness to take a leading part in encouraging
greater participation in the Payroll Savings Plan in your own
companies -- you are adding immeasurably to that contribution.
The results of last year's campaign are impressive. There
were Some one-and-a-quarter million new participants in the

- 9 -

Payroll Savings plan. Of that number, Some 180,881 were
employees of the companies represented on our U.S. Industrial
Payroll Savings Committee. As a result, the overall sale of the
Payroll-Saver bonds -- that is, the $25 to $200 denominations __
is today running at a rate of more than $3 billion annually,
accounting for some 68 percent of the E and H Bond sales dollar.
In this new year of 1966 -- in this Silver Anniversary
year of the Savings Bonds program -- our target and your mission
is to enroll 1,200,000 new employee participants in the Payroll
Plan.
The challenge is clear: next year more people will be
at work than ever before -- and at higher wages and salaries.
And while no one can say how many new jobs we will have next
year, let no one underestimate the job-creating capacity of
our economy -- which has generated some 2.7 million new
non-farm jobs over the past year, and some 8 million new
non-farm jobs over the past five years.
In little more than a month, our economy will enter its
sixth year of unbroken expansion, and during the year unemployment should fall appreciably below what has been our interim
target of 4 percent. As a result, many thousands of Americans
will just be reaching a threshold of financial well-being that
will enable them, for the first time, to take part in a program
of systematic savings. At the same time, there are many thousands
of current savers who will be financially able to save more
than they do now -- and who will do so with the proper
encouragement.
As all of us know, the task of tapping this enormous
potential for saving through the Payroll Savings Plan -- and thus
lessening the inflationary potential within the economy as well
as helping both the sound management of the public debt and
the establishment of habits of thrift among our citizens -has been made particularly difficult by the sharp disparity that
has recently developed between rates of return on Savings
Bonds and on private savings accounts.
In this connection, I am privileged to read you a letter
I have just received from the President:
Dear Mr. Secretary:
Over the years, one of the strongest links
between this Government and its citizenry has been

- 10 -

the United States Savings Bonds program. Born
in the critical days before our entry into the
Second World War, this program has been) for the
Government, a vital source of noninflationary
financing for needed Government programs. For
the public, it has provided a matchless means
for accumulating savings with absolute safety,
and with an attractive rate of return.
A successful Savings Bonds program is of
particular urgency at this time -- facing as we
do a firm commitment to the defense of freedom in
Viet Nam and a strongly rising economy at horne.
We must not, and will not, at this juncture, permit
our strength to be sapped by inflation.
Today, above all, is a time for all Americans
to rededicate themselves to the spirit that animated
the Minutemen of Concord -- who serve as the symbol
of the Savings Bonds program. For today, as at
the founding of our nation, it is freedom which is
at stake. Not all of us are called upon to fight
in the jungles of Vietnam -- but while our men
are there in the frontlines of a distant land, none
of us can remain aloof on the sidelines. We must
all do our share -- in every way we can -- to support
our men in Vietnam.
One sure way is open to all
Americans I through the Savings Bonds program.
On several occasions during the postwar period
it has been necessary to improve the rate of return
on Savings Bonds in view of the higher rates available
to many savers in various private savings accounts.
The last change was made in 1959. To have failed
to make those adjustments would have been a
disservice both to the Government and to the public
at large -- risking inflationary dangers, complicating
the task of managing our Government finances, and
depriving millions of small savers of a reasonable
rate of return on their funds entrusted to the
Government.
We are again at a point where rates available
on a variety of alternative forms of savings have
moved above the rate now paid on U.S. Savings Bonds.
At the same time, we are at a point where maximum
savings are vital to our national welfare -- indeed,

- 11 -

to our national future. Another increase in
rate on those bonds is now timely.
In order to sustain and enlarge the vital
role of the Savings Bonds program, I therefore
direct you to set in motion the necessary machinery
for raising the interest rate on these bonds as
of the earliest feasible date. Please submit to
me as soon as possible your specific recommendations.
As in past rate changes, I would like you
to make appropriate rate adjustments on outstanding
savings bonds as well, so that no current bondholder need cash in his current holdings in order
to gain the advantage of the attractive new rate,
and no prospective buyer need feel that he should
delay his purchase to await the higher rate.
Sincerely,
Lyndon B. Johnson
I hope we will be able to announce something soon to give
added incentive to your efforts -- which, as I cannot stress
too often, are doubly crucial in this year 1966.
I know, however, that there are few more encouraging
incentives -- to those of us at Treasury and, I am sure, to
all of you who will be working with him -- than to know that
the compaign in New York enjoys the able and dedicated direction
of James F. Oates, Jr., who is responsible for this meeting
today.
I have every confidence that you Mr. Oates, and George
Champion -- directing the New York Metropolitan area campaign
and John Lockton, as Chariman of the State Committee -- will
again exercise your considerable abilities and influence
towards another total E and H bond sales figure for New York
of more than half-a-billion dollars.
I know, too, Mr. Oates, how happy you must be to have as
members of your team three "old pros" at Payroll Savings like
Hal Geneen, Frank Milliken and Elmer Engstrom -- all former
Charimen of our Industrial Payroll Committee -- each of whom
enabled our program to take giant strides forward.

- 12 I know you all realize how much your efforts can help to
bolster the nation's financial position and steady its economic
footing at a time when stability and strength are more
imperative than ever.
I know that you will do all you can -- and that is a great
deal indeed.

000

TREASURY DEPARTMENT
4

FOR D-ft1EDIA TE RELEASE

January 18, 1966

SU3SCRIPTION AND ALLO'rMEWT FI3URES FOR TREASUay' S CURHEl~T CASB OFFERING

The Treasury Department today announced the subscription and allotment
figures with respect to the current. offering of 4-3/4:; Treasury Certificates
of Indebtedness of Series A-1966, due November 15, 1966.
Subscriptions and allotments were divided among the several Federal
Reserve Districts and the Treasury as follows:
Federal Reserve
District

Tota]. Subscriptions Received

Boston

499,219,000
2,979,21h,ooo
445,589,000
804,331,000
536,823,000
S70,278,ooQ
1,442,241,000
403,549,000
247,578,000
345,687,000
558,398,000
1,299,401,000
1,083,000
$10,133,391,000
$

New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Totals

F-343

Total
Allotments

79,62 Q,OOO
446,461,000
71,882,000
129,248,000
87,122,000
97,123,000
248,602,000
76,369,000
51,482,000
76,790,000
92,775,000
19~, 000, 000
228,000
$1,651,711,000
$

- 3 -

sale or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt

rna

all taxation now or hereafter imposed on the principal or interest thereat by any 8tatt
~r

or any 01' the possessions 01' the United states, or by any local taxing authority.

purposes ot taxation the amount 01' discount at which Treasury bills are originally loll
by the United States is considered to be interest.

Under Sections 454 (b) and 1221 (5

01' the Internal Revenue Code 01' 1954 the amount 01' discount at which bills issued here

under are sold is not considered to accrue until such bills are sold, redeemed or otM
wise disposed at, and such bills are excluded from consideration as capital Bssetl.
Accordingly, the owner 01' Treasury bills (other than lite insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid tor such bills, whether on original issue or on subsequent purchase, and the

8II)U

actually received either upon sale or redemption at maturity during the taxable year
tor which the return is made, as ordinary gain or 10s8.
Treasury Department Circular No. 418 (current reVision) and this notice, prescr1b
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies of

- 2 -

printed fonns and forwarded in the special envelopes which will be supplied by fedeli
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers Pro.
vlded the names of the customers are set forth in such tenders.

bank1Da

others than

c~~"

Tenders tn.

others must be accompanied by payment of 2 percent of the face amount of Treasury b1
applied for, unless the tenders are accompanied by an express guaranty of payment

an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Reser
Banks and Branches, following which public anouncement will be made by the TnmsW1
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Those submitting tenden

The Secretary of the

expressly reserves the right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final.

Subject to these

rese~·

Settlement for

accepted tenders in accordance with the bids'must be made or completed at the Feden
Reserve Bank on _ _J_an_uary..-;;..;~~2M7~1;;;;9:..:6:..:6~_, in cash or other immediately available tUI
or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.

January 27, 1966

• Calh

~
Cash adjustments will be made II

differences between the par value of maturing bills accepted in exchange and the ill
price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale
other disposition of the bills, does not have any exemption, as such, and

1088 trfII

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE,

January 19, 1966

WEEKLY BILL OFFERING
'!'he Treasury Department, by this public notice, invites tenders for two serles

of Treasury bills to the aggregate amount of $ 2,300,000,000 , or thereabouts, for

5(#

Jan~7, 1966, in the

cash and in exchange for Treasury bills maturing
of $

2,200,~000

amount

, as follows:

91 -day bills (to maturity date) to be issued

hij{
in the amount of

$1,300~,000

Januau7, 1966

, or thereabouts, represent-

ing an additional amount of bills dated
and to mature

April k1966

October 28, 1965 ,

hk)C

, originally issued in the

amount of $1,00~,000 , the additional and original bills
to be freely interchangeable.
182

)(lb£3X

-day bills, for $ 120~0.000, or thereabouts, to be dated
January 27, 1966 , and to mature

July 28, 1966

The bills of both series will be issued on 8 discount basis under competltift
and noncompetitive bidding 8S hereinafter provided, and at maturity their face
vi11 be payable without interest.

They will·be issued in bearer form only, and in

denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $l,~,~
(maturity value).
Tenders vil1 be received 8t Federal Reserve Banks and Branches up to the closU
hour, one-thirty p.m., Eastern Standard time, Monday, JanW4, 1966
vill not be received at the Treasury Department, Washington.

• 'leDIII

Each tender must be

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three dec1m&le,
e. g., 99.925.

Fractions may not be used.

It is urged that tenders be made

tile

REASURY CEPARTMENT

January 19, 1966

IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
two series of Treasury bills to the aggregate amount of
300,000,000, or thereabouts, fQr ca~h and in exchange for
iSury bills maturing January LI, 1~66, in the amount of
200,705,000, as follows:
91-day bills (to maturity date) to be issued January 27, 1966,
amount of $ 1,300,000,000, or thereabouts, representing an
ltional amount of bills dated October 28, 1965, and to
lre April 28, 1966,
originally issued in the amount of
101,010,000, the additional and original bills to be freely
~rchangeable .

~he

182-day bills, for $1,000,000,000, or thereabouts, to be dated
27, 1966, and to mature July 28, 19660

~ary

The bills of both series will be issued on a discount basis under
)etitive and noncompetitive bidding as hereinafter provided, and at
lrity their face amount will be payable without interest. They
be issued in bearer form only, and in denominations of $1,000,
100, $10,000, $50,000,
$100,000, $500,000 and $1,000,000
urity value) .
Tenders will be received at Federal Reserve Banks and Branches
o the closing hour, one-thirty p.m., Eastern Standard
, Monday, January 24, 19660
Tenders will not be
lved at t.he Treasury De~artment, Washington. Each tender must
or an even multiple of $1,000, and in the case of competitive
ers the price offered must be expressed on the basis of 100,
not more than three decimals, e. g., 99.925. Fractions may not
sed. It is urged that tenders be made on the pr~nted forms and
aroed in the special envelopes which will be supplied by Federal
~e Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
Jrners provided the names of the customers are set forth in such
~rs.
Others than banking institutions will not be permitted to
It tenders except for their own account. Tenders will be received
)ut deposit from incorporated banks and trust companies and from
)ns1ble and recognized dealers in investment secur1ties. Tenders
others must be accompanied by payment of 2 percent of the face
lt of Treasury bills applied for, unless the tenders are
'pan1ed by an express guaranty .of payment by an incorporated bank
'ust company.

344

- 2 Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on January 27, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 27, 19660 Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions Gf the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by. the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
cond i tions of the ir issue. Cop'ies of the circular may be· obtained frt'
any Federal Reserve Bank or Branch.
000

:'1'('

('}:('in1':,

1't'O)'1

all t.~Gtl;·ion no\o1

01' ll~renfLcr

LlH:l'eo1' l)y rll1y SLal,c, or :my of the
1oe:' I t~lxi Til, :mLhol'J Ly.

:imposcu. on the principal or Jnt.ere:;t

po~~seG8ions

of the Un.tted States, or by <my

For pUr})Or;cf.\ of' tnxuL:i.cn Lhe ftmount or discount nt which

'l'rca::lll'Y ldJ ts [I.re oriclnnl1y sold by Lhe Unt ted states is considered to be in-

terest.

Umler Sections 1S4 (ll) Gnd 1221 U:;) of the Internal Revenue Code of 1954

thc mnount of discount at llhich b111e issued hereunder are sold is not considered
to accrue unti 1 such bill;, aTe sohl, redeemed or otherwise dJsposed of, and such
bills n)'('

c;,clt1tl~ <J

from C'on:;j(\f'raLj(li1

oi' ']'J'CC1.~.JIll"y 03. U.~~ (other

i.ll"nl

n:;

e:'vital

n~;,~ctG.

rl.ccordingly, the owner

i ,'(' in:';1u'uncr; companies) issued hereunder need in-

elude in his income to.x 1'e turn on (y

tll(~

d.ii'fcrenee bctvlccn the price paid for such

biJ.Is, vhcther' on orLc;inal l:;r;u(' or on :;lll)r;cr]ucnt purchase, and the amount actuall:
l'cce i. vcd c 1 ther uIlon [;nle or rcdcln})L j on aL mn.turi ty durtnG the taxable year for
Hhich the return i:3 IT1rtuc, as Ql:'(linor:v u:in 01' lose.
'l'l'C'asury DcpnrtlncnL CiJ'cul.ar No. ~18 (current revision) and this notice, pre0cr:ibc Lhe terms of the '1'rc::tGur,Y bLU.s and Govern the conditions of' their issue.

Copies of thc circu_lar may be obtained from any Federal ReGe:r.re Bank or Branch.

- 2 -

anking institutions "rill not be pennl tLed to submit tenders except for their own
ccount.

Tenders ,rtll be received

v.i.

thout ucposit from incorporated banks and

I1lst companies and from responsible and recoGnized dealers in investment securities.

enders from oLhers must be accolllpanieu by payment of 2 percent of the face amount
f Treasury bills applied for, unless the tenders are accompanied by an express

uaranty of payment by an incorporated bunlc or trust company.
J:i'ede~al

Immediately after the closJ.nc; hour, t.enders will be opened a:t the

Be ...

erve Danks and Branches, ;follolfiI10 "hiel1 l)ubJic announcement mll be made by the

rcasury Department of the amount and pri cc ranGe 01' accepted bIds.
Jng tenders "lill be advised of the accept.ance or rejecLion thereof.

~'hofle

Gubml t-

The Secretary

l' the 'l'reaGury e;~rL!'£sly reserves the riGht to accept or reject any or all tenders,

n "Thole or in part, and his action in any Guch respect shall be final.
-=>

these reservations, noncompetitive tenders for :); 20\000

Subject·

or less mthout

(l)
tated price from anyone bidder vrill be accepted in full at the average price (in
lree decimals) of accepted competitive bids.
~cordance

Settlement for accepted tenders in

"lith the b'3..ds mUGt be lIla,de or comp1etcd at the Federal Reserve Banlc on

_m_uary-..;;JL-f31~.~1:..:9:...;6~6:---__ , in cash or other inunediately available funds or in a like

{II}
lee amount of Treasury bills maturJnc; _J_Bn_uary_...;....._3....,1,....:,:..-1_9_66
_ __

Cash and exchange

(X~ )

mders "Till receive equal treatment.

Cash adjustments '\611 be made for differ-

lees betvleen the par value of maturinc bills accepted in exchange and the issue
tee of the nev' bills.
The income derived from Treasury bills, l·mether interest or gain from,the sale

other diaposi tion of the bills, does not have any exemption, as such, and loss'
'0111

the sale or other disposition of Treasury bills does not have any special

entment, as such, under the Internal Revenue Code of 1954.

The bills are subject

estate, inheritance, gift or other excise tuxes, ",hether Federal 'or state, but

!1m!!il
~

TREASURY DEPARTMENT
Washington
January 19, 1966

FOR INHEDIATE RELEASE,
XXXXXXXXXX~XXXXXXXXXXXJ~

TREASURY REFUNDS ONE-YEAR BILLS

The Trcasury Department, by this public notice, invites tenders for
$1,000,000,000

( ~)

, or thereabouts, of

365

--r(j5=-"):-

-day Treasury bills, for cash and

in exchanc;e for Treasury bills maturing _ _~J__an=u.;;;;gxr!!:-.l""'31~'---.;;1....9-..;6-..;6_ _ , in the amount

li)

of $1JoooJd~8t,OOO

,to be issued on a discount basis under competitive and

noncompetitive bidding as hereinafter provided.

The bills of this series will be

January 31, 1966
, and will mature January 31, 1967
, "'hen
(I )
(~ )
the face amount will be payable without interest. They will be issued in bearer

dated

form only, and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000,
$500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve. Banks and Branches up to the
closing hour, one-thirty p.m., Eastern Standard time, Tuesday, January 25, 1966.
~)
Tenders \-Till not be received at the Treasury Department, Washington. Each tender
must be for an even multiple of $1,000, and in the case of competitive tenders ~e
price offered must be expressed on the basis of 100, with not more than three decimals, e. g., 99.925.

Fractions may not be used.

(Notwithstanding the fact t~t

these bills will run for ~ days, the discount rate will be computed on a b8Dk
discOWlt basis of 360 days, as is currently the practice on all issues of Treasur1
bills.)

It is urged that tenders be made on the printed forms and forwarded in

the special envelopes which lIill be supplied by Federal Reserve Banks or BrancheS
on application therefor.
Banking institutions

general~

may submit tenders for account of

provided the names of the customers are set forch in ~cn tenders~

custome~

Others t~

TREASURY DEPARTMENT

lOR IMMEDIATE RELEASE

January 19, 1966

TREASURY REFUNDS ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders for
;1,000,000,000, or thereabouts, of 365-day Treasury bills, for cash and
.n exchange for Treasury bills maturing January 31, 1966, in the amount
)f $1,000,387,000, to be issued on a discount basis under competitive
lnd noncompetitive bidding as hereinafter provided. The bills of
his series will be dated January 31,1966, and will mature January 31,
967, when the face amount will be payable without interest. They
rill be issued in bearer form only, and in denominations of $1,000,
;5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
maturity value) .
Tenders will be received at Federal Reserve Banks and Branches up
) the closing hour, one-thirty p.m., Eastern Standard time, Tuesday~
anuary 25, 1966. Tenders will not be received at the Treasury
epartment, Washington. Each tender must be for an even multiple of
1,000, and in the case of competitive tenders the price offered must
e expressed on the basis of 100, with not more than three decimals,
. g., 99.925. Frac tions may not be used. (Notwithstanding the fact
hat these bills will run for 365 days, the discount rate will be
omputed on a bank discount basis of 360 days, as is currently the
ractice on all issues of Treasury bills.) It is urged that tenders
e made on the printed forms and forwarded in the special envelopes
hich will be supplied by Federal Reserve Banks or Branches on
pp1ication therefor.
Banking institutions generally may submit tenders for account of
ustomers provided the names of the customers are set forth in such
enders. Others than banking institutions will not be permitted to
ubmit tenders except for their own account. Tenders will be
eceived without deposit from incorporated banks and trust companies
nd from responsible and recognized dealers in investment securities.
enders from others must be accompanied by payment of 2 percent of the
ace amount of Treasury bills applied for, unless the tenders are
ccompanied by an express gua'ranty of payment by an incorporated bank
r trus t c ompan y .
Immediately after the closing hour, tenders will be opened at the
:deral Reserve Banks and Branche.s, following which public announcement
111 be made by the Treasury Department of the amount and price range
f accepted bids. Those submitting tenders will be advised of the
-345

- 2 acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders, ~
whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $200,000 or
less ~"ithout stated price from anyone bidder will be accepted in full
at the average price (in three decimals) of accepted competitive bids.
Settlement for accepted tenders in accordance with the bids must be
made or c amp Ie ted a t the Federa 1 Reserve Bank on January 31, 1966, in
cash or other immediately available funds or in a like face amount of
Treasury bills maturing January 31, 1966. Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in exchange
and the issue price of the new bills.

The income derived from Treasury bills, whether interest or ga~
from the sale or other disposition of the bills, does not have any
exemption, as such, and loss from the sale or other disposition of
Treasury bills does not have any special treatment, as such, under t~
Internal Revenue Code of 1954. The bills are subject to estate,
inheritance, gift or other excise taxes, whether Federal or State, but
are exempt from all taxation now or hereafter imposed on the principal
or interest thereof by any State, or any of the possessions of the
United States, or by any local taxing authority. For purposes of
taxation the amount of discount at which Treasury bills are originally
sold by the United States is considered to be interest. Under
Sections 454 (b) and 1221 (5) of the Internal Revenue Code of 1954
the amount of discount at which bills issued hereunder are sold is not
considered to accrue until such bills are sold, redeemed or otherwise
disposed of, and such bills are excluded from consideration as
capital assets. Accordingly, the owner of Treasury bills (other than
life insurance companies) issued hereunder need include in his income
tax return only the difference between the price paid for such bills,
whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during
the taxable year for which the return is made, as ordinary gain or loss
Treasury Department Circular No. 418 (current revision) and this
notice, prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.

000

- 17 -

Tll',

l'C

,rould be increased ta.x payments of $200 million in calendar yeJ.l'

'L".L dChelr] t'e

$300 million if January 1967 is included.

I Lu.v·; '='lumitted to the Committee a detailed explanation of these
.L,cC'ollIDlenJ 3.ti0n;';

alonL~

vIi th detailed exhibits.

I understand that these are

'w:lilablf: to the: COllIDlittee.
CONCLUSION
In summary, the President's tax program is directed toward the immediate
situation.
Itju

r
;

It is desie;ned to bring us to a balanced cash budget in fiscal year

indeer],

small surplus -- despite the necessary increase in expendituTi

Lecuuse of our operations in Southeast Asia.

At the levels of employment and

lmsiness activity that are expected in 1966 and 1967, achieving this balance wi
llc very

im~.'rt::mt.

The particular measures advanced are desie;ned to have minimum long-range
impact on tax burdens and to achieve desirable structural changes.

They deal

almost entirely with matters on 'i'rhich there has been study in the past.

hopeful that they may be acted upon promptly.

oGo

I am

- 16 till . .::timclV:d tCL,{ system would have the double purpose of making tax
!<,.:,-mcn~

p' orle

J:lore convenient for individuals and providing some equality between
'vii th nomra,~e

',:itilXlOldin:'.

income and people 'Hi th wage income who are subj ect to

Since employee social security taxes are withheld, it is appropria

to include the self-employment tax in the estimated tax base.
In

tentative General A 'countin8 Office report recently submitted for

Treasury Departm.:::nt comments, the GAO recommended an identical proposal.

understand that the GAO will issue a formal report shortly which includes this
recommendation.
Under our proposal, self-employed individuals would make a quarterly paymer
of one-quarter of their self-employment tax liability on June 15 of this year.
There ,wuld also be quarterly payments on September 15 and on January 15, 1967.
For 1967, an April 15 payment would be required as well as payments by June 15 c
September 15, 19,'s7, and January 15, 1968.
This proposal would increase collections in fiscal year 1966 by $100 milli(
and by $100 million in fiscal year 1967.
\'i;Llt the response ';[Quld be.
:'02.'

This, of course, is only an estimate!

,~s \-Ie gained experience, \-Ie \-Iould develop a procei'

cl'editin:.:: part of the quarterly declaration payments of self-employed

indi','iciuals to the Social Security Trust Fund as these payments come into the
'='l' e a.:: ',;::.'Y •
[:l,:j'ct

FOl'

this r eason, in the long run, the provision Hould affect only

r-:'ceil::t.:: end not administr3,tive budget receipts.

C~·

- 15 T:,

increasin

ti[~htness

on credit markets also indicates that the accelerat~i

payment proposed would have some effect on business expenditures.
T:iis proposal on corporate tax payments would increase budget receipts it
i'iscill year

1966 by $1. 0 billion and, in fiscal year 1967, by $3.2 billion. It

,'/Ould increase total tax payments in calendar

year

1966 by $1.1 billion (beca'Js

of fiscal year corporations).

SELF-EMPLOYMENT TAXES
To rouno out the President I s program to make tax-paying more current, we
ill'C

proposinc- that social security taxes of the self-employed be paid on an

estimated ba3is.
The present law requires a self-employed individual to estimate and make
quarterly installment payments of his income tax if the estimated tax is at lea:
$~().

There is no logic in applying this requirement only to income taxes and m

to self-employment taxes.
Under present law, hmvever, for a self-employed individual, the requiremen1
for current payment bears only on the part of his end-of-the-year tax liabiliti ,
represented by the income tax.

In some cases this income tax liability may be

only a small part of the final total liability for income and self -employment
t::1.Xes; in others it may be a large part.

Since the taxes relate to the same

t~,-pe of income , it yvould be appropriate if the entire liability were subj ect ts

-:':le S?J!1e re~uil'ement of estimated payment.

- 14 still l'ind U.at the total of those payments was exactly the same as it
',[0

:ld ; la 'ltC' b een
It

sho~ld

~md er

pres ent law.

be noted that the total increase in all payments for a

corporation in 1967 would not be as great as the difference between the
percentage of current payment in 1966 and that in 1967, since final
payments d '~le in 1967 would be red uced by the increase in current payment
in 1966 over the present schedule.
\,t'

do not believe that this speeding up of corporate tax payments

would lead to any appreciable slowdown in the rate of accumulation of real
capital goods.

It is not our purpose to slow down the rate of growth.

At a time when we are close to full employment and full utili7ation of
capaci ty, hOvlever, a sizeable Federal budget deficit could have inflationary
implications.

For this reason, it is desirable to absorb some of the

additional liquidity in the economic system that co uld otherwise be used
in bidd ing up the prices of capital goods.

