Senator MORSE. That would be my next question, but I would like to dwell for a moment on how-what the rate of this income tax is. What I am trying to find out, Mr. Poats, is whether or not it is a substantial tax or whether they have failed thus far to really have income tax rates that are really on an ability-to-pay basis.

Mr. POATS. The tax rate on business corporations and so on is roughly similar to the United States, I believe. However, the income tax on individuals is considerably lower. I do not have the figures with me.

Mr. BELL. We will be glad to put them in the record, Senator. Senator MORSE. I have no desire to dwell unnecessarily on the point, but I do want to get it in the record.

Mr. BELL. Yes.

Senator MORSE. Would you, Mr. Poats, supply me with a memorandum in the record on the tax structure in Vietnam, because we ought to have it in there either to verify or answer the criticisms that we receive

(The information referred to follows:)

TAX STRUCTURE IN VIETNAM, INTERNAL TAXES

Internal taxes are classified into four groups. The four groups, with percentages of total domestic revenue collections for 1965 are: Direct (9.4 percent); indirect (20.5 percent); excise (16.2 percent); and registration (7.7 percent). The following table shows domestic tax revenue in 1963, 1964, and 1965.

Direct taxes include (1) a tax on income and profits, (2) real estate taxes, and (3) the patente, or business tax. The direct tax structure is as follows:

1. INCOME AND PROFITS

The system of income taxation includes four different taxes:

a. Salaries and wages

Includes indemnities, emoluments, pensions, annuities, and all compensations for service whether in income or in kind. Salaries and wages are taxed at the rate of 1 to 16 percent. There are five brackets: 1 percent on net taxable annual income up to VN$50,000; 2 percent on income from VN$50,001 to VN$100,000; 5 percent on income from VN$100,001 to VN$500,000; 10 percent on income from VN$500,001 to VN$1,000,000; and 16 percent on income over VN$1,000,000. Abatements (personal exemptions) are VN$30,000 for single persons and heads of households; VN$15,000 additional for married persons; VN$5,000 for each child under 21 years of age; and VN$3,000 for each dependent parent or grandparent. A professional deduction is allowed for travel and entertainment (10 percent of gross income up to VN$240,000 and 5 percent of gross income exceeding VN$240,000) and exemptions for pension payments are allowable. Filing date for all income taxes is April 1 for income received in the preceeding calendar year. Except for government employees, withholding tax procedures have not been developed.

b. Profits tax

Levied annually against all net profits from business operations of any kind, but excludes from its base capital gains and income from stocks and bonds. The tax is 24 percent for corporations and 16 percent for unincorporated businesses, including professions. The profit tax on individuals has the same abatements as the income tax on salaries. Deductions for firms include all ordinary and necessary expenses attributable to earning the profit.

c. General income tax

Levied on all income subject to the tax on salaries and wages, to the individual profits tax or business profits tax, and on income earned from sources outside of Vietnam. Allowable deductions are the same as for the salary and profits tax; deductions are permitted for salary, profits, and general income taxes paid in the previous year. Tax rates for the general income tax are progressive within the range of 1 to 50 percent.

d. Tax on dividends and interest paid by corporations

A withholding levy at the corporate level on dividend and interest payments. Tax rates vary between 18 and 30 percent depending on the characteristics of the corporation. For application of the tax, corporations are first divided into foreign and Vietnamese. Foreign corporations are taxed at the rate of 30 percent on all Vietnam-allocated dividends and interest payments; the allocation is construed to be the ratio of the total "turnover" resulting from operations in Vietnam and the total "turnover" of the corporation. Vietnamese corporations are subject to one of two rates: the rate of tax on dividends of a SARL (limited liability corporation) is 18 percent; a societe anonyme (corporation) is subject to a 24-percent dividends tax. Interest payments by both types of Vietnamese corporations are taxed at 18 percent.