We believe that our proposed

speed-up of corporate tax payments would remove some of this excess business
purchasineZ power without really cutting down the ability to purchase the
q,~anti t~-

of capital goods that will be available.

In recent years, corporations have reduced their holdings of liquid assets

relative to c~rrent liabilities.

An accelerated payments requirement would r:ai: o

son.e corporations re-examine their expenditure plans.

They might give second

t}:o.<::~ ts to son:e f'.arginal investrr:ent proj ects, deferment of which might ease
~ressJ'es

on costs and pric es today and, incid entally, leave more investment

~;ossi~i~i ties for the fj.t~.re when the expenditures could be more easily absor'c<f:

- 13 In~)') 3,

these corporations paid during the current year only tlvO

q;l'u.'tLrly pcijm(:nts, those in September and December.
l'~}
:J.

The Revenue Act of

\; !Jrovided t11at corporations 'would start to make quarterly payments on

current lnsis in April and June.

,-~C}wduled

These April and June payments were

to increase ;;radually up to the 25 percent level in 1970.

present they must be 9 percent each in 1966 and 14 percent each in 1967.

propose that these fL;ures be raised to 12 percent in 1966 and to the
pr;rm~ment level of 25 percent in 1967.

In 1963, cOI'llorations paid only 50 percent of their estimated tax 1iabilit:
(over $lCJG,Cl"C)) in the year in which it was earned.

When the Congress decided,

in the Revenue Act of 1964, to require that this go up to 100 percent , it was
cl ear that over some period of time corporations would have to make an addition:
~·a,Y111ent OJ

vielv

01'

l':~yment

',l;

percent of one year I s estimated tax liability to get current. In

tne economic conditions existing then, the 1964 Act spread this additio:
over seven years:

2 points in 1964; 6 points in 1965; 10 points each

Under th':. proposal nmv bein;3: made, the additional payments would be
in ~9' and 2,:; in 1957 instead of 10 points each year.

pci

These payments, with :::

c'oint s from 196 Li and the 6 from 1965, add up to 50 point s .
l'r:e only Ch3l1~E is in the timing of the additional payments.
~~ C~l2.~por3.tion re-lic-:red

"~-:"ents

,-;=.'

I I~ , I' n 1Q7~
" )

its financial experience, it vlol~ld find that its

~a.::{es i" "'Chat year -..rere exactly the same as they would have beer. ::

r~'CS2:it r'l'S'::;osc:..I.. :::'cr s:;;eeding up the acceleration had not been adopted. I:'
i': '::.~le:::.

_ ,.:2- c=~ i~s C:':J!:1=<:Jrs.tc tax payments from 1964 through 1970, it 'liO:":

- 12 n1unber of employers -I,ho use various types of payroll machinery.
believ~

that employers would find that the new withholding provisions

do not add any significant problems to their present payroll accounting.
One could expect this result simply from the fact that 18 States have
already introduced graduated withholding systems, some with more than
the six rates we are proposing.
The proposed revision of withholding would, on a full annual basis,
increase by $1,240 million per year the revenue raised by withholding.
In calendar year 1966, the additional payments would be $840 million.
Budget receipts would increase in fiscal year 1966 by $95 million and,
in fiscal year 1967, by $400 million.

The effective date, coming as it

does late in the fiscal year, accounts for the low budget effect in fiscal year
1 (,66.

Lower final tax payments and slightly higher refunds in the spring

of 1967, reflecting higher 1966 withholding, would influence the net budget
effect in fiscal year 1967.

CORPORATE ACCELERATION
The proposal for acceleration of corporate tax payments would leave
the basic tax liability unchanged.

Under present law, by 1970 corporations

-",rill :;-ay, ','lith respect to their estimated tax in excess of $100,000,
q u~rterly

rayments
of 25 nercent'
A
'I J une, Sep t emb er, an d Decemb er .
~
~
In Kprl,

- 11 -

Taking all income brackets together, the new withholding system
its nat,rre, redJ.ce the amount of underwithholding and make

wo .ld,

vcr: little net change in overwithholding.
of' thE:: withholding proposal is this:

The most striking feature

it would increase from about

12 Dlillion to about 29 n:illion the number of taxpayers whose withholding
comes within $10 of their final tax liability.
The substance of all of these figures is that, at the present time,
VlL

have a withhold ing system which, in a technical sense, does not come

as close as we Hould like to the actual tax liability of the ordinary
wage carner

one without outside income.

While we know of no feasible

system, consistent with our tax laws, that would achieve perfection, we
believe that the existing withholding system can be restructured so that
it more closely approaches the actual tax liabilities.

Our proposals

are designed to accomplis h this.
He lelie'Je that the proposed graduated system is a far
\ ; . "~I'

0:,1

a::'r:)l'L:a~"

:~a\"e

,a::

C,'I'

1']",<

Fnt

S:Ttc-:'L --

and tLat it represents an

: 91anr~inz :)1' t~c. rje:ir(';s of most taxpap:::rs, which are to

withholding come reasonably close to liabilities and to keep

oven;rittr:olding witr,in reasonable bo:.mds.
~ .;ring O.T consid eration of the techniQues of grad uated withholding

2'epresentati'res of the Joint COI;JIni ttee Staff, we have talked to a

- 10 -

TL.

~'irst

three rates in our proposal are required to red uce

,mdcr'lvithl,oldin[ for taxpayers with incomes of $10,000 or less.
For the taxpayers with adjusted gross incomes over $10,000, further
["raduation is needed to accolnplish adequate reduction of underwithholding.
Consequently, the three add i tional rates of 20 percent, 25 percent, and

30 percent would be applied.
b(~

Itemized ded uctions are assumed to

10 percent, this being the case for about one-third of the taxpayers

Cluove ;t,lO,OOO.

This structure would largely eliminate underwithholding

ubove $10,000.
But the high incidence of large itemized deductions would appear
to reslllt in ovcrwithholding under this structure.

Sixty percent of

this is due to the effect of the first three rates; the balance would
result from the last three rates.

However, high itemized deductions do

not necessarily always prod uce overwi thholding, since most taxpayers
above $10,000 also haVE nonsalary income.

Consequently, use of a level

of itC'Jilized dedlctions higher than 10 percent in the construction of the
~:r3d

',lated system

lVo~ld

have resulted in inad equate withholding both for

ta.:mayers having only salary income wi th itemized ded uctions below the
s.ss .UT.ed higr,er level and for taxpayers with nonsalary income.
The additional rates in o'~r system above 17 percent "lOuld reduce
",nl~en!it~holdin@; acove $10,000 witho'jt a di~proportionate increase in
oLn-l::.t~~oljing.

The total changes above $10,000 would result in about

;:: o~~ reG .~ct::'on in J.nd end thhold ::'ng for each $2 increase in overwi thholding.

O-.-enJl thl:olli in[
On ti,;~ su:'Ject of ovenrithholding, on incomes below $5,000, one-third
01

the amounts withheld under present law are in excess of final tax

liabilities.

A part of this can be eliminated by building the minimum

standard deduction into the withholding system.

By doing this, our plan

would reduce ovenrithholding at this level by $500 million.

The remainder

of ovenrithholding, which cannot readily be handled without gravely
complicating the system, is largely the result of itemized deductions and
intermi ttent c%ployment.

In the income group between $5,000 and $10,000, there would be a
considerable red Ilction in the number of people ovenri thheld but only a
slight reduction in the aggregate dollar amount of ovenrithholding.

sizeable number of people in this income range would have small reductions
in ovenrithholding, due to building in the minimum standard deduction. A
small n'umber now having overwi thholding but not benefiting from incorporation
of the minimum standard deduction would find their ovenrithholding slightly
increased.

In this area also, the ovenrithholding is mainly due to

itemized ded'.1ctions and intermittent employment.
In the income grou_p above $10,000, when declarations are not filed,
there is an increase in ovenrithholding under our proposal equal to abo)t

4.5 percent of the total amount

Il..::M

withheld, or about 4 percent of the

final tax liability on those returns.

Since the increase in overwi thholding

:in tClis group seews to be a large figure, $570 million, I want to describe
in detail '..1hy this result is not unreasonable, considered in terms of the
entire

prograr:-~.

- 8 -

,no erwi thhold ing
On tlle sllbject of underwithholding, the chief cause of underwithholding

today is the fact that present law uses a single rate.

Underwithholding

occurs in many cases beginning with wages of $5,000 for a single person
and $7,500 for a married couple.
Our proposal would not change the dollar amount of underwithholding
for taxpayers who have adj usted gross incomes below $5,000 and who do not
file quarterly declarations.
is $233 million.

The dollar amount involved at that level

But on returns with income between $5,000 and $10,000,

underwithholding would be reduced from $798 million to $548 million.

returns vi th income of $10,000 and above, underwi thholding would be reduced
from $1,369 million to $429 million.
Such a red uction in und erwi thholding means a red uction in the total
amount many taxpayers would owe on April 15.
hav~ng

The advantage to them of

paid more of their tax bill over the year as they earned their

incoKe and having less to pay on April 15 is obvious.
The 'J.nderwi thholding remaining under our proposal, especially below
$10,000, will arise principally where the taxpayer has nonwage income.
"::"COVe SlO,OOO, it will arise for that reason and because the tax rates
~;'01Yselves go above Oclr proposed maximum 30 percent withholding rate.

stril:.int; a calall.ce, we concluded t"hat it would be undesirable to raise
witll>:~olding rates fJ.rther because of the disproportionate additional

:::n-C:Twithholding this I-ToiJ.ld crFOate.

- 7 Nany v13.ge and salary earners, for example, voluntarily und erstate
the nwnber of exemptions to which they are entitled for withholding
purposes in ord cr to have their 1-1i thholding more closely approximate
their tax liability or even to result in overl-lithholding.

I am not

s'lggesting that overl-lithholding should not be kept to the minimum feasible
level.

He have, in designing the graduated proposal, endeavored to reduce

both underwi thholding and overwithholding to the extent possible.
The diffic Ilty here is that a withholding system, as a practical

matter, can only take into account some broad characteristics of a particular
taxpayer,

such as his gross income from wages and his marital status

and nwnbcr of exemptions and some overall estimate as to his personal
deductions.

Any taxpayer might have income from other sources that

is not subject to withholding or actual deductions that are more or less
than the overall estimate used in the system, or the taxpayer may not
be employed continuously during the year.

All of these factors -- and

others -- affect the amount of his tax liability.
Beyond recognizing that a withholding system cannot be perfect, we
need to look separately at the problems of underwithholding and overwithholdi!l€
By these terms) I am referring to the difference between the amount withheld
and tte final tax liability.

- 6 \htL regard to automobile and telephone taxes, however, only a
cl;:i:l~'~

in rate is involved -- not a restoration of the entire tax.

Also, limiting the changes to these two taxes -- which yield
s ,;bstantial revenues -- would avoid the necessity of reintrod ucing
the compliance and administrative difficulties involved in much smaller
additional taxes on a lot of various items.
In fiscal year

1967,

the increase in revenues would be

from the automobile tax and
or

$1.2

$790

million

million from the telephone tax, a total

billion.

If the legislation is enacted by March
year

$420

19((

wo'~ld be increased by

the automobile tax.

$60

15, 1966,

revenue in fiscal

million, all of which would come from

There are, as you realize, lags between the time the

taxes are collected and when they are paid into the Treasury.
The increase in cash payments by conSumers reflecting these tax
changes in calendar year

$570

tax and

1966

would be

$200

million from the automobile

million from the telephone tax.

GRADUATED WlTHHOLDJNG
With regard to the graduated withholding proposal, I think it is
important to note at the beginning that a very substantial proportion
of

citizens regard a pay-as-you-go tax system as a convenience, not

as a penalt:,r.

F-'.rther, I believe, since the withholding system cannot

~'e p2rfeC't, ,:ost taxpayers prefer Some oveTITi thholding with a refund on

~~pril 15

to -;::--"~ eY\!i thho1d ing, which means a final tax bill due in April.

- 5 -

'..It:

suCgest that the restored telephone tax rate be effective on

the first day of the first month beginning more than
lq,;isla tion is enacted.

15 days after the

Selecting the first of the month is appropriate

Lecause the lower 3 percent rate went into effect on the first of January.
This timing would result in all customers being subject to the lower rate
for the same number of months, since the telephone companies use a
regular monthly billing rotation.

The

15 days leeway is desirable to

facilitate the computation of the bills on the new basis.
He recommend that the automobile tax be restored to 7 percent on
the day after enactment.

In order to assure an orderly transition to

the new tax rate, a floor stock tax should be applied to automobiles
which dealers and distributors have on hand at the start of the day that
tlw 'I percent rate goes into effect.

This is recommended for the same

reasons that floor stock refunds are included in each of the scheduled
reductions of the automobile tax.
In approaching this question of what short-term adjustments should

be made in excise taxes, the question might come up whether some of the
taxes which were repealed as of last June or of last December should be
restored.

Imen one looks at this question, several things stand out.

the first place, when a tax is repealed, a lot of accounting and reporti ng
proced UTes associated with payment of the tax simply disappear.

Restoring

a ta): that has been completely repealed imposes a substantial administrative
l~c,rden

since these reporting and accounting systems have to be reconstitut~.

- 4 nr'IS}I. TAZFS
Amon~

tte specific proposals of the tax program, I would like to

first consider excise taxes.

vIe

are proposing the rescheduling of the

red'lction of the two large excise taxes, those on private automobiles
and on telephone service.

Under t}1,e 1965 legislation, by 1969 the

telephone tax wOldd l'ave "been eliminated and the automobile tax reduced
to 1 percent.

Our rescheduling is consistent with the principle,

recognized by the Congress in 1965, that reductions in these two large
taxes must be scheduled in the light of budgetary constraints.

With

the changed situation, these constraints are more compelling than was
the case when the legislation was enacted last year.
Specifically, the reduction that took place on January 1 of this
year should be restored as quickly as possible.

This would involve

restoring the 7 percent manufacturers excise tax on automobiles, which
was reduced to 6 percent on January 1 and the 10 percent tax on local
and long distance telephone and teletypewriter service, which fell to
: rprcent the same date.

The reductions that took place on January 1,

1966, would, under our recommendation, be rescheduled to take place on
January 1, 1968.

The further reductions in these two taxes that were

sched cUed successively for 1967, 1968, and 1969 would be rescheduled for

19c9, 1970, and 1971.

'1 ci'.-'~Cl,

:;1 t'

ris~

in tax receipts generated by our grovillf L'conolll,\' vo"ld

is in fiscal year 1967 to have a balanced budget or SUrpll\S

'c.Lt

-nal-Ld

ir,

nasonai,ly f',ll employment economy, vi th some room for increases in

Federal eivilian expenditures or further tax reduction.
But these plans must be postponed to make room for expenditures
need eel for Oilr national defense.
These expend i tures come at a time vhen the economy is at the threshold
of the 4 percent interim unemployment goal relentlessly pursued for five years.
\Jnemplo:.1T1f'nt vi 11 be red I\ced even further during the coming year.

There

is no shortare of demand; tr1ere are some signs of pressure of demand
on

slppl~'

as the gap hetveen the tvo has narroved in recent years.

In these circwnstances, our fiscal aim is to avoid additional stimulus,
dil:linish the inflationary potential in the economy, and raise Federal revenues
to a point vhere ve can project a near balanced budget in a near full
employment economy.
The appropriate fiscal balance can be achieved in the present circumstance
by the tax program proposed by the Administration.

It changes income tax

payment sched ules without changing rates or anyone I s final tax liability, and
it postpones certain scheduled excise tax reductions to specified dates.
The proposals included in the program merely extend policies already
incorporated in our tax laws.

Together with the increased revenues from

reasonably anticipated economic expansion, these changes will finance the
increased special costs of Viet Nam in fiscal year 1967 , without substantiall::
increaSing o~r de~t and diminish the deficit in fiscal year 1966.

THE FISCAL SITUATION

"t:-: ":i:tn'-'~;

'-iTtc'

recommended in the interest of sound economic

in 1 I'll L,t! ,(llicy in the fiscal years 19G6 and 19li7.
1

Although the bud,~ct

t'~il.c vrill not b( made puulic for another few days, we have the essen-

'oi'L1 i'isc:J.1 f:tcts before us.

The main fact is that increased special

eoc.;t:.s 'locsociatcd ',rith Viet Nam will add $4.7 billion in fiscal year 19Gu
:l'.niiturE'oc 'wi $1l. l) billion in fisc3.l year 19G7 over the amount origin'tlly rcc;timatul in the: estim:ltc last January for fiscal ,year 1966.
'fl!.

t:l:\ clnn"l:S rropos,:,c1 to offset these costs 'Nill:
increase fiscal yC'Jr 19 1)') revenues by $1.2 billion and fiscal
y":l1' 19'·7 revenues by .$4.8 billion,
10d"

r tilL' 'ulministr'j.ti VE' budget deficit to $1.8 billion in

i'isC',tl Y"<ir 19',)7, t1w lowest in seven years,
l'I'odue,

in that year u $500 million surplus in the cash

buj~~t,

the first in seven years,

Ininimize the stimulus to the economy from necessary increases
in defense spending in the period of high economic activity,
hell' to

m~lintain

economic stability and reduce the risks of

infl:ltion.
Tx~ation

economic

is one of the best, and most flexible, instruments of

~,olic:I

s.vailable to the Federal Government.

The Revenue Act

,,~' l~' ~ ,.-l'lic:1 has ione so much to restore vitality to our economic
~;2~em,

~~~onstrated

the effectiveness of tax policy in raising total

:::-::',n ~ '.,n·~ i::o+ ":.l output.

1-J:3.'l. our defense commitments remained

REHARKS OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE WAYS AND MEANS COMMITTEE
ON THE ADMINISTRATION I S TAX PR()}RAM
Ie A.H., EST, WEDNESDAY, JANUARY 19, 1966
[I1l.

Chairman and Members of tl:1e Committee:
I

apprt~ciatc

this opportunity to present the President I s tax program

rc::commencled in 11is State of the Union Message on which the earliest possible

I Ilouid like: i'irst to express my special appreciation for the promptness
'.-lith.lliicll the Committee has becC:un the process of legislative consideration
o( this pl'oram.
M<-'ssa.\', tllis

As the President made clear in his State of the Union

I'ro~r3JT1

is desi'"ned to fit the immediate budget and economic

situatiun, and it 'dill be of most benefit if it is enacted promptly.
Wee' reco'ni:::e, of course, the importance of careful legislative

consideration.

For that reason, I set forth the details of the program

in my lettel' of January 13 to Chairman Mills.

These proposals deal in

consider3.ble part 'I'li th subj ects that have been examined before, and prompt
It'~is13ti-ve

action should thereby be facilitated.

Briefly, the program in'Jolves (a) rescheduling the 1966-69 reductions
in the automobile and telephone excise taxes to the period 1968 to 1971 and
(b) the 'ldoption of certain collection procedures which will put income
~cBJ sel:::~-em:plo~;rlent tax payments closer to a pay-as-you-go system, thereby

inc2"2'lsin - C'J.Y'r2nt re'Jenues '.dthout changing income tax rates and 'dithout

TREASURY DEPARTMENT
Washington

REMARKS OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE WAYS AND MEANS COMMITTEE
ON THE ADMINISTRATION'S TAX PROORAM
10 A.M., EST, WEDNESDAY, JANUARY 19, 1966

Mr. Chairman and Members of the Committee:
I appreciate this opportunity to present the President's tax program
recommended in his State of the Union Message on which the earliest possible
action would be desirable.
I would like first to express my special appreciation for the promptness
with which the Committee has begun the process of legislative consideration
of this program.

As the President made clear in his State of the Union

Message, this program is designed to fit the immediate budget and economic
Situation, and it will be of most benefit if it is enacted promptly.
We recognize, of course, the importance of careful legislative
consideration.

For that reason, I set forth the details of the program

in my letter of January 13 to Chairman Mills.

These proposals deal in

considerable part with subjects that have been examined before, and prompt
legislative action should thereby be facilitated.
Briefly, the program involves (a) rescheduling the 1966-69 reductions
in the automobile and telephone excise taxes to the period 1968 to 1971 and
(b) the adoption of certain collection procedures which will put income
and self-employment tax payments closer to a pay-as-you-go system, thereby
increasing current revenues without changing income tax rates and without
changing anyone's final tax liabilities.

F-346

- 2 -

THE FISCAL SITUATION
These tax changes are recommended in the interest of sound economic
and budget policy in the fiscal yea~1966 and 1967.

Although the budget

details will not be made public for another few days, we have the essential fiscal facts before us.

The main fact is that increased special

costs associated with Viet Nam will add $4.7 billion in fiscal year 1966
expenditures and $10.5 billion in fiscal year 1967 over the amount originally estimated in the estimate last

Ja~uary

for fiscal year 1966.

The tax changes proposed to offset these costs will:
increase fiscal year 1966 revenues by $1.2 billion and fiscal
year 1967 revenue a by $4.8 billion,
lower the administrative budget deficit to $1.8 billion in
fiscal year 1967, the lowest in seven years,
produce in that year a $500 million surplus in the cash
budget, the first in seven years,
minimize the stimulus to the economy from necessary increases
in defense spending in the period of high economic activity,
help to maintain economic stability and reduce the risks of
inflation.
Taxation is one of the best, and most flexible, instruments of
economic policy available to the Federal Government.

The Revenue Act

of 1964, which has done so much to restore vitality to our economic
system, demonstrated the effectiveness of tax policy in raising total
demand and total output.

Had our defense commitments remained

- 3 unchanged, the rise in tax receipts generated by our growing economy would
have enabled us in fiscal year 1967 to have a balanced budget or surplus
in a reasonably full employment economy, with some room for increases in
Federal civilian expenditures or further tax reduction.
But these plans must be postponed to make room for expenditures
needed for our national defense.
These expenditures come at a time when the economy is at the threshold
8f the

4 percent interim unemployment goal relentlessly pursued for five years.

Unemployment will be reduced even further during the coming year.

There

is no shortage of demand; there are some signs of pressure of demand
8n

s'~pply

as the gap between the two has narrowed in recent years .

In these circumstances, our fiscal aim is to avoid additional stimulus,
diminish the inflationary potential in the economy, and raise Federal revenues
to a point where we can project a near balanced budget in a near full
employment economy.
The appropriate fiscal balance can be achieved in the present circumstances
by the tax program proposed by the Administration.

It changes income tax

payment schedules without changing rates,or anyone's final tax liability,and
it postpones certain scheduled excise tax reductions to specified dates.
The proposals included in the program merely extend policies already
incorporated in our tax laws.

Together with the increased revenues from

reasonably anticipated economic expansion, these changes will finance the
increased special costs of Viet Nam in fiscal year 1967, without substantially
increaSing our debt and diminish the deficit in fiscal year 1966.

- 4EXCISE TAXES

Among the specific proposals of the tax program, I would like to
first consider excise taxes.

We are proposing the rescheduling of the

reduction of the two large excise taxes, those on private automobiles
and on telephone service.

Under the 1965 legislation, by 1969 the

telephone tax would have been eliminated and the automobile tax reduced
to 1 percent.

Our rescheduling is consistent with the principle,

recognized by the Congress in 1965, that reductions in these two large
taxes must be scheduled in the light of budgetary constraints.

With

the changed Situation, these constraints are more compelling than was
the case when the legislation was enacted last year.
Specifically, the reduction that took place on January 1 of this
year should be restored as quickly as possible.

This would involve

restoring the 7 percent manufacturers excise tax on automobiles ,which
was reduced to 6 percent on January 1 and the 10 percent tax on local
and long distance telephone and teletypewriter service, which fell to

3 percent the same date.

The reductions that took place on January 1,

1966, would, under our recommendation, be rescheduled to take place on
January 1, 1968.

The further reductions in these two taxes that were

scheduled successively for 1967, 1968, and 1969 would be rescheduled for

1969, 1970, and 1971.

- 5 We suggest that the restored telephone tax rate be effective on
the first day of the first month beginning more than 15 days after the
legislation is enacted.

Selecting the first of the month is appropriate

because the lower 3 percent rate went into effect on the first of January.
This timing would result in all customers being subject to the lower rate
for the same number of months, since the telephone companies use a
regular monthly billing rotation.
facilitate the

com~utation

The 15 days leeway is desirable to

of the bills on the new basis.

We recorrrrnend that the automobile tax be restored to 7 percent on
the day after enactment.

In order to assure an orderly transition to

the new tax rate, a floor stock tax should be applied to automobiles
whi~h

dealers and distributors have on hand at the start of the day that

the 7 percent rate goes into effect.

This is recommended for the same

reasons that floor st:)('k refunds are includ ed in each of the sched uled
reductions of the automobile tax.
In approaching this question of what short-term adjustments should

be made in excise taxes, the question might come up whether some of the
taxes which were repealed as of last June or of last December should be
restored.

When one looks at this question, several things stand out.

the first place, when a tax is repealed, a lot of accounting and reporting
procedures associated with payment of the tax Simply disappear.

Restoring

a tax that has been completely repealed imposes a substantial administrative
burden since these reporting and accounting systems have to be reconstituted.

- 6 With regard to automobile and telephone taxes, however, only a
change in rate is involved -- not a restoration of the entire tax.
Also, limiting the changes to these two taxes -- which yield
substantial revenues -- would avoid the necessity of reintrod ucing
the compliance and administrative difficulties involved in much smaller
additional taxes on a lot of various items.
In fiscal year 1967, the increase in revenues would be $420 million

from the automobile tax and $790 million from the telephone tax, a total
of $1.2 billion.
If the legislation is enacted by March 15, 1966, revenue in fiscal
year 1966 would be increased by $60 million, all of which would come from
the automobile tax.

There are, as you realize, lags between the time the

taxes are collected and when they are paid into the Treasury.
The increase in cash payments by consumers reflecting these tax
changes in

~alendar

year 1966 would be $200 million from the automobile

tax and $570 million from the telephone tax.
GRADUATED W1THHOLDDlG

With regard to the graduated withholding proposal, I think it is
important to note at the beginning that a very substantial proportion
of our citizens regard a pay-as-you-go tax system as a convenience, not
as a penalty.

Further, I believe, since the withholding system cannot

be perfect, most taxpayers prefer some overwithholding with a refund on
April 15

to underwithholding,which means a final tax bill due in April.

- 7 Many wage and salary earners, for example, voluntarily understate
the number of exemptions to which they are entitled for withholding
purposes in order to have their withholding more closely approximate
their tax liability or even to result in overwithholding.

I am not

suggesting that overwithholding should not be kept to the minimum feasible
level.

We have, in designing thp graduated proposal, endeavored to reduce

both underwithholding and overwithholding to the extent possible.
The difficulty here is that a withholding system, as a practical
matter, can only take into account some broad characteristics of a particular
taxpayer,

such as his gross income from wages and his marital status

and number of exemptions and some overall estimate as to his personal
deductions.

Any taxpayer might have income from other sources that

is not subject to withholding or actual deductions that are more or less
than the overall estimate used in the system, or the taxpayer may not
be employed continuously during the year.

All of these factors -- and

others -- affect the amount of his tax liability.
Beyond recognizing that a withholding system cannot be perfect, we
need to look separately at the problems of underwithholding and overwithholding.
By these terms, I am referring to the difference between the amount withheld
and the final tax liability.

- 8 1.

Underwithholding
On the subject of underwithholding, the chief cause of underwithholding

today is the fact that present law uses a single rate.

Underwithholding

occurs in many cases beginning with wages of $5,000 for a single person
and $7,500 for a married couple.
Our proposal would not change the dollar amount of underwithholding
for taxpayers who have adjusted gross incomes below $5,000 and who do not
file quarterly declarations.
is $233 million.

The dollar amount involved at that level

But on returns with income between $5,000 and $10,000,

underwithholding would be reduced from $798 million to $548 million.

returns with income of $iO,OOO and above, underwithholding would be reduced
from $1,369 million to $429 million.
Such a reduction in underwithholding means a reduction in the total
amount many taxpayers would owe on April 15.

The advantage to them of

having paid more of their tax bill over the year as they earned their
income and having less to pay on April 15 is obvious.
The underwithholding remaining under our proposal) especially below
$10,000, will arise principally where the taxpayer has nonwage income.
Above $10,000, i t will arise for that reason and because the tax rates
themselves go above our proposed maximum 30 percent withholding rate.
strikinrr
o a balance , we concluded that it would be undesirable to raise
withholding rates further because of the disproportionate additional
overwithholding this would create.

- 9 ii.

Overwithholding
On the s ubject of overwithholding, on incomes below $5,000, one-third

of the amounts withheld under present law are in excess of final tax
liabilities.

A part of this can be eliminated by building the minimum

standard deduction into the withholding system.

By doing this, our plan

would reduce overwithholding at this level by $500 million.

The remainder

of overwithholding, which cannot readily be handled without gravely
complicating the system, is largely the r esult of itemized deductions and
intermittent employment.

In th e income group between $5,000 and $10,000, there would be a
considerable reduction in the number of people overwithheld but only a
sli ght reduction in the aggregate dollar amount of overwithholding.

sizeable number of people in this income range would have small r eductions
in oTerwithholding, due to building in th e minimum standard deduction. A
small number now having overwithholding but not benefiting from incorporation
of the minimum standard deduction would find their overwithholding slightly
increas ed . . In this area also, the overwithhold ing is mainly due to
itemized deductions and intermittent employment .
In the income group above $10,000, when declarations are not fi l ed,

ther e is an increase in overwithholding under our proposal equal to abo ut

4.5 percent of the total

amount~ Withheld, or about

final tax liability on those returns.

4 percent of the

Since th e increase in overwithholding

in this group seems to be a larg e figure, $570 million, I want to describe
in detail why this result is not unreasonable, considered in terms of the
entire program.

- 10 -

The first three rates in our proposal are required to reduce
underwithholding for taxpayers with incomes of $10,000 or less.
For the taxpayers with adjusted gross incomes over $10,000, further
graduation is needed to accomplish adequate reduction of underwithholding.
Consequently, the three additional rates of 20 percent, 25 percent, and
30 percent would be applied.

Itemized deductions are assumed to

be 10 percent, this being the case for about one-third of the taxpayers
above $10,000.

This structure would largely eliminate underwithholding

above $10,000.
But the high incidence of large itemized deductions would appear
to result in overwithholding under this structure.

Sixty percent of

this is due to the effect of the first three rates; the balance would
result from the last three rates.

However, high itemized deductions do

not necessarily always produce overwithholding, since most taxpayers
above $10,000 also have nonsalary income.

Consequently, use of a level

of itemized deductions higher than 10 percent in the construction of the
graduated system would have resulted in inadequate withholding both for
taxpayers having only salary income with itemized deductions below the
assumed higher level and for taxpayers with nonsalary income.
The additional rates in our system above 17 percent would reduce
underwithholding above $10,000 without a disproportionate increase in
overwithholding.

The total changes above $10,000 would result in about

$3 of reduction in underwithholding for each $2 increase in overwithholding.

- 11 -

Taking all income brackets together, the new withholding system
would, by its nature, reduce the amount of underwithholding and make
very little net change in overwithholding.
of the withholding proposal is this:

The most striking feature

it would increase from about

12 million to about 29 million the number of taxpayers whose withholding
comes within $10 of their final tax liability.
The substance of all of these figures is that, at the present time,
we have a withholding system which, in a technical

sens~does

not come

as close as we would like to the actual tax liability of the ordinary
wage earner -- one without outside income.

While we know of no feasible

system, consistent with our tax laws, that would achieve perfection, we
believe that the existing withholding system can be restructured so that
it more closely approaches the actual tax liabilities.

Our proposals

are designed to accomplish this.
We believe that the proposed graduated system is a far
better one than the present system -- and that it represents an
appropriate balancing of the desires of most taxpayers, which are to
have withholding come reasonably close to liabilities and to keep
overwithholding within reasonable bounds.
During our consideration of the techniQues of graduated withholding
with representatives of the Joint Committee Staff, we have talked to a

- 12 number of employers who use various types of payroll machinery.

believe that employers would find that the new withholding provisions
do not add any significant problems to their present payroll accounting.
One could expect this result simply from the fact that 18 States have
already introduced graduated withholding systems, some with more than
the six rates we are proposing.
The proposed revision of withholding would,

a full annual basis,

increase by $1,240 million per year the revenue raised by withholding.
In calendar year 1966, the additional payments would be $840 million.
Budget receipts would increase in fiscal year 1966 by $95 million and,
in fiscal year 1967, by $400 million.

The effective date, coming as it

does late in the fiscal year, accounts for the low budget effect in fiscal year

1966. Lower final tax payments and slightly higher refunds in the spring
of 1967, reflecting higher 1966 withholding, would influence the net budget
effect in fiscal year 1967.

CORPORATE ACCELERATION
The proposal for acceleration of corporate tax payments would leave
the basic tax liability unchanged.

Under present law, by 1970 corporations

will pay, with respect to their estimated tax in excess of $100,000,
quarterly payments of 25 percent in April, June, September, and December.

- 13 In 1963, these corporations paid during the current year only two
quarterly payments, those in September and December.

The Revenue Act of

1964 provided that corporations would start to make quarterly payments on
a current basis in April and June.

These April and June payments were

scheduled to increase gradually up to the 25 percent level in 1970.

present they must be 9 percent each in 1966 and 14 percent each in 1967.

propose that these figures be raised to 12 percent in 1966 and to the
permanent level of 25 percent in 1967.
In 1963, corporations paid only 50 percent of their estimated tax liability
(over $100,000) in the year in which it was earned.
in the Revenue Act of

196~to

When the Congress decided,

require that this go up to 100 percent, it was

clear that over some period of time corporations would have to make an additional
payment of 50 percent of one year's estimated tax liability to get current.

view of the economic conditions existing then, the 1964 Act spread this additional
payment over seven years:

2 points in 1964; 6 points in 1965; 10 points each

in 1966, 1967, and 1968; and 6 points each in 1969 and 1970.
Under the proposal now being made, the additional payments would be 16 points
in 1966 and 26 in 1967 instead of 10 points each year.

These payments, with the

2 points from 1964 and the 6 from 1965, add up to 50 points.
The only change is in the timing of the additional payments.

If, in 1971,

a corporation reviewed its financial experience, it would find that its
payments of taxes in that year were exactly the same as they would have been if
the present proposal for speeding up the acceleration had not been adopted.

it added up all of its corporate tax payments from 1964 through 1970, it would

- 14 still find that the total of those payments was exactly the same as it
would have been under present law.
It should be noted that the total increase in all payments for a
corporation in 1967 would not be as great as the difference between the
percentage of current payment in 1966 and that in 1967, since final
payments due in 1967 would be reduced by the increase in current payment
in 1966 over the present schedule.
Ive

do not believe that this speeding up of corporate tax payments

would lead to any appreciable slowdown in the rate of accumulation of real
capital goods.

It is not our purpose to slow down the rate of growth.

At a time when we are close to full employment and full utilization of
capaCity, however, a sizeable Federal budget deficit could have inflationary
implications.

For this reason, it is desirable to absorb some of the

additional liquidity in the economic system that could otherwise be used
in bidding up the prices of capital goods.

We believe that our proposed

speed-up of corporate tax payments would remove some of this excess business
purchaSing power without really cutting down the ability to purchase the
quantity of capital goods that will be available.
In recent years, corporations have reduced their holdings of liquid assets

relative to current liabilities.

An accelerated payments requirement would make

Some corporations re-examine their expenditure plans.

They might give second

thoughts to some marginal investment projects, deferment of which might ease
pressures on costs and prices today and, incidentally, leave more investment
Possibilities for the future when the expenditures could be more easily absorbed.

- 15 The

increasing tightness on credit markets also indicates that the accelerated

payment proposal would have some effect on business expenditures.
This proposal on corporate tax payments would increase budget receipts in
fiscal year 1966 by $1.0 billion and, in fiscal year 1967, by $3.2 billion.
would increase total tax payments in calendar

year 1966 by $1.1 billion (because

of fiscal year corporations).

SELF-EMPLOYMENT TAXES
To round out the President's program to make tax-paying more current, we
are proposing that social security taxes of the self-employed be paid on an
estimated basis.
The present law requires a self-employed individual to estimate and make
quarterly installment payments of his income tax if the estimated tax is at least
$40.

There is no logic in applying this requirement only to income taxes and not

to self-employment taxes.
Under present law, however, for a self-employed individual, the requirement
for current payment bears only on the part of his end-of-the year tax liabilities
represented by the income tax.

In some cases this income tax liability may be

only a small part of the final total liability for income and self-employment
taxes; in others it may be a large part.

Since the taxes relate to the same

type of income, it would be appropriate if the entire liability were subject to
the same requirement of estimated payment.

- 16 The estimated tax system would have the double purpose of making tax
payment more convenient for individuals and providing some equality between
people with nonwage income and people with wage income who are subject to
withholding.

Since employee social security taxes are withheld, it is appropriate

to include the self-employment tax in the estimated tax base.
In a tentative General Accounting Office report recently submitted for
Treasury Department comments, the GAO recommended an identical proposal.

understand that the GAO will issue a formal report shortly which includes this
recommendation.
Under our proposal, self-employed individuals would make a quarterly payment
of one-Quarter of their self-employment tax liability on June 15 of this

y~ar.

There would also be quarterly payments on September 15 and on January 15, 1967.
For 1967, an April 15 payment would be required as well as payments by June 15 and
September 15, 1967, and January 15, 1968.
This proposal would increase collections in fiscal year 1966 by $100 million
~nd

by $100 million in fiscal year 1967.

4hat the response would be.

This, of course, is only an estimate of

As we gained experience, we would develop a procedure

for crediting part of the quarterly declaration payments of self-employed
individuals to the Social Security Trust Fund as these payments come into the
rreasury.

For this reason, in the long run, the provision would affect only cash

)udget receipts and not administrative budget receipts.

- 17 There would be increased tax payments of $200 million in calendar year 1966.
This would be $300 million if January 1967 is included.
I have submitted to the Committee a detailed explanation of these
recommendations along with detailed exhibits.

I understand that these are

available to the Committee.
CONCLUSION
In summary, the President's
situation.

~ax

program is directed toward the immediate

It is designed to bring us to a balanced cash budget infiscal year

1967 -- indeed, a small surplus -- despite the necessary increase in expenditures
because of our operations in Southeast Asia.

At the levels of employment and

business activity that are expected in 1966 and 1967, achieving this balance will
be very important.
The particular measures advanced are designed to have minimum long-range
impact on tax burdens and to achieve desirable structural changes.

They deal

almost entirely with matters on which there has been study in the past.
hopeful that they may be acted upon promptly.

000

I am

TREASURY DEPARTMENT

January 20, 1966
FOR IMMEDIATE RELEASE
REGIONAL COMMISSIONERS AND DISTRICT DIRECTORS
APPOINTED FOR NEW ORLEANS REGION
Assistant Secretary of the Treasury True Davis today
announced the appointment of Major General Raymond F. Hufft,
New Orleans Collector of Customs, as Regional Commissioner of
Customs for the New Orleans Region V.
Assistant Secretary Davis also announced the appointments
of Hal M. Seale, Houston, Texas, as Assistant Regional
Commissioner for Operations; Claude E. B1ancq, New Orleans, as
Assistant Regional Commissioner for Administration; and
Milton L. LeBlanc, New Orleans, as Director of the New Orleans
Cus toms Dis tr ic t .
The appointments, made in accordance with Civil Service
regulations, will become effective February 1 with the
activation of the new region. Regionalization and the 1965
Presidential reorganization of the Bureau of Customs, which
placed the l76-year-old Customs Service wholly on a career basis,
are major parts of a general modernization of the Bureau.
The Reorganization Plan, which went into effect on May 25,
1965, provided for the elimination of 53 Customs positions
throughout the U. S. previously filled by Presidential
appointment.
New Orleans will be the fourth region to be activated in
accordance with a year-long timetable. The Miami Customs Region
is also scheduled for activation on February 1. The
San Francisco and Los Angeles Customs Regions were established
on November 1, 1965, and January 1, 1966, respectively. The
remaining five regions are scheduled as follows: Chicago
March; Baltimore -- April; Houston and Boston -- May; and
New York -- June.
Offices of the New Orleans regional headquarters will be
located on the 13th floor of the Federal Office Building at
701 Loyola Avenue, NeW Orleans, Louisiana.
F-347

- 2 -

United States Commissioner of Customs Lester D. Johnson
ads the Bureau of Customs, which is part of the Treasury
partment. His offices are at Washington, D. C.
iographies attached)

000

- 3 -

BIOGRAPHICAL SKETCH OF MAJOR GENERAL RAYMOND F. HUFFT
RAYMOND F. HUFFT, Regional Commissioner of Customs-designate
for the New Orleans Customs Region V, was born in New Orleans on
August 4, 1914. He attended Spencer Business College and the
U. S. Army Service and General Staff Schools.
General Hufft had a distinguished military career, r~s~ng
from private to major general. He entered on active duty in 1941
in a paratroop division of the U. S. Army Infantry. He was
seriously wounded in combat in the European Theater of Operations
in April, 1945, and was separated from active duty in October,
1946.
The general was the first officer of the Seventh Army to
cross the Rhine River. He crossed the Rhine with three men on
March 25, 1945, before the crossing of the main body of troops.
For this action he was awarded the Distinguished Service Cross.
His other decorations include the Silver Star with two oak leaf
clusters, the Bronze Star with three oak leaf clusters, the Purple
Heart with two oak leaf clusters, and the French Croix de Guerre with
palm.
General Hufft was vice president and general manager of radio
station WNOE in New Orle2ns before his entry into government service.
He was appointed Director of Selective Service in the State of
Louisiana in 1956, and he also served as the State's Director of Civil
Defense.
In August, 1962, General Hufft was appointed Collector of Customs
in New Orleans, in which capacity he has been responsible for the
administrative supervision of approximately 175 employees. He is an
officer in the American Legion, the New Orleans Athletic Club, the
Chamber of Commerce, and other civic and fraternal orders.
General and Mrs. Hufft have four children.
787 Amethyst Street, New Orleans, Louisiana.

000

They reside at

- 4 BIOGRAPHICAL SKETCH OF HAL M. SEALE
HAL M. SEALE, Assistant Regional Commissioner-designate
perations) for the New Orleans Customs Region, was born in
w Orleans on March 15, 1910. He attended Louisiana State University,
ceiving his B.S. degree in mechanical engineering.
Mr. Seale entered the U.S. Customs Service in New Orleans in 1935.
served as a sampler and later as a Customs examiner until 1935,
en he became an appraiser in Norfolk, Virginia. In 1962 he was
pointed appraiser in Houston with supervisory responsibility for
praisal activities in the Galveston and Port Arthur collection
stricts as well as Houston.
Mr. and Mrs. Seale reside at 8119 Dillon Street, Houston, Texas.
000

BIOGRAPHICAL SKETCH OF CLAUDE E. BLANCQ, JR.
CLAUDE Eo BLANCQ, JR o , Assistant Regional Commissioner-designate
dministration) for the New Orleans Customs Region, was born in
N Orleans in 1909 and attended Tulane University, where he majored
accounting
0

Mr. Blancq began his career as a clerk with a customhouse broker
New Orleans in 1925. Five years later he joined the U. S. Corps of