2. REAL ESTATE TAXES

There are three basic characteristics of the Vietnamese system of taxing real property: (a) the tax is primarily a Central Government source of revenue, with other levels of government receiving income based on percentage surtaxes added to the Central Government tax; (b) land is taxed according to productive capacity, while urban buildings are taxed on the basis of real capital value; (c) four basic distinctions are made in the tax rates applicable to land depending on whether it is located in an urban center, used for rice production, used for mixed agricultural production or borders a rural highway or street. a. Riceland tax

Land is classified according to productivity and taxed by hectare. six classes of land; the tax ranges from VN$10 to VN$85 per hectare. b. Mixed cultivation land tax

There are

There are seven classes of land; the tax ranges from VN$15 to VN$300 per hectare.

c. Urban land and property tax

Unimproved land is taxed by hectare following a complicated schedule based on location. There are separate rates for (1) major cities (Saigon is divided into four zones and seven categories, each with a different rate); (2) first-class cities (five zones); (3) second-class cities (four zones); (4) third-class cities (three zones); (5) land bordering national and provincial highways; and (6) land bordering auxiliary or communal roads. The rates on unimproved land range from VN$30 per hectare (class 6 above) to VN$10,000 in Saigon. Improved land is taxed twice: the land is taxed (there are five rates, ranging from VN$0.05 to VN$0.85 per square meter) and the improvements are taxed. The property tax rate may range from 1 to 5 percent of the real property value; it is fixed annually in accordance with the budgetary needs of the country. There is, in addition, a 40-percent tax on super rent properties which are rented at abnormally high prices.

3. THE PATENTE (BUSINESS LICENSE)

The patente is an annual fee levied on individuals and corporations for the privilege of engaging in a trade, profession, or industry. Exempt from the tax are teachers, farmers, those who are engaged in the extraction of natural resources and a few others.

There are two parts to the tax. The basic tax is a specific levy determined by the type of business. All businesses are listed in the fiscal code, which records 743 different types of businesses and professions and establishes minimum and maximum rates for each. For example, a tailor may be taxed within the range of VN $60 to VN $3,000 per annum; for a commercial bank the rate varies from VN $3,000 to VN $100,000; a large hotel from VN $1,400 to VN $25,000; an automobile agency from VN $600 to VN $25,000; and an import-export firm from VN $800 to VN $75,000. The basic rate for most large commercial enterprises is within the range of VN $8,000 to VN $75,000.

In addition to the basic tax, there is an ad valorem levy applied to the rental value of the business property. The tax rates on rental value are progressive in the range of 3 to 10 percent depending on the amount of the basic tax assessment. This tax rate applied to the annual rent, plus the basic tax, constitutes the total patente tax for the Central Government. Percentage increases of the Central Government patente tax are added for the benefit of local governments. There is also surtax of 22 percent of the Central Government tax for the chamber of commerce.

Twenty-five business activities, chiefly manufacturing firms, are not subject to the patente but are taxed on the basis of turnover, volume of production or services provided or according to some other specialized schedule.

Mr. BELL. Right.

Senator MORSE (continuing). That we receive as Senators concerning the fact that the South Vietnamese are not making the financial payments that the American taxpayers have a right to expect them to make in view of our tax system in this country.

You made a comment, but I want to ask the question, Mr. Bell, for the record, what is the problem, to what extent is there a problem, of tax evasion in South Vietnam?

TAX COLLECTION SYSTEM

Mr. BELL. I think it is a considerable problem, Senator. They start with a continental system-the French system-which, unlike ours, does not begin with criminal penalties, advance statements and so on. It is based on assessor arrangements under which the tax assessor is supposed to find out what he can charge a man and then they argue about it.

We think this is not nearly as efficient a system of income tax administration as we have in the United States.

I think it is fair to say, and I will be glad to supplement this for the record, that there has been some improvement in the tax administration, but it is still a rather weak one.

Senator MORSE. Is there any

Senator WILLIAMS. Would the Senator yield for a couple of questions?

Senator MORSE. Yes.

FREE WORLD SHIPPING TO NORTH VIETNAM

Senator WILLIAMS. On another matter, Mr. Bell, the question I was trying to ask when my time ran out, was why have we not taken more affirmative steps to get some of our allies to stop transporting goods into North Vietnam?

Mr. BELL. We have taken a lot of affirmative steps, Senator. I can personally testify on this. I have seen the cables, I participated in drafting them. I have been involved in some of the conversations myself, and I think there has been considerable effect.

Senator WILLIAMS. We have been fighting a war in there for a year, and when the British decided to blockade Rhodesia, they were able to do it in a matter of 48 hours. Now, their ships are still moving in North Vietnam ports along with many of the so-called allies, and to the extent that they supply North Vietnam, does that not increase our need for supplying to counteract that in South Vietnam?

Mr. BELL. Secretary Rusk testified the other day there remain some ships-some from the free world-going into North Vietnam. They are far fewer than they were a year ago or 2 years ago, but we wish they were all out. We have been seeking to achieve that objective. There are ships of very few free world countries, still in that trade. Most of them fly the British flag and are based at Hong Kong.