~ineers as an accounting clerk.
In 1931 he went to the office of the
Llector of Customs in New Orleans, serving in the positions of
Lzure clerk and time clerk; deputy collector in charge, Division of
leys and Accounts; Customs liquidator; and administrative officer.
In 1949 he was named supervisory customs entry and liquidating
:icer. In this capacity he has served as acting assistant collector,
luty collector, and chief of the entry and liquidating division.
During the periods 1943-1946 and 1950-1952 he was on duty with
U.S. Army.
Mr. and Mrs. Blancq reside at 32 Flamingo St., New Orleans,
isiana.
000

- 5 -

BIOGRAPHICAL SKETCH

OF DISTRICT DIRECTOR

MILTON L. LeBLANC, District Director-designate of the New
Orleans Customs District, was born at Houma, Louisiana, in
18980 He attended Sto Stanislaus College, Bay St. Louis,
Mississippi, and took business courses at Sto Paul's College and
Soule' College in New Orleans, where he graduated in accounting.
Mr. LeBlanc has been with the Customs Service since 1920,
when he entered as a clerk and cashier. In 1932 he was named
Assistant Collector of Customs in New Orleans, a position which
he has held to the presento

000

Weekly Withholding and Annual Overwithholding and Underwithholding
Under Present 14 Percent Withholding and Under Graduated Withholding
Weekly
Annual
Weekly withholding 2/ : Change in:
Annual
:Overwithholding (+) or underwithhoiCfing-l-)
wage 1/:
wage income
: Present
: Graduated: weekly
:
tax
:
Present
Graduated
:(no other income): 14 percent :withholding:withholding:liability 3/:
14 percent
withholding
Sin~le individual {one exemEtion}

$ 19
38
58

144
192
240
288
385
481
577

$ 1,000

2,000
3,000
5,000
7,500
10,000
12,500
15,000
20,000
25,000
30,000

$ .87

3.56
6.26
11.64
18.37
25.10
31.83
38.56
52.02
65.48
78.95

.24
3.09
6.36
12.90
22.44
32.55
45.31
59.74
88.58
117.42
146.27

$- .63
- 2.28
+ .10
+ 1.26
+ 4.07
+ 7.45
+13.48
+21.18
+36.56
+51.94
+67.32

14
161
329
671
1,168
1,742
2,398
3,154
4,918
6,982
9,242

$+
+

31
24
3
66
- 213
437
- 743
-1,149
-2,213
-3,577
-5,137

1
49
42
48
- 312
876
-1,636

Married couple, two children (four exemEtions)

144
192
240
288
385
481
577

$ 3,000
5,000
7,500
10,000
12,500
15,000
20,000
25,000
30,000

.80
6.18
12.91
19.64
26.37
33.10
46.56
60.02
73.49

Office of the Secretary of the Treasury
Office of Tax Analysis

0
$ 5.53
12.85
21.02
29.72
39.33
58.56
82.32
111.16

.80
.65

.06

+ 8.56
+ 3.35
+ 6.23
+12.00
+22.30
+37.67

0
$ 290
686
1,114
1,567
2,062
3,160
4,412
5,876

42
31
15
93
- 196
- 341
- 739
-1,291
-2,055

$+
+

2
18
21
22
17
115
131
96

January

To the nearest dollar.
Present 14 percent withholding and graduated withholding are computed by the percentage method. The present
14 percent withholding amounts may differ slightly from the amounts in the withholding tables. Assumes all
exemptions claimed for withholding.
~ Assumes deductions equal to 10 percent of income or the minimum standard deduction, whichever is larger.

1966

Example of How the Introduction of the Minimum Standard Deduction in the
Proposed Graduated Withholding System Reduces Withholding
(Single person - one exemption)
Computation of tax
liability - present law

Wage income only
~

$1,000

Wage income only

$1,000

Wage income only

$1,000

600

Less withholding
exemption

667

Less withholding
----exemption ]/

700

Wages (after
exemption)

300

Less first $200
(after
exemption) l!./

200

exemption

Less minimum standard
~uction y

300

Taxable income

Tax liability

Computation of withheld tax (annual basiS]
Present law
Proposed graduated withholding

100

Wages subject to
withholding at
14% flat rate

333

Wi thheld tax

Overwithholding

--or wages

Wages subject to
withholding at
graduated rates

Wi thheld tax

Office of the Secretary of the Treasury
Office of Tax Analysis

!I
g;

100

Overwithholding

Underwithholding

a
January

$200 for each taxpayer and $100 for each exemption claimed including the taxpayer himself.

Tax Code value of each personal withholding exemption claimed by the employee.
3/ Proposed legal value of each withholding personal exemption claimed by the employee.
~ First $200 of wages (after exemption) under proposed law would not be subject to withholding.

- 2 -

the tax system in the 1964 Revenue Act but was not carried
over into the 14 percent withholding rate.

As a result,

''''''1

many low-income taxpayers ~ve be:;:J overwithheld.

Incorporation

of the minimum standard deduction would alleviate the problem
substantially.

The table gives an example of how this would

work in the first withholding bracket.
The tables are attached o

1/2~/66

FOR IMMEDIATE RELEASE
EFFECT OF GRADUATED INCOME TAX
WITHHOLDING PROPOSAL
The Treasury today released two tables supplementing the
information on the effect of the President's proposal ~or
graduated income tax withholding rates which was submitted to
the House Ways and Means Committee last week.
The first table shows the effect of the proposal on weekly
wages and pay checks for annual incomes from $1,000 to $30,000
for single persons and married couples with two children who
have deductions of 10 percent or who use the minimum standard
deduction.

The material submitted to the Committee included thi

information on an annual basis.
The second table illustrates the proposed incorporation
of the minimum standard deduction into withholding for low-incott
taxpayers.

The minimum standard deduction was introduced into

TREASURY DEPARTMENT
January 21, 1966
FOR LMMEDIATE RELEASE
EFFECT OF GRADUATED INCOME TAX
WITHHOLDING PROPOSAL
The Treasury today released two tables supplementing the
information on the effect of the President's proposal for
graduated income tax withholding rates which was submitted to
the House Ways and Means Committee last week.
The first table shows the effect of the proposal on
weekly wages and pay checks for annual incomes from $1,000 to
$30,000 for single persons and married couples with two
children who have deductions of 10 percent or who use the
minimum standard deduction. The material submitted to the
Committee included this information on an annual basis.
The second table illustrates the proposed incorporation
of the minimum standard deduction into withholding for lowincome taxpayers. The minimum standard deduction was introduced
into the tax system in the 1964 Revenue Act but was not
carried over into the 14 percent withholding rate. As a
result, many low-income taxpayers now are overwithheld.
Incorporation of the minimum standard deduction would
alleviate the problem substantially. The table gives an
example of haw this would work in the first withholding
bracket.
The tables are attached.

F-348

- z Weekly Withholding and Annual Overwithholding and Underwithholding
Under Present 14 Percent Withholding and Under Graduated Withholding
Weekly
wage

Annual
Weekly withholding 2/ : Change in:
Annual
:Overwithholding (+) or underwithholding (-)
wage income
: Present
: Graduated: weekly
:
tax
:
Present
Graduated
:(no other income): 14 percent :withholding:withholding:liability 3/:
14 percent
withholding

!I:

Sinsle individual {one exemEtion)

$ 19
38
58
96
144
192
240
288
385
481
577

$ 1,000

2,000
3,000
5,000
7,500
10,000
12,500
15,000
20,000
25,000
30,000

.87
3.56
6.26
11.64
18.37
25.10
31.83
38.56
52.02
65.48
78.95

.24
3.09
6.36
12.90
22.44
32.55
45.31
59.74
88.58
117.42
146.27

$- .63
- 2.28
+ .10
+ 1.26
+ 4.07
+ 7.45
+13.48
+21.18
+36.56
+51.94
+67.32

14
161
329
671
1,168
1,742
2,398
3,154
4,918
6,982
9,242

31
24
3
66
213
- 437
- 743
-1,149
-2,213
-3,577
-5,137

$+
+

1
49
42
48
312
876
-1,636

Married couEle, two children {four exemptions)

58
96
144
192
240
288
385
481
577

$ 3,000
5,000
7,500
10,000
12,500
15,000
20,000
25,000
30,000

.80
6.18
12·91
19.64
26.37
33.10
46.56
60.02
73.49

Office of the Secretary of the Treasury
Office of Tax Analysis

$ 5.53
12.85
21.02
29.72
39.33
58.56
82.32
111.16

.80
.65
.06
+ 8.56
+ 3·35
+ 6.23
+12.00
+22.30
+37.67

$ 290
686
1,114
1,567
2,062
3,160
4,412
5,876

42
31
15
93
- 196
341
- 739
-1,291
-2,055

$+
+

2
18
21
22
17
115
131
96

January

1966

Computation of tax
liability - present law

Wage income only
~

$1,000

Wage income only

$1,000

Wage income only

$1,000

600

Less withholding
-exemption

667

Less withholding
--exemption J/

700

Wages (after
exemption)

300

exemption

Less minimum standard
----cieduction

300

Taxable income

Tax liability

100

Wages subject to
withholding at
14% flat rate

333

Wi thheld tax

Overwithholding

first $200
of wages (after
exemption) 1jj

200

Wages subject to
withholding at
graduated rates

Withheld tax

Office of the Secretary of the Treasury
Office of Tax Analysis

!I
g;

100

Overwithholding

Underwithholding

0
Januaryl~---

$200 for each taxpayer and $100 for each exemption claimed including the taxpayer himself.
Tax Code value of each personal withholding exemption claimed by the employee.
3/ Proposed legal value of each withholding personal exemption claimed by the employee.
~ First $200 of wages (after exemption) under proposed law would not be subject to withholding.

- 3 -

great pride to me, as it has, I'm sure to
all Americans."

,
On July 9, 1963, Admiral ROiland received the Legion of

....

Merit from former Treasury Secretary Douglas Dillon in
recognition of his outstanding achievement in maintaining
a military readiness posture "unparalleled in the peacetime
history of the Coast Guard."
Commissioned an Ensign on May 15, 1929, after graduating

...

from the Coast Guard Academy, Admiral Royland advanced

'"
steadily in rank as he fulfilled a series of assignments that
touched upon every facet of Coast Guard's diverse operations.
He attained his present rank and command of the U. S. Coast
Guard on April 23, 1962.
A copy of the Distinguished Service Medal Citation
is

attached~

- 2 -

impo~th
on

mental and physical discipline

themSe~y

know that

---...........
~,.~

/"~~

conflict, or war, or.. JJ.a~ion
/

./-'

respo~,~u~~ be equal

,..----

"
"The responses that Admiral Royland and the
\.

Coast Guard have made during the past few
years to crises affecting the welfare and
lives of human beings and the security of
our country have been impressive.

The

exceptionally effective manner in which the
Coast Guard responded to requests for
assistance in South Viet Nam and in directing
operations in the Straits of Florida to
protect Cuhan refugees has been a matter of

(,~

, / ' i. J l;c ,-'- c. ,c
/ {tt /---:
~OR REbEAS-R::.P;)t:.NEWSPAPERS

January 21, 1966
<.

FRIDAY, JANUARY 21, 1966
ADMIRAL EDWIN JOHN Rq/LAND RECEIVES
THE DISTINGUISHED SERVICE MEDAL
Treasury Secretary Henry H. Fowler, acting on behalf
of President Johnson, today presented the Distinguished
....

Service Medal to Admiral Edwin John

Ro~land,

Connnandant of the

United States Coast Guard.
The Distinguished Service Medal is the nation's highest
award for meritorious achievement and service to a member of
the Armed Forces.
The Secretary said in part:

~In tim

of peace we too frequently ta

granted the
during peri~/o[ peace, offic

country.

for
Yet

men must

•

T~~R~E~A~S~U~R~Y~D~E~P~A~R~T~M~E~N~T~~~~i~~:
WASHINGTON. D.C.
January 21, 1966

• ·

IMMEDIATE RELEASE
ADMIRAL EDWIN JOHN ROLAND RECEIVES
THE DISTINGUISHED SERVICE MEDAL
Treasury Secretary Henry H. Fow'.2r, acting on behalf of
President Johnson, today presented the Distinguished Service
Medal to Admiral Edwin John Roland, Commandant of the United
States Coast Guard.
The Distinguished Service Medal is the nation's highest award
for meritorious achievement and service to a member of the Armed
Forces.
The Secretary said in part:
"The responses that Admiral Roland and the
Coast Guard have made during the past few years to
crises affecting the welfare and lives of human
beings and the security of our country have been
impressive. The exceptionally effective manner in
which the Coast Guard responded to requests for
assistance in South Viet Nam and in directing
operations in the Straits of Florida to protect
Cuban refugees has been a matter of great pride to
me, as it has, I'm sure to all Americans."
On July 9, 1963, Admiral Roland received the Legion of
Merit from former Treasury Secretary Douglas Dillon in recognition
of his outstanding achievement in maintaining a military readiness
posture "unparalleled in the peacetime history of the Coast Guard."
Commissioned an Ensign on May 15, 1929, after graduating from
the Coast Guard Academy, Admiral Roland advanced steadily in rank
as he fulfilled a series of assignments that touched upon every
facet of Coast Guard's diverse operations. He attained his present
rank and command of the U. S. Coast GU2rd on April 23, 1962.
A copy of the Distinguished Service Medal Citation is attached.
F-349

THE SECRETARY OF THE TREASURY
WASHINGTON

The President of fha United States takes pleaeure
i11. prGsennng the DISTINGUISHED SERVICE lvlEDAL

ADMIRAL EDWIN JOliN ROLAND
UNITED STATES COAST GUARD
lor service as ael forth in t~ following
CITATION:
"For ea:ceptionally meritorious service to the
G01.)ernmeru of the United States in Cl position of great
responsibility as Commandant oj the Coast Guard
from June 19 (j 2 to fhe present.
By his inspired
Zea.dership, Admira.l ROLAND has been eminently
successful in ca.rr?Jing out 0.11. extremely d~fftcult and
exacting assignment. Notable aains made by the Coast
Guard under his direction are reflec!ed in every
phase of the Sermce. By his enlightened approach to
manageT.1.eni, he has ma.de the Coast Guard a pioneer
in management by objective rather lhCln reac:ion and
has increased its capabilities as an Armed Porce and
a. humanitarian agency.
In the summer of 1965,
Admiral ROLAND responded swiftly to urger.t requirements jor small ri'Uer and coastal craft fo aseist
in checl:ing the flow of supplies Jrom North Vieinam to
Viet Cong units in the south. 1'1ithin wsel;s afler the
requesf 't(Jas made, the '\Isssels were on their way
to the fighting fronts oj southeast Asia. Later in the
earne year~ in the Fall oj 19(;5, the entire nation wa.s
impressed by the sl.:ill and sureness with which
Admiral ROLAND gdded his organization through
'he tense sitt~ation prevailing in the Straits oj Florida.
His handZina of this sensitive situation has enhanced
our cO'l.vr.,frv's sbbre throv.[Jhout the world. As part of
hie forward-lool;ir.g leadership, Admiral ROLAND
has revita.lized lhe Coast Guard's program of oceanographic research. Today the Coast Guard is one oj
the reco:::r;.i~ed leaders in this strategic area. To all of
hia dealings with the Government bu.reat.:.s and with international agencies, Ad7r_iral ROLAND hcs brought
outabnding tact and courlesy.
His disti7tgv.ished
service ar.d aci:iaveT:1.enls re/Zect the highest credit
upon himself a'7l.d the United States Coast Gua.rd."
For the Preeiient,

Penry 11. FOWler

TREASURY DEPARTMENT
Washington

REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE A MEETING ON BEHALF OF THE
UNITED STATES SAVINGS BONDS PROGRAM
WITH BUSINESS AND CIVIC LEADERS IN AUGUSTA, GEORGIA
MONDAY, JANUARY 24, 1966, AT 7: 30 P.M., EST

We meet today on behalf of a program -- the United States
Savings Bonds program -- which has long played a crucial role in
helping, not only to insure the sound management of the nation's
financial affairs, but also to assist millions of Americans in
putting their own financial affairs upon a sound and secure
bas is.
Today, the success of this program is more urgent than ever.
For, while the struggle in Vietnam is taking place thousands of
miles from our shores, we are all -- all Americans -- profoundly
engaged in that struggle, which affects so many facets of our
lives in so many ways. In particular, that struggle has a crucial
impact upon the nation's financial and economic affairs -- as we
at home work to insure that our already burgeoning economy
absorbs without inflation the expenditure of additional billions
of dollars to support the military effort in Vietnam.
The times, therefore, demand responsible restraint in the
conduct of the nation's fiscal and economic affairs -- both in
the public and private sectors. It is of that need for fiscal
and economic responsibility -- and the importance of the
Savings Bonds program in meeting that need -- that I would like to
speak to you today.
Let us, first, consider where we stand:
In little more than a month, our economy will enter its sixth
consecutive year of expansion -- thus marking another milestone in
the economic advance that, for length, strength and stability,
already stands without rival in in the entire history of our
na tion.

- 2 -

That expansion has been broadly based, and its benefits have
been broadly shared. Between 1960 and 1965, this expansion has
brought us:

-- a 34 percent rise in our total national output;
-- a 32 percent rise in consumer spending;
a 45 percent rise in business investment in plant
and equipment;
-- a 32 percent rise in manufacturing production;
--

a 32 percent rise in personal income;

-- a 67 percent rise in corporate profits after taxes;
an 8 percent rise in employment and a reduction in
the unemployment rate from 6.9 percent in early
1961 to 4.1 percent last month -- the lowest figure
since May of 1957.
We can gather some idea of how tremendous this accomplishment
has been when we consider that the increase alone in our national
output since the expansion bega~- an increase of over $190
billion between the first quarter of 1961 and the fourth quarter
of 1965 -- surpasses the total annual output of any other nation
in the Free World. Measured in constant dollars, our economy
1as grown at an average rate of about 5-1/2 percent a year during
this expansion -- more than double the rate of the preceding
rears following the end of the Korean War and comparing quite
favorably with the rate of growth in Western Europe, which last
~ar averaged around 3-1/2 percent.
This region and this state have shared fully in the
lbundant benefits of this expansion.
Between 1961 and 1964, for example, in the Sixth Federal
-- which embraces the states of Tennessee,
Louisiana, Florida and Mississippi:

~eserve District
~orgia, Alabama,

The total number of nonfarm workers has grown by
8.3 percent, compared with 5.2 percent for the
nation as a whole;

,/j

)

- 3 -

,L~

Average weekly earnings of production workers in
manufacturing have grown by 12.7 percent, compared
with 5.2 percent for the nation as a whole;
Total personal income has grown by 23 percent,
compared with 18 percent for the nation as a whole;
Per capita personal income has grown by 16 percent,
compared with 13 percent for the m tion as a whole.
Never, therefore, has this nation begun a new year better
prepared to meet the challenges that lie before it.
Those challenges arise from the fact that, today, in
Southeast Asia, we take up arms to help others in their struggle
for freedom -- and at home we labor to build for all Americans
a society worthy to be called great.
In his State of the Union Address -- less than two weeks
ago -- President Johnson told the nation that we can, and
must, meet both the challenge in Vietnam and the challenge at
home. At the same time, he stressed, the war in Vietnam
means that, at home, "we cannot do all we should, or all we
would like to do" -- although we must, and will, continue to
do all we can.
Because of Vietnam, therefore, we must proceed at a
slower speed and on a smaller scale toward meeting our mounting
needs at home -- but proceed we can and proceed we must.
We can do so -- without overstraining either our economy
or our budget -- because our economic policies and programs
over the past five years have met with such signal success.
We can do so because our economv has flourished under
a fiscal program designed to encourage strong and stable
growth in the private sector through a combination of massive
reductions in Federal tax rates and suitable restraints upon
the growth of Federal expenditures.
J

The tax measures we have adopted over the past five years
will lighten this year's tax bill for America's wage earners
and investors by a total of some $20 billion. In response to
these measures, the economy has surged steadily ahead -- with

- 4 rising incomes and profits, rising sales and jobs, rising
investment and productivity. And these, in turn, have meant
rising revenues for our Federal, state and local governments.
We estimate that, under present law, administrative budget
receipts for fiscal 1966 would be about $21 billion greater
than five years ago -- more than double the increases in the
previous half decade when there were no significant tax
reductions.
And at the same time that we have been reducing Federal
taxes -- to incrase growth in the private sector -- we have
been restraining the growth of Federal expenditures.
President Johnson's unrelenting insistence that every
dollar, in his words, be "spent with the thrift and with the
common sense which recognizes how hard the taxpayer worked in
order to earn i~' has resulted in what amounts to a whole new
policy of expenditure control.
Through the tenacious pursuit of that policy, President
Johnson has accomplished these remarkable results:
1.

He has cut the original estimated expenditure
level of $98.8 billion for fiscal 1964 by $1.1
billion to an actual $97.7 billion.

He has cut the original estimated expenditure
level of $97.9 billion for fiscal 1965 -- ending
last June 30 -- by $1.4 billion to an actual
$96.5 billiono

The expenditure target for fiscal 1966 was fixed
last January at $99.7 billion. But accelerated
military activity in Vietnam required extra
expenditures of some $4.7 billion. In addition,
uncontrollable or legislated expenditures required
another unavoidable increase amounting to a net
figure of some $2 billion. These expenditures included
$740 million of military and civilian pay increases
voted by Congress in excess of Presidential
recommendations, an additional $500 million increase
in veterans pensions, a $500 million increase in
interest charges on the debt and two further
increases of $500 million each as a result of
payments required by law under the space and

- 5 -

agricultural programs. All of these increases
more than wiped out economies realized since the
original budget estimate for fiscal 1966.
What all this adds up to is the striking fact that, had
it not been for these unavoidable increases as a result of
Vietnam and these other uncontrollable increases I have cited,
the President in nearly three years in office would have held
expenditures in the administrative budget to a total increase
of less than $1 billion over the amount estimated for the
fiscal year in which he assumed office. We can gain some
idea of what a remarkable achievement this is when you compare
it with the average increase of $3 billion per year over the
previous ten years.
Yet to talk about expenditure control solely in terms of
expenditure totals is to tell only half the story -- for we
receive the greatest benefits from the President's insistent
emphasis on cost reduction and program evaluation in the urgent
new programs it enables us to afford through savings on those
of lesser urgency and through greater productivity in existing
programs.
And joined with rlslng Federal revenues from rising
economic activity, this program of rigorous expenditure control
has allowed us to meet urgent national needs while at the
same time reducing the Federal deficit.
The record is
years ago forecast
part, on major tax
actual fiscal 1964

clear: the 1964 budget submitted three
a deficit of $11.9 billion premised, in
reduction. This figure was reduced to an
deficit of $8.2 billion.

Last year's budget contained an estimated deficit for
fiscal 1965 of $6.3 billion. This was trimmed down to
$3 .4 b ill ion.
The budget submitted last January projected a $5.3 billion
deficit for fiscal 1966. As of June 30, this estimate had
been cut to $4.2 billion. Had it not been for the additional
defense needs resulting from Vietnam, the higher revenues
flowing from our vigorous economic expansion would have cut
even further that estimated deficit for the current fiscal
year.

- 6 -

Had it not, in fact, been for the increases projected for
Vietnam expenditures in fiscal 1966 and fiscal 1967 since the
1966 budget was originally submitted last January, we could have
used the fiscal dividends furnished by this continued expansion
to balance the budget in fiscal 1967 and still have had room
for some increases in civilian expenditures or for additional
tax reduction.
As a result of all these policies which, under President
Johnson's leadership, have proven so productive, we now have
the economic strength and the fiscal resources -- and the firm
confidence these accomplishments more than justify -- to carry
on the fight for freedom in South Vietnam without abandoning
our efforts to build a Great Society at home. This was the
real significance of the President's announcement -- in his
State of the Union Message -- that the enactment of all his
recommendations will entail a deficit in the administrative
budget for fiscal 1967 of only $1.8 billion -- the smallest in
seven years -- and will give us a surplus of $500 million in the
cash budget.
And this accomplishment is made all the more extraordinary
by the fact that fiscal 1967 expenditures include an increase
in the special costs of Vietnam of $10.4 billion over the fiscal
1965 level -- a $5.8 billion increase in fiscal 1967 on top of
an increase of $4.6 billion in fiscal 1966.
But the new budget represents more than a reflection -bright -- of past accomplishments in economic policy.
Above all, it represents a full recognition of, and an
effective response to, the paramount present need for fiscal
responsibility if -- at a time of mounting military expenditures
we are to maintain strong and stable growth in an economy where
the gap between demand and efficient production and supply has
markedly narrowed.
h~ever

Thus, the increaseq revenues we expect to receive as our
economy continues to grow -- and our gross national product
rises in calendar 1966 to a projected level of slightly over
$720 billion from the $675.5 billion level of calendar 1965
will be employed to meet the increased requirements of the
Vietnam struggle.
At the same time, because of significant economics in less
urgent areas of the budget, all expenditures other than the
special costs of Vietnam will rise during the coming fiscal year

- 7 by only a projected $600 million -- even though some sectors
of the budget, particularly in the essential fields of education,
health and the war on poverty, will be substantially increased.
Yet even the application to Vietnam and other essential
programs of the fiscal dividends from economic growth and from
economies in government operations other than those in Vietnam
would still leave a sizeable deficit at a time when the
economic and financial situation calls for avoiding additional
stimulus to demand.
As a result, the President has proposed a tax program that
will increase federal revenues in the administrative budget
for fiscal 1966 by $1.2 billion and in fiscal 1967 by an
additional $3.6 billion, for a total in fiscal 1967 of $4.8
billion -- enough to bring the administrative deficit down to
a tolerable $1.8 billion and produce a cash surplus of $500
million.
In brief, this program would:
Modify income tax collection procedures, without -let me emphasize -- increasing income tax rates
or changing anyone's final income tax liabilities;
And temporarily postpone the scheduled reductions
in auto and telephone excise taxes.
More specifically the program includes:
1.A speed-up in the acceleration of corporate
tax payments -- which would simply telescope the
acceleration timetable established by the Revenue
Act of 1964 and move the completion date up from
1970 to 1967;
2.

A delay in the 1966 and later scheduled
reductions of automobile and telephone excise
taxes -- postponing for two years the staged
reduction of these taxes and restoring them
in the interim to the levels in effect at the
end of 1965;

- 8 -

)

()

Replacement of the present 14 percent
flat rate for income tax withholding on wages
and salaries by a graduated, six-rate scale,
so that wages withheld for income tax purposes
would more closely approximate actual tax
liabilities at the end of the taxable year;

Quarterly payment of Social Security taxes
by self-employed taxpayers, to relieve them
of the present obligation of making such payment
in one lump sum after the end of the taxable
year (which goes into the Trust Fund and does
not affect the administrative budget).

The economic and financial effect of these measures, over
the near term, would be to diminish the inflationary potential
in the economy and raise federal revenues to a point where we
can project a near balanced budget in a near full employment
economy.
These measures, we believe, should furnish some restraining
influence against any potential excessive economic exuberance
without harming the continued healthy growth of our economy -and we must, in our zeal to avoid the onslaught of inflation,
take care tha t in trying to prevent the disease we do not
imperil the patient. At the same time, we all recognize that the
most present danger before us -- whose avoidance will require our
most wary and watchful vigilance -- is the danger of economic
excess, not economic defic iency.
Today, therefore, in clear contrast to the situation at
~ny time over the past five years, the economic realities call
f~ increased restraint on the part of us all -- for continued
::ooperation between both the public and private sectors in
3.dapting their plans and programs to current economic
::ircums tances .
In particular, let me stress the fact that, while the
~overnment can do a great deal to create a climate to encourage
lon-inflationary growth, it is upon the shoulders of our
msinesses and our unions that the responsibility squarely
~ests for pursuing non-inflationary price and wage policies.
md today -- when we fight a brutal war in Vietnam -- it is
~mperative that wage and price increases remain within the
~ideposts set by the President's Council of Economic Advisers
lr we run the grave risk of squandering the gains for which

- 9 -

we have all worked so hard and so long and of undermining the
economic strength which must support, not only the struggle in
Vietnam, but our efforts elsewhere in the world and here at
home.
In the days and months ahead, therefore, all of us -in government and in the private sector -- must bear an extra
burden of responsibility in a truly national effort to keep
a sure and steady economic footing while we continue to move
ahead. And there is a special sense in which you here today
can help in that effort -- for now more than ever it is
essential that we finance our debt without inflation, and now
more than ever it is essential that we do all we can to
encourage greater savings throughout our economy.
Through the United States Savings Bonds program -- on
whose behalf we meet today -- we accomplish both these ends at
once.
The first principle of debt management is, of course, to
keep the debt from growing to an unmanageable size -- and
nowhere, as I have already pointed out, is our success in
doing that better illustrated than in the budgets President
Johnson has presented and carried out, and most particularly in
the budget for fiscal 1967, which he has just sent to the
Congress today.
As a result of this record of expenditure control,
Treasury demands on our capital markets have not been -- and
will not be -- as great as many have expected. And, in the
future, as in the past, we will continue -- consistent with
minimum cost and other debt management objectives -- to place
our debt in the most non-inflationary manner possible.
Our entire debt increase in calendar 1965 was financed
outside the banking system -- despite the sharp step-up in
spending for Vietnam. Indeed, commercial bank holdings of
Treasury issues steadily declined by several billions of dollars
during the las t year.
The Savings Bonds program, as you know, is vital to the
success of our debt management policy -- and in the months
ahead it could prove one of our most valuable weapons in averting
inflation.
The fact that E and H Bonds outstanding now account for
Some 23 percent -- or $49 ~illion -- of the entire publicly
held Federal debt is an abundant indication both of the
importance of Sayings Bonds to Federal debt management and

- 10 of the tremendous job done by the corps of volunteers - - whose
dedication and abilities are not better exemplified than they
are here today -- who have advanced the Savings Bonds program.
Each of you here today, by your leadership in the civic
and economic affairs of your community, your city and your
state, is making a substantial contribution to the stability
and strength of our national economy. You can add immeasurably
to that contribution by doing all you can in every way you can
to help promote the purchase of United States Savings Bonds.
The challenge is clear: this year more people will be
at work than ever before -- and at higher wages and salaries.
And while no one can say how many new jobs we will have this
year, let no one underestimate the job-creating capacity of
our economy -- which has generated some 2.7 million new
non-farm jobs over the past year, and some 8 million new
non-farm jobs over the pas t five years.
This year, therefore, many millions of Americans will
be reaching a threshold of financial well-being that will enable
them, for the first time, to take part in a program of
systematic savings. At the same time, there are many millions
of current savers who will be financially able to save more
than they do now -- and who will do so with the proper
encouragemen t •
Recently, as you know, there has developed a significant
disparity between rates of return on Savings Bonds and on
private savings accounts. To have allowed that disparity to
continue would not only have seriously diminished the prospects
for sustained success in the Savings Bonds program -- thus
harming our efforts to ward off inflation and soundly manage
the nation's fiscal affairs -- but would also have been a grave
breach of faith with those millions of Americans who, through
the purchase of Savings Bonds, have entrusted their savings to
the Governmen t .
As a result, President Johnson last week directed me to
raise the interest rate on Savings Bonds at the earliest possible
date. At the same time, the President asked that I also make
the appropriate adjustments in the rates on outstanding savings
bonds -- so that no one who now holds bonds need cash in his
holdings to gain the benefit of the new rate, and so that no
one who now wants to buy savings bonds need postpone his purchase
to await the higher rate.

- 11 -

We are now working feverishly to carry out the President's
directive as soon as possible -- and I hope that, in the very
near future, we will be able to announce the new, higher rate
on United States Savings Bonds.
In the meantime, there is no need to await the actual
announcement of a new rate before launching an all-out effort
in your communities and places of business to generate the largest
possible investment in a strong and secure economy -- in a
strong and secure America -- through the purchase of United
States Savings Bonds.
I know you all realize how much your efforts can help to
bolster the nation's financial position and steady its economic
footing at a time when stability and strength are more imperative
than ever.
I know that you will do all you can -- and that is a great
deal indeed.

000

TREASURY DEPARTMENT
Washington

REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE A MEETING ON BEHALF OF THE
UNITED STATES SAVINGS BONDS PROGRAM
WITH BUSINESS AND CIVIC LEADERS IN NASHVILLE, TENNESSEE
MONDAY, JANUARY 24, 1966, AT 12:30 P.M., CST

- 2 -

That expansion has been broadly based, and its benefits have
been broadly shared. Between 1960 and 1965, this expansion has
brought us:

-- a 34 percent rise in our total national output;
--

a 32 percent rise in consumer spending;
a 45 percent rise in business investment in plant
and equipment;

-- a 32 percent rise in manufacturing production;
-- a 32 percent rise in personal income;

-- a 67 percent rise in corporate profits after taxes;
an 8 percent rise in employment and a reduction in
the unemployment rate from 6.9 percent in early
1961 to 4.1 percent last month -- the lowest figure
since May of 1957.
We can gather some idea of how tremendous this accomplishment:
has been when we consider that the increase alone in 0Jr national
output since the expansion bega~- an increase of over $190
billion between the first quarter of 1961 and the fourth quarter
of 1965 -- surpasses the total annual output of any other natioll
in the Free World. Measured in constant dollars, our economy
has grown at an average rate of about 5-1/2 percent a year during
this expansion -- more than double the rate of the preceding
years following the end of the Korean War and comparing quite
favorably with the rate of growth in Western Europe, which last
year averaged around 3-1/2 percen t.
This region and this state have shared fully in the
abundant benefits of this expansion.
Between 1961 and 1964, for example, in the Sixth Federal
Reserve District -- which embraces the states of Tennessee,
Georgia, Alabama, Louisiana, Florida and Mississippi:
The total number of nonfarm workers has grown by
8.3 percent, compared with 5.2 percent for the
nation as a whole;

- 3 Average weekly earnings of production workers in
manufacturing have grown by 12.7 percent, compared
with 5.2 percent for the nation as a whole;
Total personal income has grawn by 23 percent,
compared with 18 percent for the nation as a whole;
Per capita personal income has grawn by 16 percent,
compared with 13 percent for the ra tion as a whole.
Never, therefore, has this nation begun a new year better
prepared to meet the challenges that lie before it.
Those challenges arise from the fact that, today, in
Southeast Asia, we take up arms to help others in their struggle
for freedom -- and at home we labor to build for all Americans
a society worthy to be called great.
In his State of the Union Address -- less than two weeks
ago -- President Johnson told the nation that we can, and
must, meet both the challenge in Vietnam and the challenge at
home. At the same time, he stressed, the war in Vietnam
means that, at home, "we cannot do all we should, or all we
would like to dd' -- although we must, and will, continue to
do all we can.
Because of Vietnam, therefore, we must proceed at a
slower speed and on a smaller scale toward meeting our mounting
needs a thorne - - but proceed we can and proceed we mus t.
We can do so -- without overstraining either our economy
or our budget -- because our economic policies and programs
over the past five years have met with such signal success.
We can do so because our economy has flourished under
a fiscal program designed to encourage strong and stable
growth in the private sector through a combination of massive
reductions in Federal tax rates and suitable restraints upon
the growth of Federal expenditures.
The tax measures we have adopted over the past five years
will lighten this year's tax bill for America's wage earners
and investors by a total of some $20 billion. In response to
these measures, the economy has surged steadily ahead- - with

He has cut the original estimated expenditure
level of $98.8 billion for fiscal 1964 by $1.1
billion to an actual $97.7 billion.

He has cut the original estimated expenditure
level of $97.9 billion for fiscal 1965 -- ending
last June 30 -- by $1.4 billion to an actual
$96.5 billiono

- 5 -

agricultural programs. All of these increases
more than wiped out economies realized since the
original budget estimate for fiscal 1966.
What all this adds up to is the striking fact that, had
it not been for these unavoidable increases as a result of
Vietnam and these other uncontrollable increases I have cited,
the President in nearly three years in office would have held
expenditures in the administrative budget to a total increase
of less than $1 billion over the amount estimated for the
fiscal year in which he assumed office. We can gain some
idea of what a remarkable achievement this is when you compare
it with the average increase of $3 billion per year over the
previous ten years.
Yet to talk about expenditure control solely in terms of
expenditure totals is to tell only half the. story -- for we
receive the greatest benefits from the President's insistent
emphasis on cost reduction and program evaluation in the urgent
new programs it enables us to afford through savings on those
of lesser urgency and through greater productivity in existing
programs.
And joined with r1s1ng Federal revenues from r1S1ng
economic activity, this program of rigorous expenditure control
has allowed us to meet urgent national needs while at the
same time reducing the Federal deficit.
The record is
years ago forecast
part, on major tax
actual fiscal 1964

clear: the 1964 budget submitted three
a deficit of $11.9 billion premised, in
reduction. This figure was reduced to an
deficit of $8.2 billion.

Last year's budget contained an estimated deficit for
fiscal 1965 of $6.3 billion. This was trimmed down to
$3 . 4 bill ion.
The budget submitted last January projected a $5.3 billion
deficit for fiscal 1966. As of June 30, this estimate had
been cut to $4.2 billion. Had it not been for the additional
defense needs resulting from Vietnam, the higher revenues
flowing from our vigorous economic expansion would have cut
even further that estimated deficit for the current fiscal
year.

- 6 Had it not, in fact, been for the increases projected for
Vietnam expenditures in fiscal 1966 and fiscal 1967 since the
1966 budget was originally submitted last January, we could have
used the fiscal dividends furnished by this continued expansion
to balance the budget in fiscal 1967 and still have had room
for some increases in civilian expenditures or for additional
tax reduction.
As a result of all these policies which, under President
Johnson's leadership, have proven so productive, we now have
the economic strength and the fiscal resources -- and the firm
confidence these accomplishments more than justify -- to carry
on the fight for freedom in South Vietnam without abandoning
our efforts to build a Great Society at home. This was the
real significance of the President's announcement -- in his
State of the Union Message -- that the enactment of all his
recommendations will entail a deficit in the administrative
budget for fiscal 1967 of only $1.8 billion -- the smallest in
seven years -- and will give us a surplus of $500 million in the
cash budget.
And this accomplishment is made all the more extraordinary
by the fact that fiscal 1967 expenditures include an increase
in the special costs of Vietnam of $10.4 billion over the fiscal
1965 level -- a $5.8 billion increase in fiscal 1967 on top of
an increase of $4.6 billion in fiscal 1966.
But the new budget represents more than a reflection -however bright -- of past accomplishments in economic policy.
Above all, it represents a full recognition of, and an
effective response to, the paramount present need for fiscal
responsibility if -- at a time of mounting military expenditures
we are to maintain strong and stable growth in an economy where
the gap between demand and efficient production and supply has
markedly narrowed.
Thus, the increased revenues we expect to receive as our
economy continues to grow -- and our gross national product
rises in calendar 1966 to a projected level of slightly over
$720 billion from the $675.5 billion level of calendar 1965
will be employed to meet the increased requirements of the
Vietnam struggle.
At the same time, because of significant economics in less
urgent areas of the budget, all expenditures other than the
special costs of Vietnam will rise during the coming fiscal yea~

- 8 -

Replacement of the present 14 percent
flat rate for income tax withholding on wages
and salaries by a graduated, six-rate scale,
so that wages withheld for income tax purposes
would more closely approximate actual tax
liabilities at the end of the taxable year;

The economic and financial effect of these measures, over
the near term, would be to diminish the inflationary potential
in the economy and raise federal revenues to a point where we
can project a near balanced budget in a near full employment
economy.
These measures, we believe, should furnish some restraining
influence against any potential excessive economic exuberance
without harming the continued healthy growth of our economy -and we must, in our zeal to avoid the onslaught of inflation,
take care tha t in trying to prevent the disease we do not
imperil the patient. At the same time, we all recognize that the
most present danger before us -- whose avoidance will require our
most wary and watchful vigilance -- is the danger of economic
excess, not economic defic iency.
Today, therefore, in clear contrast to the situation at
1ny time over the past five years, the economic realities call
for increased restraint on the part of us all -- for continued
~ooperation betvleen both the public and private sectors in
idapting their plans and programs to current economic
~ircumstances .
In particular, let me stress the fact that, while the
can do a great deal to create a climate to encourage
lOn-inflationary growth, it is upon the shoulders of our
lUsinesses and our unions that the responsibility squarely
:ests for pursuing non-inflationary price and wage policies.
md today -- when we fight a brutal war in Vietnam -- it is
.mperative that wage and price increases remain within the
~ideposts set by the President's Council of Economic Advisers
Ir we run the grave risk of squandering the gains for which

~overnment

- 9 -

we have all worked so hard and so long and of undermining the
economic strength which must support, not only the struggle in
Vietnam, but our efforts elsewhere in the world and here at
home.
In the days and months ahead, therefore, all of us -in government and in the private sector -- must bear an extra
burden of responsibility in a truly national effort to keep
a sure and steady economic footing while we continue to move
ahead. And there is a special sense in which you here today
can help in tha t effort - - for now more than ever it is
essential that we finance our debt without inflation, and now
more than ever it is essential that we do all we can to
encourage greater savings throughout our economy.
Through the United States Savings Bonds program -- on
whose behalf we meet today -- we accomplish both these ends at
once.
The first principle of debt management is, of course, to
keep the debt from growing to an unmanageable size -- and
nowhere, as I have already pointed out, is our success in
doing that better illustrated than in the budgets President
Johnson has presented and carried out, and most particularly in
the budget for fiscal 1967, which he has just sent to the
Congress today.
As a result of this record of expenditure control,
Treasury demands on our capital markets have not been -- and
will not be -- as great as many have expected. And, in the
future, as in the past, we will continue -- consistent with
minimum cost and other debt management objectives -- to place
our debt in the most non-inflationary manner possible.
Our entire debt increase in calendar 1965 was financed
outside the banking system -- despite the sharp step-up in
spending for Vietnam. Indeed, commercial bank holdings of
Treasury issues steadily declined by several billions of dollars
during the las t year.
The Savings Bonds program, as you know, is vital to the
success of our debt management policy -- and in the months
ahead it could prove one of our most valuable weapons in averting
inflation.
The fact that E and H Bonds outstanding now account for
some 23 percent -- or $49 ~illion -- of the entire publicly
held Federal debt is an abundant indication both of the
importance Q£ Sav~ Bonds to Federal debt management and

- 10 of the tremendous job done by the corps of volunteers -- whose
dedication and abilities are not better exemplified than they
are here today -- who have advanced the Savings Bonds program.
Each of you here today, by your leadership in the civic
and economic affairs of your community, your city and your
state, is making a substantial contribution to the stability
and strength of our national economy. You can add immeasurably
to that contribution by doing all you can in every way you can
to help promote the purchase of United States Savings Bonds.
The challenge is clear: this year more people will be
at work than ever before -- and at higher wages and salaries.
And while no one can say how many new jobs we will have this
year, let no one underestimate the job-creating capacity of
our economy -- which has generated some 2.7 million new
non-farm jobs over the past year, and some 8 million new
non-farm jobs over the pas t five years.
This year, therefore, many millions of Americans will
be reaching a threshold of financial well-being that will enable
them, for the first time, to take part in a program of
systematic savings. At the same time, there are many millions
of current savers who will be financially able to save more
than they do now -- and who will do so with the proper
encouragement.
Recently, as you know, there has developed a significant
disparity between rates of return on Savings Bonds and on
private savings accounts. To have allowed that disparity to
continue would not only have seriously diminished the prospects
for sustained success in the Savings Bonds program -- thus
harming our efforts to ward off inflation and soundly manage
the nation's fiscal affairs -- but would also have been a grave
breach of faith with those millions of Americans who, through
the purchase of Savings Bonds, have entrusted their savings to
the Government.
As a result President Johnson last week directed me to
raise the intere~t rate on Savings Bonds at the earliest possible
:late. At the same time the President asked that I also make
the appropriate adjustm~nts in the rates on outstanding savings
)onds -- so that no one who now holds bonds need cash in his
101dings to gain the benefit of the new rate, and so that no
)ne who now wants to buy savings bonds need postpone his purchase
:0 await the higher ra te •

- 11 -

000

TREASURY DEPARTMENT

R RELEASE 6:30 P.M.,
nday, January 24, 1966.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
115, one series to be an additional issue of the bills dated October 28, 1965, and
e other series to be dated January 27, 1966, which were offered on January 19, were
ened at the Federal Reserve Banks today. Tenders were invited for $1,300,000,000,
thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-day
l1s. The details of the two series are as follows:
NGE OF ACCEPTED
MP~ITIVE

BIDS:

High
Low
Average
~
l4~
84~

91-day Treasury bills
maturing April 28, 1966
Approx. Equiv.:
Price
Annual Rate
98.842
4.581%
98.835
4.6091>
98.838
4.596% ~/

182-day Treasury bills
maturin~ Jull 28, 1966
Approx. Equiv.
Price
Annual Rate
97.626 ~
4.696~
97.623
4.702~
97.624
4.699~ Y

Excepting one tender of $100,000
of the amount of 91-day bills bid for at the low price was accepted
of the amount of 182-day bills bid for at the low price was accepted

TAL TENDERS APPLIED FOR AND ACCEPl'ED BY FEDERAL RESERVE DISTRICTS:

District
~ston

New York
~ilade1phia

Cleveland
Richmond
Atlanta
~hicago

St. Louis
~nneapolis

~nsas

City
Dallas
3an Francisco
TO~

Applied For
$
29,695,000
1,385,910,000
28,902,000
35,068,000
23,525,000
36,498,000
293,862,000
56 ,205,000
16,649,000
40,836,000
29,019,000
107,070,000

Accepted
$
19,395,000
804,708,000
16,902,000
35,068,000
23,525,000
22,578,000
180,848,000
45,205,000
13,789,000
36,321,000
20,159,000
81 , 950,000

$2,083,239,000

$1,300,448,000

Applied For
$
46,792,000
1,620,431,000
12,961,000
43,862,000
5,876,000
37,901,000
275,694,000
34,409 ,000
10,087,000
14,826,000
14,418,000
187,373,000

Accepted
$
16,842,000
818,868,000
4,066,000
19,867,000
5,376,000
10,938,000
59,737,000
14,409,000
4,987,000
13,861,000
9,218,000
21,835,000

$2,304,630,000

$1,000,004,000 ~/

mcludes $254,653,000 noncompetitive tenders accepted at the average price of 98.838
mcludes $120,088,000 noncompetitive tenders accepted at the average price of 97.624
~ese rates are on a bank discount basis. The equivalent coupon issue yields are
4.71~ for the 91-day bills, and 4.88% for the 182-day bills.

-350

- 18 and the Senate Finance Committee, insists on the most searching
scrutiny of every tax proposal.

There has been little or no

change in the original thesis of the men who framed the
Constitution that the power to tax is crucially important
and must be carefully safeguarded.
All this is well and good, but within these safeguards
we must continue to seek the most effective and appropriate
use of our system of taxation.
That is the task which the President, the Administration,
and the Congress have now taken up again.

000

- 17 of this nation -- and this was done at a time when revenues
totalled only a few billion dollars.

We have learned a lot

since those days, but I would be the first to admit that our
knowledge is still far from complete.

From my viewpoint in

the Treasury, one of the most encouraging aspects of our nation
today is the willingness of industry, labor and the financial
community, as well as the Congress, to examine soberly the
economic realities of the world in which we live and to seek
the policies which

best fit these realities.

I have always believed that to change the tax laws of
the United States you must have support that runs from twothirds to three-fourths of the country.
never sufficient.

A close majority is

I do not object to this.

I do not object

to the fact that Congress, in the Ways and Means Committee

- 16 - ~

' . ~., I -(I ,{{ ! -

the President has made

-I '

~ abttnd~ly

;-- L.Ay
()

clear:

If the Viet Narn

situation requires additional revenues, he will not hesitate
to go to the Congress to ask for them.
He are at the beginning of the second phase of the
debate.

The issue now before the country is whether we have

the economic sophistication to use fiscal policy as a moderating
influence which will balance our cash budget in a full-employment
economy.

Hopefully, the Congress and the country will see the

reasonableness of our arguments, for then we as a nation will
have come to an awareness that budget policy and tax policy
as well as monetary policy are essential and useful tools which
can be used with flexibility and force in a free society.
In 1932 the Congress increased taxes by more than a
billion dollars during the worst depression in the history

- 15 move to a "pay as you go" system for meeting their tax
liabilities, and a system of graduated withholding to relate
the tax payments of individuals more closely to their accruing
tax liabilities.
The question is often asked:

Why did we select a

package of temporary postponements of excise tax reductions
plus what are essentially "one-shot" measures in corporate
speed-up and graduated withholding?

Hhy did we not reconnnend

a straight-out increase in taxes on individuals and corporations?
The answer is related to the uncertainties of our involvement
in Viet Nam, and the only answer that I can give you is that
we simply do not know precisely what will be required or for
how long.

Therefore, it seemed only prudent to use the

"one-shot" measures which were available.

I should add that

- 14 The moderating influence that the President proposed
was a package of revenue measures that will total $1.2 billion
for the rest of fiscal 1966 and $4.8 billion for fiscal 1967.
This package will bring the Administration's fiscal 1967
budget close to balance with a deficit of $1.8 billion.

will produce a small surplus of $500 million in our cash budget.
Without these additional revenues the increased costs of
Viet Nam would have triggered an administrative deficit of
$6.6 billion.

A deficit of this magnitude was clearly

unthinkable and dangerous in our present nearly full-employment
economy.
As you know, the revenue measures involve a postponement
for two years of the reduction in excise taxes on

automobiles~

and telephones; a speed-up in the rate at which corporations

- 13 $600 million in spite of the fact that some increases, such
as for interest

payments, were clearly beyond his control.

The added costs of Viet Nam amount to $4.7 billion in fiscal
1966 and an additional $5.8 billion in fiscal 1967 -- a total
of $10.5 billion.

These increases represent the hard decisions

on what this country must spend to live up to its commitments
in the world, including Viet Nam.
All these decisions, when combined with the probable
course of the domestic economy, indicated an increase in
economic activity which clearly threatened to strain the
capacity of our plant, our labor and our savings.

They clearly

indicated that some moderating action was necessary to limit
the risk of a serious inflationary threat.

- 12 (3)

The pressure on our savings was equally apparent.

In spite of the fact that the banking system was able to
accommodate an enormous increase in business and personal
loans this past year, amounting to almost $25 billion, still
the demand for funds to build new plants and finance operations
showed no signs of abating.

Indeed, every sign indicated that

last year's total would be equalled or surpassed.
It was against this background that the President had
to make his decisions on the Budget.

His decisions are

spelled out in the Budget Message which was delivered

yesterd~.

His decision was that in the non-defense areas of Government
expenditures he would use the strongest restraint possible
without damaging essential domestic programs.

Excluding

Viet Nam, Administration expenditures have risen by only

- 11 which President Johnson framed his budget decisions for the
balance of fiscal year 1966 and for fiscal year 1967.
The picture looked like this in December:
(1)

Our manufacturing plant was operating at about

91 percent of capacity.

Hhile there is some disagreement

over the precise level at which our plants can operate most
efficiently, the comprehensive McGraw-Hill survey indicates
that industry expects upward pressure on costs above the
"preferred" rate of 92 percent of capacity.
(2)

In December the unemployment rate had dropped to

4.1 percent.

Even more Significantly, the unemployment rate

for married men had dropped to 1.8 percent, the lowest rate
since the statistical series was started in 1954.
was not much i!give" in our supply of labor.

Clearly there

- 10 -

realize is that, although our tax cuts
years total about $20

billion~

the past five

the revenues of the United

States grew more than twice as fast during this five-year
period as they did in the previous five years when there
were no tax cuts.
This brings us to an historic turn in the evolution of
the economic debate.

We have demonstrated that tax policy

is an extraordinarily powerful weapon for stimulating the
expansion of an economy which is operating far below its
potential.

The question now at issue is whether tax policy

is also an appropriate tool to use as a moderating force when
the country's plants, supply of labor, and savings are all
being utilized at capacity or near capacity and the threat
of still greater demands lies ahead.

This was the climate in

- 9 Other support may even have come from those who believed that
our economic arguments were wrong:

that we would end up with

smaller -- not greater -- revenues; and that this would force
the Government to retrench in many areas.

When this broad

support was combined with President Johnson's vigorous
leadership and his severe restraints on the budget, the result
was an economic decision that was unique for the United States -a tax reduction designed to stimulate economic growth to such
an extent that Government revenues would actually increase.
The statistical evidence is now available to support the
truth of our arguments.

I need not remind you that we are

now in the 59th month of economic expansion -- by far the
longest in the history of the United States with the single
exception of the iiorld War II period.

What many fail to

- 8 -

the question of whether or not certain people and certain
businesses were carrying their fair shares of the tax burden.
In 1963 the debate was resumed with greater intensity,
because in that year we approached Congress and the country
with the proposition that a tax structure could be too high -it could be so high as to be counterproductive.

We argued

that a reduction of rates for individuals and for corporations
would release productive energies and actually would result
in greater revenues for the Government.

We finally passed

this legislation in 1964 with unusually broad support.

Part

of our support came from those who were convinced that our
economic arguments were correct -- that the country could
really produce more if we left more income in the private
stream rather than diverting it into the Federal revenues.

- 7 The great debate on this subject opened in May of 1961
when President Kennedy sent forward his first tax recommendations, which included among other proposals an investment
credit designed to stimulate investment in the United States
both for new capacity and for the replacement of obsolete
capacity.

In all candor I must admit that the great debate

made little headway that first year.

But in 1962, when the

Treasury indicated that it "meant business" and liberalized
our whole concept of depreciation, the debate began in earnest
and resulted in the enactment of far-reaching tax legislation.
The discussions of 1961 and 1962 were centered primarily
on the reform of our methods of treating investment, but the
attention of the American people was also focused on the whole
question of the equity of our tax system -- particularly on

- 6 -

I cannot honestly state that there is total agreement in
the country today on the use of budgetary policy to insure full
utilization of resources at all times and in all circumstances.

I~J

There certainly seems to be general agreement and understanding

of the fact that a sizable budgetary deficit in boom times is
dangerous and potentially inflationary.
Further, I believe that there has been a significant
change in the attitude of the American people towards the
concept of taxation.

There seems to be rather general awareness

today of the fact that our tax system is an enormously powerful
tool which can generate a non-inflationary expansion of economic
activities in times when our labor, our plants, and our savings
are being under-utilized -- when our economy is clearly falling
short of its potential output.

- 5 -

up-side by raising interest rates and tightening credit, it
was clearly impossible for them to move against a recession
by lowering rates, ,Cheap money would have encouraged an
outflow of funds seeking more attractive rates overseas, and
our balance of payments problems would have been increased.