The Secretary testified the other day we have no evidence that any of them is carrying anything of particular significance to the Vietnamese

economy.

Senator WILLIAMS. Mr. Bell, you know as well as I do when a war is going on all material has military significance. You are testifying before this committee asking for $275 million to step up the economic aid. That has military significance, and to the extent we fail to supply this, it would make our problem greater from the military standpoint. Now, that is the whole basis of your argument, I agree with that. But, by the same token, as our allies are supplying, whether it be food or what it may be, to the North Vietnamese, they are helping those whom we are trying to fight; is that not true?

Mr. BELL. I am not defending, sir, the ships going into North Vietnam. We have been trying to stop it, and we are continuing to try to stop it, and we have made very considerable headway in that direction. There remain some ships, and we regret that.

Senator WILLIAMS. I would suggest that, perhaps, if we would take the policy that those who are supplying our enemy would receive no aid or any loans or any assistance from our Government until they stopped, it may expedite the decision somewhat.

Mr. BELL. No, sir; because the principal country whose ships are still active is Britain and, of course, we give no aid to Britain.

Senator WILLIAMS. Well, now, wait a minute, the British pound was in trouble last fall. Who helped them? Did we not step forward with other countries?

Mr. BELL. I am sorry, you are using the term "aid" in a broader term than I was.

Senator WILLIAMS. I am speaking of aid in a broader term.

Mr. BELL. That is a legitimate question that I am not competent to

answer.

Senator WILLIAMS. If the Senator does not mind, I would like to ask one more question.

Senator MORSE. Go right ahead.

FINANCING OF PUBLIC OPINION POLLS IN FOREIGN COUNTRIES

Senator WILLIAMS. I notice in the Star of January 7 an article by Walter Pincus, and he refers to the fact that the AID program is spending $452,000 to conduct polls in foreign countries to determine what they think of our foreign policy.

58-320-66-pt. 1- -12

Mr. BELL. Not the AID program; no, sir. The USIA, perhaps, but not the AID program.

Senator WILLIAMS. Well, the USIA, I won't get into that. Maybe it is not yours but as far as the taxpayers are concerned it is still a part of our foreign policy or AID program. For example, you spent $3,500 in Brazil to sample the voter behavior pattern in three Brazilian cities. Wouldn't it be equally important to survey the voter behavior pattern in Cook County?

Mr. BELL. Senator, you are asking me about a program I do not know anything about. Leonard Marks is in charge of that.

Senator WILLIAMS. You mean to say as the Director of our AID program you do not know anything about the USIA program that is running concurrently with your program?

Mr. BELL. No; I know a good deal about the USIA program. I know nothing about that particular point.

Senator WILLIAMS. What do you think about that particular point as a man on the outside who is not connected with it?

Mr. BELL. I do not know what the background is and, therefore, I have no basis for judging it.

Senator WILLIAMS. I hope we can get somebody up here to explain it because I am wondering what we are doing with this USIA money surveying the voter behavior pattern in Brazil, the voter behavior pattern in France and Germany, as well as conducting a $450,000 poll of what the people of foreign countries think of our foreign policy.

I am wondering if it would not be a good idea to conduct a poll as to what a lot of American people think of our foreign policy, and maybe we had better spend some of it. But I would hope you would familiarize yourself with the program and give us the benefit of your wisdom.

Mr. BELL. I would be glad to consult with Mr. Marks, sir.
Senator WILLIAMS. I thank the Senator.

FLAGS OF SHIPS GOING TO NORTH VIETNAM

Senator MORSE. Will you tarry a moment before you leave because this raises a lot of thoughts on my part when you talk about ships going into North Vietnam.

Mr. Bell, and I do not want anything, as I have always said, that in any way jeopardizes our security, but I do not see how this could possibly could you supply to this committee a list of the flags of foreign countries that go into North Vietnam with their ships and an indication of the goods that we have knowledge of their taking into North Vietnam?

Mr. BELL. In December, sir, ships of only three free world countries went into

Senator MORSE. What was the date, December?

Mr. BELL. December 1965, the last figures I have before me, there were approximately a dozen ships, and most of them, all but two or three, were, as I indicated, flying the British flag, and virtually all of those were actually based in Hong Kong.

Senator MORSE. For that month?

Mr. BELL. Well, yes, sir. I was going to say that that pattern is not dissimilar from November, October, September, August, all