If we were to counteract the recessionary tendencies that
were still apparent early in 1961 and stimulate the rather
sluggish growth rate of the Fifties, the nation obviously had
to look for other tools.

The only other tools available were

budgetary policy and tax policy, and in these two areas we came
squarely against the weight of public opinion.

No consensuS

existed in the country on the use of budgetary policy or tax
policy to make certain that our people, our plants, and our
savings were utilized to the fullest.

- 4 responsibility, under the Employment Act of 1946, " ••• to promote
maximum employment, production and purchasing power."
The particular issue of credit regulation, which had
excited and often divided the country for 150 years, seemed
to be settled, the only remaining question being 4R the policies
which the Federal Reserve Board followed in exercising its
authority.
But when I carne to the Treasury in 1961, it was apparent
that events had imposed severe limitations on the powers of
the Federal Reserve Board.

A new and perplexing phenomenon

confronted the nation in the form of a chronic and persistent
balance of payments deficit which averaged more than

$3~

billion

a year for the years 1958, 1959, and 1960, and which in 1960
alone resulted in a gold loss amounting to $1.7 billion.

While

the Federal Reserve Board still had room to maneuver on the

- 3 -

By 1958, when I was elected to the Congress, the use of
monetary policy as a tool of Federal power to try to smooth
out the business cycle was rather generally accepted.

The

Federal Reserve Board had gradually mopped up the excess
liquidity generated by World

l~ar

II and during the decade

of the Fifties was using its powers over credit in an attempt
to moderate swings in the business cycle -- tightening up on
credit in boom times, and making credit more easily available
in times of recession.
While the Federal Reserve Board was often subject to
vigorous criticism on the timing and direction of its moves,
there was still general acceptance of the thesis that the Board
had the power to regulate credit and should exercise this
power to keep the economy on a fairly even basis.

Moreover,

as a part of the Federal Government, the Board had the

- 2 -

in influencing the nation's level of economic activity.

one can estimate with eer-taimy the breadth or the depth of
this recent consensus, but I can say with certainty that it
is far more extensive than it was in 1958.

A brief review

of the development of our financial thinking in this nation
illustrates this clearly.
Since the earliest days of the Republic the nation has
debated the issue of whether or not the use of monetary

authori~

(or the control of credit) was an appropriate tool of Federal
power.
Our understanding of the issue was gradually sharpened
in the nation as our financial experience developed through
the First and Second Banks of the United States, the National
Bank Act of 1863, the Federal Reserve Act of 1913, and the
Banking Acts of 1933 and 1935.

DRAFT - 1/20/66

C (~~'G'

UNDER SECRETARY BARR'S DRAFT STATEMENT ·FOR-.DELIV£RY
TO THE ROTARY CLUB~. INDIANAPOLIS, INDIANA, ON
JANUARY 25, 1966. ~ \, '

My two years in the

Executive Branch of the G

release on delivery

in the area of Federal fi
which I would like to adc
particularly appropriate

Remarks by the Honorable Joseph W.Barr
Under Secretary of the Treasury
before
a L~ncheon. Me~~i~Aeaf the Rotary Club
Ind~anapolis, Claypool Hotel, Indianiapolis,
Indiana, Muesday, January 25, 1966,
12 Noon, CST
Q

the President's Budget ME
24 hours ago .
./

As I look back over
by what seems to be an extraordinary change in the attitude
of the nation towards Federal finance.

Gradually over these

years there seems to have developed a growing awareness that
the Federal budget and Federal taxes play an important role

TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY

REMARKS BY THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE A
LUNCHEON MEETING OF THE ROTARY CLUB OF INDIANAPOLIS ,
AT THE CLAYPOOL HOTEL, INDIANAPOLIS, INDIANA
TUESDAY, JANUARY 25, 1966, 12:00 NOON, CST.
FEDERAL FINANCIAL POLICY
two years in the Congress and five years in the
Ie Branch of the Government have been concentrated in
1 of Federal finance, and this is the subject to which
like to address myself today. This is a particularly
Late day for such a discussion because the President's
1essage arrived in the Congress just 24 hours ago.
I look back over these past seven years, I am struck
seems to be an extraordinary change in the attitude
lation towards Federal finance. Gradually over these
lere seems to have developed a growing awareness that
!ral budget and Federal taxes play an important role
lencing the nation's level of economic activity. No one
.mate the breadth or the depth of this recent consensus,
.n say with certainty that it is far more extensive
was in 1958. A brief review of the development of our
.1 thinking in this nation illustrates this clearly.
Since the earliest days of the Republic the nation has
debated the issue of whether or not the use of monetary
authority (or the control of credit) was an appropriate tool
of Federal power.
Our understanding of the issue was gradually sharpened
in the nation as our financial experience developed through
the First and Second Banks of the United States, the National
Bank Act of 1863, the Federal Reserve Act of 1913, and the
Banking Acts of 1933 and 1935.
By 1958, when I was elected to the Congress, the use of
monetary policy as a tool of Federal power to try to smooth
out the business cycle was rather generally accepted. The
Federal Reserve Board had gradually mopped up the excess
F-351

- 2 -

liquidity generated by World War II and during the decade
of the Fifties was using its powers over credit in an attempt
to moderate swings in the business cycle -- tightening up on
credit in boom times, and making credit more easily available
in times of recession.
While the Federal Reserve Board was often subject to
vigorous criticism on the timing and direction of its moves,
there was still general acceptance of the thesis that the
Board had the power to regulate credit and should exercise this
power to keep the economy on a fairly even basis. Moreover,
as a part of the Federal Government, the Board had the
responsibility, under the Employment Act of 1946, " ... to promote
maximum employment, produc tion and purchas ing power. II
The particular issue of credit regulation, which had
excited and often divided the country for 150 years, seemed
to be settled, the only remaining question being the policies
which the Federal Reserve Board followed in exercising its
authority.
But when I came to the Treasury in 1961, it was apparent
that events had imposed severe limitations on the powers of
the Federal Reserve Board. A new and perplexing phenomenon
confronted the nation in the form of a chronic and persistent
balance of payments deficit which averaged more than $3-1/2
billion a year for the years 1958, 1959, and 1960, and which
in 1960 alone resulted in a gold loss amounting to $1.7
billion. While the Federal Reserve Board still had room to
maneuver on the up-side by raising interest rates and tightening
credit, it was clearly undesirable for them to move against
a recession by lowering rates to any major degree. Very
cheap money would have encouraged an outflow of funds seeking
more attractive rates overseas, and our balance of payments
problems would have been increased.
If we were to counteract the recessionary tendencies that
were still apparent early in 1961 and stimulate the rather
sluggish growth rate of the Fifties, the nation obviously had
to look for other tools. The only other tools available were
budgetary policy and tax policy, and in these two areas we
came squarely against the weight of public opinion. No consensus
existed in the country on the use of budgetary policy or tax
policy to make certain that our people, our plants, and our
savings were utilized to the fullest.

- 3 -

I cannot honestly state that there is total agreement in
the country today on the use of budgetary policy to insure full
utilization of resources at all times and in all circumstances.
But there certainly seems to be general agreement and
understanding of the fact that a sizable budgetary deficit in
boom times is dangerous and potentially inflationary.
Further, I believe that there has been a significant
change in the attitude of the American people towards the
concept of taxation. There seems to be rather general
awareness today of the fact that our tax system is an enormously
powerful tool which can generate a non-inflationary expansion
of economic activities in times when our labor, our plants, and
our savings are being under-utilized -- when our economy is
clearly falling short of its potential output.
The great debate on this subject opened in May of 1961
when President Kennedy sent forward his first tax recommendations,
which included among other proposals an investment credit
designed to stimulate investment in the United States both
for new capacity and for the replacement of obsolete capacity.
In all candor I must admit that the great debate made little
headway that first year. But in 1962, when the Treasury
indicated that it "meant business" and liberalized our whole
concept of depreciation, the debate began in earnest and
resulted in the enactment of far-reaching tax legislation.
The discussions of 1961 and 1962 were centered primarily
on the reform of our methods of treating investment, but the
attention of the American people was also focused on the whole
question of the equity of our tax system -- particularly on
the question of whether or not certain people and certain
businesses were carrying their fair shares of the tax burden.
In 1963 the debate was resumed with greater intensity,
because in that year we approached Congress and the country
with the proposition that a tax structure could be !££ high
it could be so high as to be counterproductive. We argued
that a reduction of rates for individuals and for corporations
would release productive energies and actually would result
in greater revenues for the Government. We finally passed
this legislation in 1964 with unusually broad support. Part
of our support came from those who were convinced that our
economic arguments were correct -- that the country could
really produce more if we left more income in the private

- 4 stream rather than diverting it into the Federal revenues.
Other support may even have come from those who believed that
our economic arguments were wrong: that we would end up with
smaller -- not greater -- revenues; and that this would force
the Government to retrench in many areas. When this broad
support was combined with President Johnson's vigorous
leadership and his severe restraints on the budget, the result
was an economic decision that was unique for the United States
a tax reduction designed to stimulate economic growth to such
an extent that Government revenues would actually increase.
The statistical evidence is now available to support the
truth of our arguments. I need not remind you that we are
now in the 59th month of economic expansion -- by far the
longest in the history of the United States with the single
exception of the World War II period. What many fail to
realize is that, although our tax cuts enacted into law during
the past five years total about $20 billion for this year
(and each year to follow), the revenues of the United States
grew more than twice as fast during this five-year period as
they did in the previous five years when there were no tax
cuts.
This brings us to an historic turn in the evolution of
the economic debate. We have demonstrated that tax policy
is an extraordinarily powerful weapon for stimulating the
expansion of an economy which is operating far below its
potential. The question now at issue is whether tax policy
is also an appropriate tool to use as a moderating force when
the country's plants, supply of labor, and savings are all
being utilized at capacity or near capacity and the threat
of still greater demands lies ahead. This was the climate in
which President Johnson framed his budget decisions for the
balance of fiscal year 1966 and for fiscal year 1967.
The picture looked like this in December:
(1)

Our manufacturing plant was operating at about
91 percent of capacity. While there is some
disagreement over the precise level at which
ourplants can operate most efficiently, the
comprehensive McGraw-Hill survey indicates
that industry expects upward pressure on
costs above the "preferred" rate of 92 percent
of capacity.

- 5 (2)

In December the unemployment rate had dropped
to 4.1 percent. Even more significantly,
the unemployment rate for married men had dropped
to 1.8 percent, the lowest rate since the
statistical series was started in 1954. Clearly
ther e was no t muc h "
· " ·In our supply of labor.,
glve

(3)

The pressure on our savings was equally apparent.
In spite of the fact that the banking system was
able to accommodate an enormous increase in
business and personal loans this past year,
amounting to almost $25 billion, still the
demand for funds to build new plants and finance
operations showed no signs of abating. Indeed,
every sign indicated that last year's total
would be equalled or surpassed.

It was against this background that the President had
to make his decisions on the Budget. His decisions are
spelled out in the Budget Message which was delivered
yesterday. His decision was that in the non-defense areas
of Government expenditures, he would use the strongest
restraint possible without damaging essential domestic
programs. Excluding Viet Nam, Administration expenditures
have risen by only $600 million in spite of the fact that
some increases, such as for interest payments, were clearly
beyond his control. The added costs of Viet Nam amount to
$4.7 billion in fiscal 1966 and an additional $5.8 billion
in fiscal 1967 -- a total of $10.5 billion. These increases
represent the hard decisions on what this country must spend
to live up to its commitments in the world, including
Viet Nam.
All these decisions, when combined with the probable
Course of the domestic economy, indicated an increase in
economic activity which threaten to strain the capacity of
our plant, our labor and our savings. They indicated that
Some moderating action was necessary to limit the risk of
an inflationary threat.

- 6 The modernizing influence that the President proposed
was a package of revenue measures that will total $1.2 billion
for the rest of fiscal 1966 and $4.8 billion for fiscal 1967.
This package will bring the Administration's fiscal 1967
Administrative budget close to balance with a deficit of $1.8
billion. It will produce a small surplus of $500 million in
our cash budget. Without these additional revenues the increased costs of Viet Nam would have triggered an administrative deficit of $6.6 billion. A deficit of this magnitude
was clearly not appropriate in our present nearly full-employment
economy.
As you know, the revenue measures involve a postponement
for two years of the reduction in excise taxes on automobiles
and telephones; a speed-up in the rate at which corporations
move to a "pay as you go" system for meeting their tax
liabilities, and a system of graduated withholding to relate
the tax payments of individuals more closely to their accruing
tax liabilities.
The question is often asked: Why did we select a package
of temporary postponements of excise tax reductions plus what
are essentially "one-shot" measures in corporate speed-up and
graduated withholding? Why did we not recommend a straight-out
increase in taxes on individuals and corporations? The answer
is related to the uncertainties of our involvement in Viet Nam,
and the only answer that I can give you is that we simply do not
know precisely what will be required or for how long. Therefore,
it seemed only prudent to use the "one-shot" measures which were
available. I should add that the President has made his course
very clear: If the Viet Nam situation requires additional revenues,
he will not hesitate to go to the Congress to ask for them.
We are at the beginning of the second phase of the debate.
The issue now before the country is whether we have the economic
sophistication to use fiscal policy as a moderating influence
which will balance our cash budget in a full-employment economy.
Hopefully, the Congress and the country will see the reasonableness
of our arguments, for then we as a nation will have come to an
awareness that budget policy and tax policy as well as monetary
policy are essential and useful tools which can be used with
flexibility and force in a free society.

- 7 -

In 1932 the Congress increased taxes by more than a billion
dollars during the worst depression in the history of this
nation -- and this was done at a time when revenues totalled only
a few billion dol1 9 rs. We have learned a lot since those days,
but I would be the first to admit that our knowledge is still far
from complete. From my viewpoint in the Treasury, one of the
most encouraging aspects of our nation today is the willingness
of industry, labor and the financial community, as well as the
Congress, to examine soberly the economic realities of the world
in which we live and to seek the policies which best fit these
realities.
I have always believed that to change the tax laws of the
United States you must have support that runs from two-thirds to
three-fourths of the country. A close majority is never sufficient.
I do not object to this. I do not object to the fact that Congress,
in the Ways and Means Committee and the Senate Finance Committee,
insists on the most searching scrutiny of every tax proposal.
There has been little or no change in the original thesis of the
men who framed the Constitution that the power to tax is crucially
important and must be carefully safeguarded.
All this is well and good, but within these safeguards we
must continue to seek the most effective and appropriate use of
our system of taxation.
That is the task which the President, the Administration and
the Congress have now taken up again.

000

TREASURY DEPARTMENT

OR RELEASE 6 :30 P.M.,

uesday, January 25, 1966.
RESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
The Treasury Department announced that the tenders for $1,000,000,000, or
hereabouts, of 365-day Treasury bills to be dated January 31, 1966, and to mature
'anuary 31, 1967, which were offered on January 19, were opened at the Federal Reerve Banks today.
The details of this issue are as follows:

Total applied for - $1,916,612,000
Total accepted
- $1,000,691,000

(includes $55,986,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)

Range of accepted competitive bids: (Excepting two tenders totaling $3,200,000)
- 95.250 Equivalent rate of discount approx. 4.685~ per annum
95.225"""""
4.710~"
..
95.236"""
II
"4.699~"
II 1/

High
Low
Average

(93 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL

:I This

Total
Applied For
$
38,535,000
1,323,710,000
11,087,000
50,341,000
7,940,000
28,857,000
320,298,000
23,212,000
6,678,000
5,454,000
17,948,000
82,552,000

Total
Accep_t..;..ed_ __
;$
27,465,000
637,789,000
1,087,000
27,491,000
7,940,000
26,972,000
190,198,000
22,212,000
6,678,000
5,454,000
11,878,000
35,527,000

$1,916,612,000

$1,000,691,000

rate is on a bank discount basis.

F-352

The equivalent coupon issue yield is 4.94i·

- 3 ~

aale or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.

The bills are subject to estate,

inheritance, gift or other excise taxes, whether Federal or State, but are exempt fnm
all taxation now or hereafter imposed on the principal or interest thereot by any Sta1
or any of the possessions of the United States, or by any local taxing authority.

purposes of taxation the amount of discount at which Treasury bills are originally

801

by the United states is considered to be interest.

Under Sections 454 (b) and 1221 (:

of the Internal Revenue Code of 1954 the amount of discount at which.bills issued hen
under are sold is not considered to accrue until such bills are sold, redeemed or othf
wise disposed of, and such bills are excluded from consideration as capital assete.
Aecordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent purchase, and the

actually received either upon sale or redemption at maturity during the taxable year
for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescril
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.

Copies of

- 2 -

printed forms and forwarded in the special envelopes which will be supplied by Fe del
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers
vided the names of the customers are set forth in such tenders.

others than

pro,

institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust campaniel
and from responsible and recognized dealers in investment securities.

Tenders fna

others must be accompanied by payment of 2 percent of the face amount of Treasury b:
applied for, unless the tenders are accompanied by an express guaranty of payment b:
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Rese:
Banks and Branches, following which public anouncement will be made by the Treasury
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.

Those submitting tender:

The Secretary of the

Trea~

expressly reserves the right to accept or reject any or all tenders, in whole or
part, and his action in any such respect shall be final.

Subject to these

rese~·

tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder viII be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.

Settlement for

accepted tenders in accordance vith the bids'must be made or completed at the Feder
Reserve Bank on

February:3, 1966
, in cash or other immediately avail.e.ble 1'u
(ft)
or in a like face amount of Treasury bills maturing
Febru.a.ry ~ 1966
• Cash
{
and exchange tenders will receive equal treatment. Cash adjustments will be made t
differences between the par value of maturing bills accepted in exchange and the is
price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale
other disposition of the bills, does not have any exemption, as such, and

1088 ~

TREASURY DEPARTMENT

Washington
FOR IMMEDIATE RELEASE,

January 26, 1966

$2.202.18~QQO

,as follows:
(
91 -day bills (to maturity date) to be issued Februar,y 3, 1966

(IO

(I)

in the amount of $1,300,000,000 ,or thereabouts, represent(i)
ing an additional amount of bills dated November 4~ 1965
(
and to mature May 5, 1966
, originally issued in the
(~)

amount of $ l'OOCiB01,000 , the additional and original bills
to be freely interchangeable.
182 -day bills, for $ 1,000,000,000 , or thereabouts, to be dated

en)

Februar,y 3, 1966
(U)

(~)

, and to mature August 4, 1966
(it)

The bills of both series will be issued on a discount basis under competitive
and noncompetitive bidding as hereinafter provided, and at maturity their face moow
will be payable without interest.

They will, be issued in bearer form only, and in

denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and

$l,OOO,~

(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the elosu
• ~ndt
31. 1966
Xii)
will not be received at the Treasury Department, Washington. Each tender must be

hour, one-thirty p.m., Eastern Standard time, Monday,

Janu~

for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three decimals,
e. g., 99.925.

Fractions may not be used.

It is urged that tenders be made on the

TREASURY Ct::PARTMENT

FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$2,300,000,000,or thereabouts, for cash and in exchange for
Treasury bills maturing February 3, 1966, in the amount of
$2,202,185,000, as follows:
91 -day bills (to maturity date) to be issued February 3, 1966,
in the amount of $1,300,000,000, or thereabouts, representing an
additional amount of bills dated November 4, 1965, and to
mature May 5 1966,
originally issued in the amount of
$1,OOO,131,OOO,the additional and original bills to be freely
interchangeable.
182 -day bills, for $ 1,000,000,000, or thereabouts, to be dated
February 3, 1966, and to mature August 4, 1966.
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Standard,
time, Monday, January 31, 1966.
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
up

Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-353

- 2 -

Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids.
Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final.
Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on February 3, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing February 3, 1966. Cash and exchange tender
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained fro
any Federal Reserve Bank or Branch.
000

TREASURY DEPARTMENT

January 26, 1966

FOR RELEASE P.M. NEWSPAPERS
WEDNESDAY, JANUARY 26, 1966
William Robert Grubb, 50, of the Treasury, died late Tuesday
night- at the Washington Hospital Center after a heart attack.
Mr. Grubb was Special Assistant to Comptroller of the Currency
James J. Saxon. In that post he was responsible for the public
information activities of the Comptroller's office.
Mr. Grubb came to the Treasury in 1963 as a public affairs
consultant in the Office of the Secretary. In that capacity he was
active in the information program for major tax legislation. Secretary
of the Treasury Henry H. Fowler, in expressing his regrets, characterizec
Mr. Grubb as "a dedicated public servant".
Later in 1963 Mr. Grubb became Public Information Officer for
Mr. Saxon, and in 1964 was named Special Assistant to the Comptroller.
Before coming to the Treasury, Mr. Grubb served several years as
a private public relations consultant in the New York area. At that
time he and his family lived at Westport, Conn. From 1951 to 1960
he was with the New York public relations firm of Carl Byoir and
Associates, Inc.
Mr. Grubb had been a newspaper reporter and editor for 14 years
before entering the public relations field. He worked on daily
newspapers in Buffalo, New York, and Philadelphia and Bethlehem, Pa.
From 1942 to 1948 he was with the Associated Press, at one time
serving as news supervisor of the World Service in New York.
Mr. Grubb was
Pennsylvania State
in journalism, and
Pennsylvania State

born in Easton, Pa. He was a graduate of
University, where he received a bachelor's degree
was a member of the Alumni Advisory Board of the
School of Journalism.

F-354
(OVER)

- 2 Mr. Grubb was very active in community affairs. He was a
founder of the United Youth Fund of Westport -- a community fund
raising organization. He was a member-at-large of the National
Council, Boy Scouts of America, and public relations advisor to the
Boy Scouts of America. He was a member of Sigma Delta Chi, the
National Press Club, the New York Deadline Club, and the Silurians
Club, an organization of financial news writers.
He was also a charter member of the Overseas Press Club in
New York and public relations advisor to both the National Art Museum
of Sports and the American Society for the Preservation of Historic
Ireland. He was a member of St. Alban's Episcopal Church in Washingtc
Survivors include his wife, Marion, of 3005 Cathedral Avenue,N.W.
three children, Michael, a junior at Cornell University, Dennis, a
senior at Southern Illinois University, Carbondale, Ill., and Marcia,
a student at Western High School; and a brother, Norton of Bowie,
Md., former advertising manager of the Washington World, now with the
Commerce Department.

000

- 9 -

to build a cooperative respona. to their national, regional
and Asl.a.....,wid. economic problems.
~ratl.ons

And finally, the lank!.

cl' r2~~},

'[ t 11 •• A L' •• .,. sound development ledd1ng principle.
A

I\.

learned over decades in the World Bank and other internatienal
development institutions.
Thank you.

060

.. ,3 -

place in discharging its responsibilitle. during the for.at1vw
per lod of the Bank':s development.

To SUlll.ap, then, I heartily eoeueod the Asia" neftlo.-t
Bank to you, allr.1 I hope that this distinguished Ioaaittee w111
act favorably and ~oon upon"'", d¢1Ef!t'.' ,<because:
,..

In my opinion,

or:~ani:lation

!lank affords the Uni.t'hl :';t:ates

well t.ittr.i.n onr L(!1ancial sne4tls.

r>rograms

\c1e

of th. A£dan Developmeat
utliqt'te

opportuni,ty to show

It ..,.,il1 be able to use ita

ha:"i': long SpOl.lsored anJ continue to sponsor in

is a nucleus .arn~nd which the Asian peoples en draw totathel'

- 7 and financial needs.

aClwitiittil ~..,· ••efltM~ly ~"iI

\/
Let me add tnat laHti •••••5• • • • • · • • r( the President to accept
A

I'--

A..

iHtIlbership l.n the proposed lSank at a.n early
#btr-_t". .t--·m.....s.t..

The vital

oraanizin~

date~l.

•• its

meetinga of the

bank are to be held promptly after the Bank enters into force.
The United States should be io po8itioll to take its P"Oper

-;;agauut our export. lot appears that any effects upon our

balance of payments will be vary ..all.

eay)! tal of the laRk. g1v1ftI cl.... evideaee of their deep
cGmM1~t

to the idee of regional cooperation for

d.velo~t.

-- Our ecoaora1c interest. will be vell.i.served by .....r.hip
in the Asian Deftlo~t: Bank.

tAli.

* ...... j.9t' a'

$200 aa111ioa repr.....t. 20 pereeat of the

Bau'.

a.pital, the expeeted 8ubacript1oDa of the ether

eountr.188 -- Japaa,

~tr.lia

autboriaed
~

and New Zealand in the Asian

region, aDd ••arly a doMll elaewhera -- repreMnt _ra thD
double that &mount.
-- WaIf ~fte

;.J,!-s- eapi••l' lIM!lt Oe ._!lerioee•.;..~ b

desire of Asian

countr~.s

for a

develo~t

Is .'11"

iDstitut10n chat

is their own, specifically attuoed to their ecoGOmic, social

-,;'Asia t B future -- and the world' 8

...

x-equir. . it. It

But, as the President also noted in bis Mesaage, the
!lank i8 neither utopian nor vague.
On the contrary, United States participatl.oa

ita tbe ....

dea1riable for the following very practical rea.ou, . . . .

others that will emerge in the testimony of lhader SMfttuJ lair
and the further details that you will fiAd iD. the TI:U8"'J

Special R.eport on the Proposed Asian Developsmlt ..... thaC

bas been made available to you.
-- The Asian Development Bank will make &Ound laesa
for economic development in Asia.
-- Its lending will cODtpleaent and extend the .ffectti......
af the economic assistance the Uoi.tad Statu and oehea:.

am., giving in Asia.

-- When outlaYfJ of capital loJ:'

ct. . .

Baak

an -tela. .

. . ~ that Eugene BVleR made f8IICN.I itt the .aay years he _.
:it the helm of the World Bank.

In lIlY opinion, the fact that

Eugene Black has been in on every phase of the organiut1oa
of this Bank, and that. together with UrlC"r !earaary laft'.

he was

l'lillL.~g

to put his signature to ita Charter at 1!Ia1.1a

last December 4, is one of tile strongest recoameadatlees that

can he made for United States participation in it.
The members of this Coumittee were asked to be •• ,. .n,

as Congressional Advisers, of the United State. Del. . .tloD to
the Man.ila Conference.

We tfere delighted that ....,. of you

accepted, and that in consequence our delegation to Kaaila
harl a very distinguished Congressional ela.ent.

in the A9ian Development BAnk in • single sentenee of bAa
f.1essage of January 13:

- 1 -

Inter-agency Task Foree of the -...uti.. Iraaeh 'ask .isce
dellling with tha Asian Development Jank.

Be va_ alt:ezute

chairman, with Eugene R. Black., of the United Stat•• Delept1.

to the

toundin~

eonferenee for the Miell Develop Tnt BaItk at

Manila last December.

Assistant Seeretary Trued be. . . . the

United States Delegation to the Bangkok CoafeftllCe,

October, at which the proposed new Bank'. Articl•• of

Agreement were negotiated.
Th~

Bank's Articles reflect the experience cad wi.doa

of Etlgene Black, the Pres ident t II Special Adviser on Ee~c
and Social Development in &outheast Asia.

In effect the Art:l.o1.

are his testimony to you, since h. caanot 1M here be.:ause be
is preparing for a journey abroad.

I daiak you will ... ill

the Articles of Agreement the stallp of pl'Ud. . . aad 1maginat1OD

- 2 -

to note, therefore, that this distinguished s~t~

ba.

its attention to a;-fIUHr It:: without delay.

~iven

.uej..t

Our plans for preeenting evidence to you on this
are der;iz,ned to COl'ltl.nue this pace unabated.

My ata~t,

if it please you, will be brief and aimed chiefly,;.at proridiaa

you t"ith a

~;tatement

of our views as to the role wetthink

the Afiuln Development Bank will play. and why we believe that
Lt

both important and necessary for the United State. to

1.8

participate in it.
I bav'e asked the Under Secretary of the Trea$ury.

Jo!.eph h'. Barr, who is here "lith me t and the Assistant
Se~retary

of the Treasury for Internatl. .1 Affairs, Marl)'ll I.Tn

to complete the
~i~hly

Tre~sury' Ed

qualified \v.ttness8s:

testimony-

You will find

t,.~...

UDder Seeretary Jarr beads the

Januar,x 21. 196j

StATEMENT BY THE HONORABLE HEIR! H. FOWLft
SECRETARY OF THE TREASURY

TO THE
INTERNATIONAL FINANCE IUBCOMMlTTEE OF THE
HOUSE 3ANKlNG AND CtJRRENCY CMaTrE£
WEDNESDA.Y, JANUARY 26, 1966

1 appear before you this morning in support of a project
charged with very special hope and meaning, for US. for the

Free World as a whole,
tl

~~j,

in partieular. for no 1e.1 than

billion peopl@ -- a third of humanity -- in Asia.
This project, as it comes before you, is the Asian

I urge, as PreeLdent Johnson urged in his Message to the
Congress of January 18, and a.s speakers on both sides of the

aisle in the House have urged, that the Congress give
nrompt and firm approval to United States participation

TREASURY. DEPARTMENT
WashLngton

STATEMENT BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE
INTERNATIONAL FINANCE SUBCOMMITTEE OF THE
HOUSE BANKING AND CURRENCY COMMITTEE
WEDNESDAY, JANUARY 26, 1966
10:00 A.M.
I appear before you this morning in support of a project
charged with very special hope and meaning, for us, for the
Free World as a whole, and, in particular, for no less than
a billion people -- a third of humanity -- in Asia.
This project, as it comes before you, is the Asian
Development Bank Act, H. R. 12219 and H. R. 12220.

Identical

legislation has been introduced by other members of the
Committee.
I urge, as President Johnson urged in his Message to the
Congress of January 18, and as speakers on both sides of the
aisle in the House have urged, that the Congress give prompt
and firm approval to United States participation in this new
development bank.

I am very glad to note, therefore, that

this distinguished Committee has given its attention to this
matter without delay.
Our plans for presenting evidence to you on this subject
are designed to continue this pace unabated.

My statement,

if it please you,will be brief and aimed chiefly at providing
you with a statement of our views as to the role we think
the Asian Development Bank will play, and why we believe that

- 2 it is both important and necessary for the United States to
participate in it.
I have asked the Under Secretary of the Treasury,
Joseph W. Barr, who is here with me, and the Assistant
Secretary of the Treasury for International Affairs,
Merlyn N. Trued, who is also present, to complete the
Treasury's testimony.
witnesses:

You will find them highly qualified

Under Secretary Barr heads the Inter-agency Task

Force of the Executive Branch dealing with the Asian
Development Bank.

He was alternate chairman, with

Eugene R. Black, of the United States Delegation to the
founding conference for the Asian Development Bank at tvIanila
last December.

Assistant Secretary Trued headed the

United States Delegation to the Bangkok Conference, last
October, at which the proposed new Bank's Articles of
Agreement were negotiated.
The Bank's Articles reflect the experience and wisdom
of Eugene Black, the President's Special Adviser on Economic
and Social Development in Southeast Asia.

In effect the

Articles are his testimony to you, since he cannot be here
because he is preparing for a journey abroad.

I think you

w ill see in the Articles of Agreement the stamp of prudence

and imaginatioft that Eugene Black made famous in the many

- 3 years he was at the helm of the World Bank.

In my opinion,

the fact that Eugene Black has been in on every phase of the
organization of this Bank, and that, together with
Under Secretary Barr, he was willing to put his signature to
its Charter at Manila last December 4, is one of the strongest
recommendations that can be made for United States participation
in it.
The members of this Committee were asked to be members,
as Congressional Advisers, of the United States Delegation to
the Manila Conference.

We were delighted that many of you

accepted, and that in consequence our delegation to Manila
had a very distinguished Congressional element.
President Johnson summed up our reasons for participation
in the Asian Development Bank in a single sentence of his
Message of January 18:
"Asia's future -- and the world's --

requ~res

~t.

But, as the President also noted in his Message, the
Bank is neither utopian nor vague.
On the contrary, United States participation in the Bank
is desirable for the following very practical reasons, among
others that will emerge in the testimony of Under Secretary Barr
and the further details that you will find in the Treasury

- 4 Special Report on the Proposed Asian Development Bank that
has been made available to you.
The Asian Development Bank will make sound loans
for economic development in Asia.
Its lending will complement and extend the
effectiveness of the economic assistance the
United States and others are now giving in Asia.
When outlays of capital for the new Bank are
matched against our exports it appears that any
effects upon our balance of payments will be very
small.
Countries in the Asian region are contributing 65
percent of the authorized capital of the Bank,
giving clear evidence of their deep commitment
to the idea of regional cooperation for
development.
Our economic interests will be well served by
membership in the Asian Development Bank.
While our subscription of $200 million represents
20 percent of the Bank's authorized capital, the
expected subscriptions of the other advanced
countries -- Japan, Australia and New Zealand in
the Asian region, and nearly a dozen elsewhere
represent more than double that amount.

- 5 The Asian Development Bank satisfies a widespread
desire of Asian countries for a development
institution that is their own, specifically attuned
to their economic, social and financial needs.
Let me add that it would be in the national interest to
authorize the President to accept membership in the proposed
Bank at an early date.

The vital organizing meetings of the

bank are to be held promptly after the Bank enters into force.
The United States should be in position to take its proper
place in discharging its responsibilities during the formative
period of the Bank's development.
To sum

up, then, I heartily commend the Asian Development

Bank to you, and I hope that this distinguished Committee will
act favorably and soon upon this legislation because:
In my opinion, organization of the Asian Development
Bank affords the United States a unique opportunity to show
its goodwill toward the peoples of Asia as a whole.
well within our financial means.

It is

It will be able to use its

resources in numerous ways consistent with the assistance
programs we have long sponsored and continue to sponsor in
Asia, and will draw new capital resources into the vast task

- 6 of economic development in an area extending from the Caspian
Sea to the South Pacific.

The Asian Development Bank is a

nucleus around which the Asian peoples can draw together
to build a cooperative response to their national, regional
and Asia-wide economic problems.

And finally, the Bank's

charter for operations is based upon sound development lending
principles learned over decades in the World Bank and other
international development institutions.
Thank you.

000

TREASURY DEPARTMENT
Washington

STATEMENT OF THE HONORABLE JOSEPH W. BARR
THE UNDER SECRETARY OF THE TREASURY
BEFORE THE
INTERNATIONAL FINANCE SUBCOMMITTEE OF THE
HOUSE BANKING AND CURRENCY COMMITTEE
WEDNESDAY, JANUARY 26, 1966
10:00 A.M.
I come before this Committee on the subject of the
Asian Development Bank with particular pleasure.

I have had

the benefit of extensive contact with a large number
of the members of the Committee on this project who served as
Congressional Advisers to the United States Delegation to
the founding conference of the Asian Development Bank, at
Manila last December.
It is my assignment, as the head of the Inter-Agency
Task Force on the Asian Development Bank, to provide for you,
in this testimony, information concerning the proposed Bank's
structure and operations, additional to the President's
Message of January 18 and Secretary Fowler's testimony.

will try, with the help of Assistant Secretary Merlyn N. Trued,
to answer your questions.

In my testimony, and in our answers

to your questions, we will be drawing upon the Treasury
Special Report on the Proposed Asian Development Bank, which
has been provided to the Committee.

F-3S6

- 2 Before I enter into the body of my testimony ,hawever ,
I would like to add my tribute to that of Secretary Fowler
with respect to the role of Eugene Black in the organization
of the Asian Development Bank.

I would like to add what I

am sure the many members of this Committee who served as
Congressional Advisers at the Manila Conference learned,
if they did not already know it:

that Eugene Black

has an exceptional standing among Asians.

His

judgment is trusted, for he is regarded by them not only as
their friend, but as a wise friend.
The Proposed Bank's Resources
The Asians were prepared to provide the major part of
the Bank's capital.

But if the Bank were to be able to make

any considerable contribution to the amelioration of Asia's
tremendous economic and social problems, it was necessary to
have financial links to the developed countries.
In part, this necessity was met by the fact that Japan
offered to provide no less than $200 million of the Bank's
proposed authorized capital of $1 billion, and that Australia
and New Zealand, as countries within the region made further
pledges totaling over $100 million.

- 3 -

The decisive event assuring that the Bank would be
supported outside the region, was President Johnson's
announcement, last April, that the United States would be
prepared to be a member of a properly constituted Asian
Development Bank.

The United States pledge that you are now

asked to apprare is the same as Japan's -- $200 million.
Other pledges from outside the region total over $100 million,
including $30 million each from Great Britain and Germany,
$25 million from Canada and $10 million from Italy.
The Bank's Articles permit it to increase its resources
beyond its capital subscriptions in ways already familiar in
the existing international development institutions.
The Bank is authorized to accept from member or
from non-member countries, or from others,
Special Funds, which the Bank may administer
on terms designated by the donor, so long as the
purposes are consistent with the Bank's
development objectives and methods.
The Bank may enlarge its resources by borrowing,
through the sale of its bonds in the world's
capital markets.

It is not expected that the

Bank will be in position to commence such
borrowing for some time.

When it does begin, it

is required to avoid any undue concentration of its
borr~¥in8 iP

anyone financial center.

- 4 The Bank can reconstitute its capital by sales
from its loan portfolio.
The Bank is permitted to borrow or to sell from its
portfolio in member countries only with prior official approval.
The Relation of the Asian Development Bank to
Development Assistance in Asia

The proposed new Bank's authorized capital of $1 billion
is equal to no more than $1 per head of the populations of
the developing member countries.

And, the Bank's development

territory runs from Iran on the Caspian Sea to Western Samoa
far into the Pacific.
The proposed Bank can make an important addition to
what is now being done to help the Asian nations, and its
activities will in many ways extend or even be a multiplier
of present assistance.

Let me mention a few such instances.

The Bank can bring together consortiums for lending on
projects that are too big for anyone donor to undertake.
It can improve the effectiveness of the assistance of others
by helping to finance enlarged programs of technical education
and training and other types of technical assistance.

It can

- 5 -

improve the setting in which assistance is given, by financing
surveys and through the provision of expert assistance in the
formulation of projects.
Subscriptions to the Bank's capital will help to spread
the aid burden -- by bringing in funds from nations not
previously giving aid there, or by increasing the assistance
that they might otherwise have provided.
The proposed Bank's authority to accept and administer
Special Funds would also permit it to spread the burden of
development assistance by serving as a channel for this form
of additional financing from donor countries.
The Bank's Charter gives it all necessary powers to
stimulate and assist private enterprise development in Asia.
The Bank can do the following:
Make loans directly or guarantee loans by others
to private enterprises in Asian countries.
Make loans to development banks in Asian countries
which would then relend to small private enterprises.
At an appropriate time, commence to invest in equity
capital of private enterprises.

- 6 Facilitate development of local caplta
. 1 markets by
underwriting or participating in underwriting of
securities issued by private enterprises.
Draw on funds in private capital markets, through
bond sales and sales of portions of loans it has
made, for lending in the Asian region.
Normally, the Bank's hard loans will be similar to those
of the World Bank, currently 5-1/2 percent interest and up to
25-30 years maturity.
The Asian Development Bank's Charter permits it also
to extend and increase the economic assistance being
given in Asia in a limited special use of its
own funds.

I refer to the authority given the Bank to

earmark up to 10 percent of its paid-in capital as Special Funds
that it may use to make, or to guarantee, loans of longer
than usual maturity, with longer initial periods before
repayment begins, and lower than ordinary interest rates.
These loans are to go to projects where the need is
great, the potential payoff is great, but where the ability
to liquidate the debt on conventional terms is low in the
absence of such assistance.

This gives the Bank a means --

through use of its own funds -- to break through the vicious
cycle in which poverty becomes the cause of poverty.

- 7 The Membership and Management of the Proposed
Asian Development Bank
The Asian Development Bank's membership is open to members and
associate members of the United Nations' Economic Commission for
Asia and the Far East, and to other Asian nations
and developed non-Asian nations -- that are members of the
United Nations or of any of its specialized agencies.

This

excludes Communist China, North Korea and North Vietnam.
At the Manila conference, the United States and 21 other
countries signed the Bank's Charter.

In addition, other

countries named in Annex A to the Articles of Agreement can
become Charter members by signing and making a pledge by
January 31.

Thereafter, members may be admitted only by

the vote of two thirds of the Governors of the Bank -- one
Governor per member -- representing not less than three
fourths of total voting pawer.
Voting in the Bank will be related to size of subscription.
Twenty percent of the total votes, called basic votes, are to
be distributed equally among the members.

The rest are

distributed in proportion to subscriptions.
Since the United States is a minority subscriber in the
Asian Development Bank it has a minority voting position,
roughly 17 percent of the total votes.

However, the Charter

of the proposed Bank provides that matters of unusual importance
are to be settled by votes requiring large majorities -- two

- 8 -

thirds in some cases and in others, such as membership, three
quarters of total voting strength.

All member countries,

regional and non-regional, have a substantial financial stake
in the Bank.

Under these circumstances, it can be expected

with reasonable certainty that our capital and position in
the Bank can be protected.
The Board of Governors will be the senior policy making
arm of the Bank.

Day to day supervision of policy is to be

in the hands of a ten-man Board of Directors.

The subscription

of the United States entitles it to one of the three non-Asian
Directorships.

The Governors will elect the Bank's chief

executive, its President, who is to be an Asian.

This

President is to serve for a renewable five year term.
The Asian members of the Bank have selected Manila as
the Bank's site.
The Bank is to enter into force when 15 of the signatories
of the Bank's Charter -- 10 of them Asian

having subscriptions

of at least $650 million, have deposited instruments of
ratification or acceptance of membership.

The legislation

that is before this Committee would authorize the President
of the United States to accept membership in the proposed Bank.

- 9 -

The Board of Governors is to hold its inaugural meeting,
elect the Bank's President and make other vital decisions
establishing in the Bank's regulations the purposes and
practices envisaged in its Charter, soon after the minimum
requirement for entry into force is met.

It is for this reason

that the President proceeded speedily in the new term to ask
the Congress to authorize United States participation, and
that early action by the Congress is essential.

Subscription to the Capital of the
Asian Development Bank
The authorized capital of the Asian Development Bank is
$1 billion.

Asian nations are authorized to subscribe $650

million dollars and others $350 million.
Half the authorized capital is to be paid in five equal
annual payments.

The other half is callable capital to be

fully subscribed -- without any payment required -- at the
outset.

The function of the callable portion is the same

as in the World Bank and the Inter-American Development Bank:
to provide backing against which the Bank would be able to sell
bonds.

The funds would be called for only if needed to make

good on such borrowings.

In the experience of the World Bank

- 10 and the Inter-American Development Bank, the use of the callable
capital has never been required and we do not expect that it
would be required by the Asian Development Bank.
All subscriptions to paid-in capital are to be at least
half in dollars or other convertible currency.

No member

may restrict the Bank's use of this portion of its subscription.
The remainder may be in the currency of the subscriber.

the case of the United States this payment will be on a
convertible basis.
The $200 million United States pledge to the capital of
the Asian Development Bank is smaller than its share of the
capital of the World Bank, the International Development
Association, or the Inter-American Development Bank.
Required U. S. payments amount to $20 million initially
and $20 million a year thereafter until $100 million has been
paid.
However, one half of each $20 million payment would, in
accordance with an option given in the Articles, be made in
the form of irrevocable letters of credit to the Bank, to
be drawn upon only when the cash is actually needed by the
Bank.

Table 3 in the Treasury Special Report on the Proposed

Asian Development Bank summarizes, by fiscal year, the
subscription obligations of the United States.

- 11 -

The Asian Development Bank and
The United States Balance of Payments
The foregoing section of my testimony indicates that in
practice, the effects upon our Balance of Payments of our
capital subscription to the Asian Development Bank would not
exceed, initially, the cash portion of our payment, that is,
$10 million in the first year.
Over a somewhat longer term, looking into the period
when procurement in the U. S. resulting from the proposed
Bank's lending would largely match our subscriptions, we look
for no net balance of payments cost to the United States resultir.g
from our participation in the Asian Development Bank.
This is the case because, first, procurement by the Bank
is limited to member countries, and, second, the Bank's lending
will finance, for the most part, the purchase of capital goods
and expert services.
The United States is a competitive world supplier
of capital goods and of technical services.

Further, the

United States has a strong supplier position already in a number
of the countries where the Bank will be lending for development.
The United States has pledged to subscribe about a fourth of
the Bank's convertible currency.

Convertible currency

procurement in the U. S. resulting from Bank lending should
come close to or exceed this proportion.

- 12 -

Any United States contributions as Special Funds to the
Bank can be tied explicitly to procurement in the United
States.
The Bank cannot use its dollar holdings as a claim on
our gold stock.
Thank you.

000

Attachments

TABLE 1.

SUBSCRIPTIONS TO ASIAN DEVELOPMENT BAffiC CAPITAL
(Based on Pledges as of January 25, 1966)

In
$ Mil.

% of Total % of Developed % of ReSubscriptions

Country Sub~s~cr~ip~t~i~o~n~s~_

gional
Country Subscriptions

Regional:
Afghanistan
Australia
Cambodia
Ceylon
Rep. of China
India
Iran
Japan
Korea
Laos
Malaysia
Nepal
New Zealand
Pakistan
Philippines
Vietnam
Singapore
Thailand
\vestern Samoa
Sub-Total:

3.36
85.00
3.00
8.52
16.00
93.00
60.00
200.00
30.00
O.

0.3
8.7
0.3
0.9
1.6
9.5
6.1
20.4
3.1

13.2

31.1

l~2

20.00
2.16
22.56
32.00
35.00
7.00
4.00
20.00
0.06

2.0
0.2
2.3
3.3
3.6
0.7
0.4
2.0

642.08

65.6

47.8

5.00
5.00
25.00

0.5
0.5
2.6

0.8
0.8
3.9

3.5

Non-Regional:
Austria
Belgium
Canada

0.5
13.2
0.5
1.3
2.5
14.5
9.3
31.1
4.7
3.1
0.3
3.5
5.0
5.5
1.1
0.6
3.1
100.0

TABLE 2.

VOTING STRENGTH IN ASIAN DEVELOPMENT BANK

(Based on Pledges as of January 25, 1966)
Subscription
Amount
(In $ Mil.)

country

REGIONAL:
Afghanistan
Australia
CaQbodia
Cey 10n
China
India
Iran
JJpan
Korea

Proportionate
Votes

3.36
05.00
3.00
8.52
16.00
93.00
60.00
200.00
30.00
U.42
20.00
2.16
22.56
32.UO
3S.UU
4.0U
20.00
7.00
0.06

336
8,SOO
300
852
1,6uO
1;!,300
6,000
20,000
3,000
42
2,000
Llb
2,L'5b
3,2uO
3,5UO
4uO
2,000
700

SI'Jeden
Uni ted K:;.ngdom
United States

5.00
5.00
25.00
5.00
5.00
30.00
10.00
11.00
5.00
5.00
30.00
200.00

500
500
2,500
500
500
3,000
1,000
1,100
500
500
3,000
20,000

Total Regional

G42.08

6l~,

Laos

Halay sia
Nepal
NevI Zealand
Pa:nstan
P;1i1ipp:ines
S~ngapore

Tlwiland
Vietnam
Hes l:ern Samoa

Total
Votes

% of

73<)
78<)
78Y
709
789
709
739
789
78<)
789
789
7'09
7'<59

1,125
9,28<)
1, U(j<)
1,641
2,389
10,08<)
6,789
20,789
3,73<)
331
2,78<)
1,UUS
3,U45

0.92
7.60
0.89
1. 34
1. 95
8.25
5.55
17.00
3.10

/'dlJ
/8'-)

3,'1ol)
4,L'8(j

7'0<)
789
789
789

1,1(59
2,789
1,489
795

789
78c.J
789
78S
i89
739
739
789
789
789
789

1,239
l,289
3,239
1,2G9

Bosic
Votes

Total

0.6~

2.28
U.8L'
2. 4~'
3.'1.6
3.)1
u. ~J7

2.20
l.22
0.65

NON-REGIONAL: .
Austr ia
BelgiUlll
Canada
Denmark
Finland
Germany
Italy
Nether lands
Norw<1Y

7SS

3,709
1,789
1,889
1,289
1,28S
3, 789
20, 789

2.69
1. OS
1.05
3.10
1. 46
1. 54
1. 05
1. 05
3.10
li.OO

208

1l(.,991

79~199

64.78

9:468

futa1 Non-Regional

336.00

33,600

;rand Total:

972.08

97,808

Note:

1.05
1. 05

24,459

Totals may not add due to rounding.

28~:

43,068

35.22

122,267 100.00

- 2 -

Table 1. (continued)

Denmark
5.00
Finland
5.00
Germany,Fed.Rep. 30.00
of
Italy
10.00
Netherlands
11.00
Non'lay
5.00
SHeden
5.00
United Kingdom
30.00
United States
200.00
~jub-Tota 1

GRAND TOTAL

0.5
0.5
3.1

0.8
0.8

1.0
1.1
0.5
0.5
3.1
20.lj.

1.6
0.8
4.7
31.1

336.00

34.3

52.2

978.08

100.0

4. i

1.7
0.8

Note: Totals may not add due to rounding.

100.0

TREASURY DEPARTMENT
WASHINGTON,
FOR lMMEDIATE RELEASE

•

D.C.\~:

January 26, 1966

TREASURY ANNOUNCED $28.8 BILLION REFUNnJNG
The Treasury today ~ounced that it is offering holders of the notes maturing
February 15, 1966, and f~ve other note and bond issues maturing from April 1 to
August 15, 1966, an opportunity to exchange their holdings at attractive yields.
The securities eligible for exchange and those being offered are as follows:
Securities eligible for exchange
and their maturity dates

Securities offered in exchange
and their maturity dates

3-5/8~ notes, B-1966
3-7/8~ notes, C-1966
l-1/2~ notes, EA-1966

4-7/8~ notes, E-1967

2/15/66
2/15/66
4/1/66

notes, A-1970

8/15/67
11/15/70

5% notes, A-1970

11/15/70

PREREFUNDING

4% notes, D-1966

3-3/4~ bonds, 1966

4% notes, A-1966
3% bonds, 1966

5/15/66
5/15/66
8/15/66
8/15/66

The public holds $13.7 billion of the securities eligible for exchange, and
about $15.1 billion is held by Federal Reserve and Government investment accounts.
Cash subscriptions for the new securities will not be received.
The books will be open for three days only, on January 31 through February 2,
for the receipt of subscriptions. Subscriptions addressed to a Federal Reserve
Bank or Branch, or to the Office of the Treasurer of the United states, and placed
in the mail before midnight, February 2, will be considered as timels'. The payment
and delivery date for the new notes will be February 15, 1966. Interest will be
adjusted as of that date except in the case of the notes of Series EA-1966 on which
interest will be adjusted as of March 15, 1966. The new notes will be made available in registered as well as bearer form. All subscribers requesting registered
notes will be required to furnish appropriate identifying numbers as required on
tax returns and other documents submitted to the Internal Revenue Service. This
is a taxable exchange.
All coupons dated February 15, 1966, on the securities eligible for exchange
should be detached and cashed when due. All other coupons on securities eligible
for exchange must be attached. The February 15, 1966, interest due on registered
securities will be paid by issue of interest checks in regular course to holders
of record on January 14, 1966, the date the transfer books closed. If a net
amount is payable by the subscriber it should accompany the subscription.

F-357

- 2 -

Interest on the 4-7/8~ notes will be payable on August 15, 1966, and February
15 and August 15, 1967. Interest on the 5f1, notes will be payable on May 15 and
November 15, 1966, and thereafter on May 15 and November 15 until maturity.
Details showing cash and interest adjustments appear in Table 1, and approximate investment yields in Table 2, both tables attached.

'l'ABLI

P.,.e.t. to ..d by the Sublcriber i . the Pebruar;r 1966 RetuadiJig

(In dollar. per $100 fac. value)

Seem ties to
be exchanged

Aaouats to be J)!1d to or by subscribers
Price adjust.at
: Accrued interest
:
~/t
: to adjuatment ut~4/: Wet amount to be paid
1_
:
to be pa1d
: _ _ _ _ _ _ _ __
:
T
:..
:
To
:!z::
:
:...2
:.:L
:Iubseriber:aubacriber:
To:
!l
:Iublcriber:lublcriber:
y
:
:8ubscriber:8ubscriber

:
:
:

70r the '-7/~ Note 8/15/67
:3 5/~ Note
:3 7/fYf, Note

2/115/66 ••

1 1/-z1, Note '/1/66

.125000
.125000
.125000

.67994.5

.377072

.125000
.125000
.427873

For the 5! Bote 11/115/70

S/(!Ip Note 2/115/66 ••
:3 7/~ lote 2/115/66 ••
1 1/-z1, Note 4./1/66
4:~ Note
5/115/66
:3 '5/4."P Bond 5/lS/66
4~ Note
8/15/66

..
..

:3~ Bond

8/115/66

.250000

.67994.5
1.016575

• :500000

.95:5039

.450000
.900000

.3867.0

.293205
.766575
.653039
.450000
.900000

lI. P.,ment on account of purChase price of offered securities.
y. On I.curi ties exchanged.
y. March
On lecurt tiel offered.
II
1.5, 1966, for the 1-1/~ notel and Februar,y 15, 1966, for the May 15, 1966,
maturities.

TABLE No.2
Investment returns in the February 1966 Pre-Refunding

Securities eligible
for exchange y

Approximate investment : Approximate reinvestment
yield from
:
rate for the
2/15/66 to matuxity?}:
extension period 31

.....
Note, May 15, 1966 .....
Bond, Aug. 15, 1966 ....
Note, Aug. 15, 1966 ....

3-3/4% Bond, May 15, 1966

4.98%

5. 0 CYjo

4.98

5.00

4.98

5.02

4.97

5.00

Office of the Secretary of the Treasury
Office of Debt Analysis

January 26, 1966

Not eligible for nontaxable exchange privilege.

Yields to nontaxable holders (or before tax) on issues offered in exchange
based on prices of eligible issues (adjusted for payments on account of
issue price). Prices are the mean of bid and ask quotations at noon on
January 25, 1966.

Rate for nontaxable holder (or before tax).

TREASURY DEPARTMENT

January 27, 1966
lOR HINGDIATi;

RE~SE

ABU DHABI, BA.HRAIN, INDONESIA, mAN, IRAQ, KffiiAIT-SAUDI ARABIA NEU'ffiAL ZONE, LIBYA, QATAH AND SAUDI ARABIA
TO EE MADE SUBJECT TO INTEREST EQUALIZATION TAX
The ?resident has notified the Congress that on or shortly after
February 26, 1966, he intends to issue an Executive Order terminatin6 the
"less develo~dll designation of Abu Dhabi, i3ahrain, Indonesia, Iran, Iraq,
Kuwait--Saudi Arabia Neutral Zone, Libya, Qatar and Saudi Arabia for purposes
of the Interest Equalization Tax.
The President's action will have the effect of applying the Interest
Equalization Tax to purchases by U. S. citizens fron: foreigners of stock and
debt obligations originating in these nine countries which are currently exempt
from the Tax. All such purchases made after the date of the Executive Order
will be subject to the Tax, except those for which written commitments existed
prior to December 7, 1965, the date on which notice of the President's intention to issue this Executive Order appeared in the Federal Register.
The Interest Equalization Tax bas been applied to the acquisitions of
various foreign securities by U. S. citizens since July 18, 1963. The Tax is
designed to help curb the outflow of capital from the United States, which has
been a major factor contributing to this country's adverse balance of payments
position. The Tax does not apply to stock and debt obligations issued by
countries wlIich, for the purpose of this Tax, are determined to be "less
developed countries," and by certain corporations and other persons living or
doing business in such countries.
The Interest Equalization Tax law autborizes the President to expand the
list of countries considered not to be "less developed," so that the application of the Tax can be adjusted to reflect economic development in different
parts of the world. When such changes are to be made, however, Congress must
be given )0 days advance notice.
In connection with the intensified balance of payments program announced
on December 6, 1965, the Administration has reviewed the list of "less
developed countries ll currently exempt from the Tax. On the basis of that
reView it was determined that these nine countries should no longer be
considered as less developed tor purposes of the Interest Equalization Tax.
This action parallels the inclusion of these countries under the voluntary
program administered by the Commerce Department.

F-358

000

OFFICE OF THE SECRETARY OF THE TREASURY
Washington, D. C. 20220

STATEMENT
by
DAVID C. ACHESON
Special Assistant to the Secretary
(for Enforcement)
before the
SUBCOMMITTEE TO INVESTIGATE JUVENILE DELINQUENCY
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ON S. 2152, S. 2113 AND S. 2114
Thursday, January 27, 1966
10 A.M.
Mr. Chairman:
The Treasury Department welcomes the opportunity to
give its views on the bills relating to the treatment and
rehabilitation of narcotic addicts.

Your letter inviting

our views mentions three bills, S. 2152, S. 2113 and S. 2114.
These bills have important objectives in common and also have
some important differences.

- 2 As a preliminary, let me say that the Treasury, while
charged with enforcement of the federal narcotic laws, wholeheartedly supports any program which holds out additional
promise of reclaiming narcotic addicts and restoring them
to a functional, productive life in their communities.

There

is nothing inconsistent between this objective and the parallel
objective of building cases on the racketeers and profiteers
who illegally import and distribute narcotic drugs for gain.
We want to send as many of them to jail as we can.

We want

to see as many as we can of their addicted victims treated
and restored to independence from their habit.
When we speak of the narcotics problem, we must not forget that we are dealing with several wholly different types
of people.

There are large traffickers who are not addicts.

For them the only treatment we can provide is prosecution.
There are traffickers, ranging from small peddlers to substantial retail traffickers, who are addicts.

For some, an

opportunity for treatment might hold promise, for others

- 3 -

clearly not.

Then there are criminals who are addicts , who

commit a wide range of offenses other than narcotic offenses.
Some are dangerous, some are not.

Some are hopeless cases

for treatment of their addiction, some are not.

A statu-

tory program for treatment, to be successful, must enable a
sorting out of these categories from each other, and must
allow enough judicial and executive discretion so that the
borderline cases can be handled as common sense and the
particular facts may suggest.
We welcome legislation which can accomplish these
objectives.

There is a good chance that we can lighten

the burden of the federal courts, provide more hopeful
treatment for amenable addicts, and protect the public
from taking chances with truly dangerous criminals.

While

all of these bills point toward these objectives, we believe that S. 2152 contains important advantages over
the other legislation and would make the longest gains
in the directions that we all want.

It is the only one

- 4 of the bills that has all of the features t h at we regard as
important:
1) pretrial cOmmitment procedure in lieu of prosecution;
2) eligibility for treatment beyond those charged with
narcotic offenses;
3) violent offenders excluded from statutory treatment
procedure and conditional release·, and
4) retention of mandatory penalties for continued use
against traffickers, and to put effective teeth
into the procedure for electing treatment.
Three facts dominate the narcotics problem today and
make S. 2152 and other similar legislation which is before
this subcommittee matters of urgent concern o
First, addiction to narcotic drugs is a cause of substantial social waste and human losses, counted both in the
misery that addicts inflict upon themselves and in the crime
which they inflict on others.
Second, narcotic addiction is a sickness.

Addicts need

medical treatment not only to halt the physical compulsion to
use drugs, but also to attack whatever it may be that leads
them back to drugs long after physical dependence has been
cured.

- 5 -

Third, we need flexible legal machinery that will enable
us to use medical resources to the limit of our knowledge
of drug addiction.

2152 is a response to those needs.

bill will end neither crime nor addiction.

Of course, the
It will, however,

offer the addict who becomes involved in crime the hope and the
means of rehabilitating himself and returning to a productive
and drug-free life in the community.

It will do this without

jeopardizing the safety of the public and without impairing
law enforcement.
S. 2152 is organized in three titles.

Title I would

establish a procedure whereby a narcotic addict who is charged
with a federal offense and who meets certain standards of
eligibility could be considered for medical treatment instead
of standing trial.

Title II would establish an alternate

sentencing procedure whereby certain narcotic addicts who are
convicted of a federal offense could be committed for medical
treatment instead of being imprisoned.

Title III would make

parole available to all violators of the marihuana laws, and
make indeterminate sentencing under the Federal Youth Corrections
Act available to all violators of the marihuana and narcotics
laws who have not attained the age of 26 at the time of
conviction.

- 6 -

TITLE I
There are five principal features of the pretrial commitment procedure provided for in Title I.

(1) The election to

convert the criminal case into a civil commitment must be made
by the defendant at an early stage of the criminal proceeding.
(2) The election is only open to those addicts who are thought
by the court to be likely to be rehabilitated by treatment.
(3) The treatment is for a period of up to 36 months and includes both institutional confinement and supervised aftercare
in the community.

(4) The prosecution of the criminal charge

can be resumed in the event that medical treatment fails.
(5) The civil commitment is not deemed a criminal conviction.
These five points are expanded below.
Election.

Under the existing system, one of two things

happens to the narcotic addict who is charged with a federal
offense.

If he makes bond, he remains free pending trial and

normally continues to commit crime to support his habit.

he fails to make bond, he is incarcerated, normally without
treatment.

Under S. 2152, the eligible addict is advised of

the treatment option at his first appearance before the district
court.

Within five days of that appearance he must make his

election.

If he elects treatment he is then confined for

examination without bond.

This procedure has the double

- 7 advantage of protecting the public against the addict and the
addict against himself, and it does both without the long
delays so often encountered in bringing a case to trial.
Eligibility.

There are many varieties of narcotic addicts

charged with federal crime.

Some addicts pose a greater threat

to society than others and some are better prospects for rehabilitation than others.

S. 2152 recognizes these distinctions.

It is designed to make civil commitment available only to those
addicts who present a low risk of danger and a high potential
for cure.

The addict is excluded if he is charged with a crime

of violence, or with a sale of narcotics unless such sale was
related primarily to his own addiction, or if another felony
charge is pending against him or he is on probation or parole,
or if he has twice been convicted of a felony or twice civilly
committed for addiction.

If none of these exclusions apply

and the addict elects treatment, he is committed to the custody
of the Surgeon General for an examination.

He is not committed

for treatment unless the court, acting on the Surgeon General's
report and other information, determines both that he is an
addict and that he is likely to be rehabilitated.
This careful selection process is one of the most important safeguards in the bill.

- 8 -

Treatment.

Ending an addict's physical dependence on a

drug is only the beginning of treatment.

Drug addiction and

its underlying causes are a chronl'c dl'sease ,an d a program of
institutional treatment and aftercare l'n the
necessary to prevent relapse.

COnnTIUlll ty

are

This is the lesson which has

been so painfully learned at the federal hospital at Lexington,
where the freedom to discontinue treatment and the absence of
aftercare have resulted in a relapse rate of about 90% among
voluntary patients.
Under S. 2152, the committed addict would be maintained in
the custody of the Surgeon General, for up to three years.

The

Surgeon General could keep him hospitalized for as much of this
period as necessary, subject only to the requirement that the
court be notified after confinement for 24 months.

The Surgeon

General would also fix the time and terms of the conditional
release and designate the aftercare authority to which the
addict would be required to report.

This would enable the

treatment to follow the addict into the community.

The Surgeon

General could revoke the conditional release at any time and
return the addict to institutional treatment.

During his

unbroken span of control, the broadest range of services and
facilities, both public and private, would be available to the
Surgeon General.

- 9 -

This is the kind of coordinated program, having both
compulsion and continuity, which promises success.

This

promise would be reinforced by the careful selection process,
already des.cribed, which screens out of the program those
addicts not likely to be rehabilitated.
The Criminal Charge.
of treatment.

Motivation is an essential element

Under S. 2152 this motivation would be provided

in the form of the abeyant

c~iminal

charge.

If the addict

relapsed to the use of narcotics, or if a 36-month period
elapsed without the Surgeon General certifying successful
treatment, prosecution on the original charge would be resumed.
These provisions will make recovery a matter of self-interest
for the addict.

They will also protect the public against the

premature release of the uncured addict.
TITLE II
In New York's experience with the Metcalf-Volker Act,
although this experience is short and not fully applicable
to federal criminal proceedings, many addicts have not elected
pretrial civil commitment even when it was available.

In con-

templation of this, S. 2152 provides an alternate sentencing
procedure whereby selected narcotic addicts can be committed
for treatment following conviction.

- 10 Commitment under these provisions resembles a Title I
commitment in that the addict must meet the same

st~ndards

of eligibility and must be found after preliminary examination
to be a likely prospect for rehabilitation.

These precautions

are again taken in the interest of public safety and with the
intent of making the treatment facilities available only to
those most likely to profit from them.
An addict committed under this title would be placed in
the custody of the Attorney General for an indeterminate period
of not longer than 10 years and in no event to exceed the maximum sentence which could otherwise have been imposed.

would be eligible for conditional release after six months in
a treatment institution and upon certification by the Surgeon
General that he had made sufficient progress to warrant release
under supervision.

The Board of Parole would be the supervising

authority.
The idea of post-conviction commitment for narcotics
addicts is not a new one.

California adopted the procedure

in 1961 and has had an acceptable measure of success.
time to put the idea to work in federal procedure.

It is

- 11 -

TITLE III
One provision of this title makes parole available to
all marihuana offenders.

A second extends the indeterminate

sentencing.provision of the Federal Youth Corrections Act to
all narcotic drug and marihuana violators under the age of
26.

A third directs the Board of Parole to review and recon-

sider in light of the first two provisions the sentences of
all marihuana offenders and all narcotic drug offenders who
were under the age of 26 when convicted.
Since the use of marihuana is hard to detect, does not
produce physical dependence, and is not principally a medical
problem, the commitment procedures established by Title I and
Title II are not provided for marihuana users.

An intensive

course of medical treatment for such persons would be clearly
inappropriate.

At the same time the absence of addiction in

the marihuana user makes him less likely to relapse and gives
him a higher potential for rehabilitation.

Eligibility for

parole will give him the chance to realize this potential.
The Young Adult Offenders Act extended to persons between
the ages of 22 and 26 the benefits of indeterminate sentencing
and conditional release under the Federal Youth Corrections
Ac t .

Under present law persons are excluded from these bene-

fits if they are convicted of an offense for which a mandatory

- 12 minimum penalty is provided.

S. 2152 would remove this ex-

clusion as to marihuana and narcotic drug offenders, and
will thus give those offenders under age 26 the same opportunity for rehabilitation as other offenders of the same age.
This would recognize the particular importance of exhausting
the avenues of rehabilitation for youth in a way not likely
to give comfort to racketeers.

COMPARISON OF S. 2152 WITH

2113 AND S. 2114

2113, which establishes a pretrial commitment procedure,

is more or less similar to Title I of

2152.

2114 deals

with the sentencing questions which are covered in Title II
and Title III of

2152.

Both of these bills, however, con-

tain provisions in which the Treasury Department sees major
disadvantages.

I would like to touch upon some of the major

points of difference.
(1)

2113 would exclude from the civil commitment

procedure all persons but those charged with a violation of
federal narcotics laws.

Yet an addict who forges a government

check to obtain money to buy drugs is no less in need of treatment than an addict who is arrested for a violation of the
narcotics laws.

We believe that an effective treatment program

must reach as many addicts as possible within the limitations

- 13 -

of public safety and sound medical practice.

The exclusion of

all non-narcotic offenders would not promote this end.

As of

last year, for example, 43 percent of the addicted inmates of
federal prisons were serving sentences for non-narcotic offenses.
(2)

S. 2113 would exclude from the civil commitment pro-

gram any person charged with a narcotic violation which "involved
the sale of narcotics . . . • . . . . to another, with knowledge
that the person to whom the sale was made intended to dispose
of such narcotics by resale."

This is an attempt to distinguish

between the small pusher who sells to support his own habit and
the major trafficker or wholesaler who sells for profit.

The

Department agrees that the big commercial sellers should be
excluded.

The language of S. 2113, however, poses an insoluble

evidentiary problem.

The majority of narcotic sales which result

in prosecution are made to undercover police officers who obviously
don't intend to resell.

This would preclude a showing of know-

ledge on the part of the seller, and he would be able to avoid
the exclusion.
We see important advantages in the language of S. 2152,
which excludes every person charged with a sale of narcotics

- 14 "unless the court determines that such sale was for the primary
purpose of enabling the individual to obtain a narcotic drug
which he req~ires for his personal use because of his addiction
to such drug."

This language is certainly not free of difficulty,

but it at least will give effect to the policy of excluding
the profiteer from civil commitment.
(3)

Under S. 2113, after the election for treatment is

made, the Surgeon General conducts a preliminary examination
and reports to the court only on the question whether the
individual is a narcotic addict.
committed.

If he is, he may be civilly

Under S. 2152, on the other hand, the Surgeon

General must report, and the court must determine, both that
the individual is an addict and that he is likely to be rehabilitated.
Since the Surgeon General administers the treatment program, it is clearly appropriate for him to have a part in
determining who is suitable or unsuitable for medical treatment.

The more thorough examination and the dual finding called

for by

(4)

2152 would avoid this problem.

2114 would abolish the mandatory minimum penalties

and the prohibition against parole wherever these are found in

- 15 the narcotic and marihuana laws.

2152 would mitigate

these provisions only to the extent of authorizing parole
for all marihuana offenses and increasing the coverage of the
Young Adult Offenders Act.
The mandatory penalties are a hard but effective deterrent
and an absolutely essential weapon against the higher and
organized echelons of the illicit narcotic traffic.

They are

probably not effective and not essential against the small
peddler who is an aJdict.

The right way to handle these dif-

ferences is not to do away with the mandatory penalties altogether, but rather to apply them selectively.

This is done

now pursuant to federal prosecution practice.

2152

becomes law, moreover, the already remote chance of an addict
being confronted with a mandatory penalty will be made still
more remote by the pretrial and post-conviction commitment
procedures.

This legislation will give us the flexibility

and the tools to do what should be done for the victims of
the narcotics traffic and for the profiteers as well as for
the many shades and degrees of other offenders.

- 16 At this point, Mr. Chairman, let me turn to the numbered
questions on page two of your letter of December 16 , 1965 , to
Secretary Fowler.
Question 1.

I will take them in order.
The Treasury is strongly convinced that the

mandatory minimum sentence provisions in the narcotics laws
should be retained, except to the extent mitigated by S. 2152.
There is evidence that they have been a healthy deterrent.
Prosecutors say that many sizable racketeers have abandoned
the narcotics traffic in the belief that the risk of a long
prison term had become unacceptably high.

This attitude can

have an important shrinking effect on the traffic, and perhaps
proof of this can be found in the recent severe shortage of
heroin in New York for many months and in the much greater
dilution of the drug.

Finally, in plotting the curve of the

addiction rate per head of population, there appears to be a
downward trend in the curve following the enactment of the
mandatory minimum penalties in 1950 and 1956.

Thus, while we

cannot claim a mathematically precise and demonstrable causation from the penalties to the improved addiction rate, we do
think the evidence points that way and we would not want to
disturb any helpful factors in the enforcement picture.

- 17 But we should emphasize that there is room for discretion
in sentencing in the present framework, contrary to what is
commonly said and believed.

Narcotic and marihuana sellers

are not automatically charged with cffenses calling for mandatory sentences.

Except in cases where there is proof of

unlawful importation, or where the defendant has been previously convicted of a felony, prosecutions of first-offenders
ordinarily proceed under non-mandatory statutes.

First-

offenders charged with possession offenses (not involving
unlawful importation) are eligible to receive suspended sentences, to be placed on probation, and to be released on
parole.
Second, the indeterminate sentencing and conditional
release provisions of the Federal Youth Corrections Act are
available to all narcotic and marihuana violators under age 22,
and to all first offenders under age 26 who are convicted
under the possession statutes (26 U.S.C. §4704(a), 4744(a».

- 18 -

Suspension of sentence, probation and conditional release
are denied only if the defendant is not within either of these
important categories which I have described.
Question 2.

We believe that persons who are charged with

dangerous crimes of violence should be excluded from eligibility
for treatment, as under S. 2l?2.
release.

Treatment permits conditional

The public should be protected from the repetition

of dangerous offenses, and a balance must be struck between the
aim of conditional release for addicts and secure custody of
criminals who are dangerous to life and limb.
It is important to remember that, if treatment should
prove ineffective, it might well be impossible to resume prosecution.

Witnesses may be unavailable, evidence lost, or

memories faded.

Thus, the abeyance of prosecution while

treatment takes place ought to be limited to offenders who
will not be serious dangers to the public, should prosecution
and treatment fail.
It is also important to remember that even dangerously
violent offenders, who are addicts, can be treated under existing law as part of their institutional custody, without resort
to the procedures of the bill.

A prisoner in the Attorney

General's custody can be given withdrawal treatment, psycho-

- 19 -

therapy and other treatment services short of release, either in
a federal hospital, or within the medical facilities of a prison,
or in some comb;nat;on.
L

Tre a t men t can b e required as a condi-

tion of probation or parole.

Thus, to exclude violent offenders

from eligibility under S. 2152 is not to deny treatment to them
under present statutes.
Question 3.

Undoubtedly, many habitual dangerous drug users

would benefit from some form of treatment for their habit.

Whe-

ther the treatment should be similar to, or very different from,
the treatment needed by narcotic addicts is a matter on which
the Surgeon General's views would probably be worth much more
than the views of the Treasury Department.

Perhaps the enforce-

ment experience of the Department of Health, Education and Welfare
under P.L. 89-74 will illuminate the useful avenues of treatment
for takers of depressant and stimulant drugs.

Without recommend-

ing the use of the same facilities and treatment for dangerous
drug cases as for narcotic cases, we think that S. 2152 is flexible enough to authorize different modalities of treatment for
a wide range of drug habits, and that there might well be advantages in modifying the bill to bring dangerous drug users under it.
Question 4.

This answer would appear to cover question 4

as well as question 3.
Question 5.

As written, S. 2152 would make offenders

- 20 -

a crime of violence or with conspiracy to import or sell narcotic drugs.

Offenders charged with substantive crimes of

violence and narcotic sales are ineligible.

This is a loophole

which would penalize the servant and reward the master of a
criminal conspiracy.

The conspirator should not be eligible

if the substantive offender is not.
In addition, we believe that either the bill or the legislative history should equate a commitment to the custody of
the Surgeon General under Title I with the custody described
in the Federal Escape Act (Title 18 U.SoCo §751), so that an
eligible addict committed for treatment under the bill, who
escapes from institutional custody, can be prosecuted for that
escape as can a federal prisoner.
Question 6.

There is a significant flow of narcotic drugs

and marihuana from Mexico into the United States.

While Mexico

is not the chief source of narcotics for the illicit market
in the United States, it serves as one of the conduits for
narcotics produced elsewhere.

Mexico is the chief source of

the marihuana distributed throughout the United States.

While

marihuana grown in the United States is often found in the
traffic, it is the Mexican variety which appears to be preferred and is most prevalent in the United States.

- 21 -

In developing better methods to curb the illegal flow
of narcotics and marihuana from Mexico, officials of Mexico
and the United States have agreed to meet, and do meet, on a
regular basis to discuss problems and establish cooperative
measures.

This program has proved to be successful and mutu-

ally satisfactory.
The Bureau of Narcotics has three agents stationed in
Mexico who work closely with the Mexican Attorney General's
office.

At a meeting in June, 1965, representatives of the

two countries resolved to intensify the efforts of both
countries and agreed (1) to place two Mexican agents in the
United States for liaison purposes, (2) to improve the system
of exchange of information, (3) to intensify public education,
and (4) to consider prosecution in Mexico of Mexican nationals
who take refuge in Mexico after violating the laws of the
United States.
While these are steps in the right direction, nevertheless
continuing effort is needed to control the flow of narcotic and
marihuana traffic from Mexico.
It should not be forgotten that the narcotics traffic
from Mexico is only part of a larger smuggling problem in which
truly effective enforcement at the borders is close to impossible.

- 22 Finely meshed mass customs inspection at th

b d
or ers or at

the ports, through which must freely flow vast rivers of
vehicular traffic, ship and air traffic, freight and mail, is
not physically possible on any basis that would be acceptable
to American opinion or consistent with good government.

We can

do more, but it would cost more -- in men, money and public
good will.

At present we can perform little more than spot-

check customs inspection, investigate suspicious circumstances,
and investigate specific leads furnished by informers or agents.
Narcotics enforcement, both by customs agents and narcotics
agents, is very uphill work, and enforcement needs all the
resources and legal authority that it can get.

At best, we

have hold of only the tip of the tail of the narcotics traffic,
and we can never afford to be complacent about it or tothink
it is under control.

In baseball there is a saying "you can't

hit what you can't see," and this well states a dominant fact
of life in narcotics enforcement.
While enforcement against the trafficker goes ahead, we
would do well to diversify t h e tools

have for helping

°n a small way, a hopeful
addicts and for developing, even 1
rehabilitation program.

would serve such a program,
S. 2152

and we support it.
0000 0

TREASURY DEPARTMENT

January 28, 1966

TREASURY DECISION ON SHOES
UlIDill\ T~ ANTIDUlWll'IG ACT
The

Treasul~

Department has completed its investigation with

respect to the possible dwnping of shoes, leather, men's and boys'
from Czechoslovakia.

A notice of a tentative determination that

this merchandi se is not being, nor likely to be, sold at less than
fair value within the meaning of the Antidumping Act, 1921) as
arllended, will 'ue published in an early issue of the Federal Register.
AppraiseL1ent of the above-described merchandise from Czechoslovru~ia

will continue to be withheld pending a final determination

in this lllatter.
DJPorts of the involved merchandise received during the period
June I, 1964, through I'Jovember 30, 1965) amounted to approximately

$4 J lOu J ()OC •

IJ)

l\.

TREASURY DEPARTM,ENT
WASHINGTON, D.C.

•..

January 28, 1966

FOR lllMEDIATE RELEASE

TREASURY DECISION ON SHOES
UNDl!:R THE ANTIDUMPING AC.T

The Treasury Department has completed its investigation with
respect to the possible dumping of shoes, leather, men's and boys'
from Czechoslovakia.

A notice of a tentative determination that

this merchandise is not being, nor likely to be, sold at less than
fair value within the meaning of the Antidumping Act, 1921, as
amended, will be published in an early issue of the Federal Register.
Appraisement of the above-described merchandise from Czechoslovakia will continue to be withheld pending

final determination

in this rratter.
Imports of the involved merchandise received during the :perJod
June 1, 1964, through November 30, 1965) amounted to approximately
$4,100,000.

TREASURY DEPARTMENT

January 30, 1966
ADVANCE FOR USE A.M. PAPERS
MONDAY, JANUARY 31, 1966
NEW DEPUTY ASSISTANT FOR PUBLIC AFFAIRS
Secretary Fowler today announced the appointment of Mark T.
Sheehan as Deputy Assistant to the Secretary for Public Affairs.
Mr. Sheehan, who joined the Treasury on August 21, 1961, replaces
Stephen C. Manning, Jr., who retired last month.
In his new post, Mr. Sheehan will be principal assistant to
Dixon Donnelley, the Assistant to the Secretary for Public Affairs.
Mr. Donnelley directs the information, press, and related activities
of the Treasury Department and all its bureaus.
Mr. Sheehan was born in Wallingford, Connecticut, June 28, 1927.
He was graduated from the Choate School in Wallingford in 1945.
After serving in the U. S. Army in Guam and China, he entered
Brown University, graduating in 1951. In 1957 -- under a fellowship
financed by the Ford Foundation -- he did a year's graduate work in
Foreign Affairs at the Woodrow Wilson School of Public and International
Affairs at Princeton University.
Before joining the Treasury, Mr. Sheehan was a reporter and
editor for the Associated Press in Washington; New York City; Newark,
New Jersey; and New Haven, Connecticut. He began his newspaper career
as a reporter on the Meriden (Conn.) Record and later worked as a
reporter and editor for the Waterbury (Conn.) Republican, which he
left to join the Associated Press.

000

F-359

TREASURY DEPARTMENT

FOR RELEASE 6: 30 P. M. ,
It>nday, January 31, 1966.

RESULTS OP TREASURY'S WEEIa..Y BILL OFFmING
The Treasury' Department announced that the tenders for two series of Treasury
bills, one series to be an additional issue of the bills dated November 4, 1965, and
the other series to be dated February 3, 1966, which were offered on January 26,
1966, were opened at the Federal Reserve Banke today. ~ders were invl ted for
$1,300,000,000., or thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-day bills. Ifhe details of the two series are as follows:
RANGE OF ACCEPTED

91-day Treasury bills
maturing May 5, 19613
Approx. Equi v •
Price
Annual Rate

C<H'E!ITIVE BIDS:

High

72~

4.609~
4.6ao~

98.835
98.822
98.828

Low
Average

4.638~

l82-day ~easury bills
maturing August 4 t 1966
Approx. Equiv.
Price
Annual Rate
4. 718~
4.779~

97.615
97.584
97.604

!./

4. 740~

!./

of the amount of 91-day bills bid for at the low price was accepted

24~of the amount of 182-day bills bid for at the low price was accepted

'l'OTAL 'fENDEBS APPLIED FOR AND ACCEP'l'ED BY FEDmAL RESERVE DIS!RICTS:

District

Applied For

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
161las
San Francisco

1'O'l!ALS

!I Includes
4.76~

Applied For

Accepted

$2,145,174,000

$1,301,266,000

11,326,000
1,545,344,000
27,696,000
23,667,000
9,987 , 000
47,687,000
262,259,000
58,403,000
18,726,000
27,507,000
29,751,000
82,821,000

11,326,000:
858,144,000:
15,696,000 :
23,667,000 :
9 ,987 ,000 :
37,687,000:
144,971,000 :
49,403,000 :
18,726,000 :
27,501,000 :
26,471,000 :
77,681,000 :

32,031,000
1,157,214,000
14,212,000
44,276,000
4,260,000
36,678,000
235,676,000
22,668,000
10,273,000
15,150,000
12,632,000
88,326,000

~/ $1,673,:396,000

32,031,000
622,414,000
6,212,000
44,276,000
4,260,000
36,678,000
110,674,000
17,168,000
10,273,000
15,150,000
12,632,000
88,326,000

$1,000,094,000

$249,373,000 noncompetitive tenders accepted at the average price of 98.828
$1l0,843,000 noncOOlpet1t1ve tenders accepted at the average price of 97.604
rates are on a bank discount basis. The equivalent coupon issue yields are
"for the 91-day bills, and 4.92~ for the 182-day bills.

y Includes

Y !hes

Accepted

F-360

Full text of Press Releases of the United States Department of the Treasury : Volume 152

FRASER