B-125992, NOV. 29, 1955

B-125992: Nov 29, 1955

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THE AMERICAN BATTLE MONUMENTS COMMISSION: REFERENCE IS MADE TO LETTER OF OCTOBER 3. WAS REQUIRED TO PAY ON MATERIALS PURCHASED BY THAT FIRM IN CONNECTION WITH THE FURNISHING OF HEADSTONES FOR THE COMMISSION. WAS ALSO REFERRED TO IN A REPORT TRANSMITTED TO YOU BY OUR LETTER OF DECEMBER 13. IT IS STATED THAT THE COMMISSION ORIGINALLY INTERPRETED THE FOREGOING TO MEAN THAT THERE WAS AN EXEMPTION NOT ONLY ON TRANSACTIONS BETWEEN THE COMMISSION AND ITS CONTRACTORS BUT ALSO TRANSACTIONS BETWEEN THE CONTRACTORS AND THEIR SUPPLIERS. OTHER INFORMATION OF RECORD HERE INDICATES THAT BIDDERS WERE SO INFORMED IN ALL INVITATIONS TO BID AND ALL CONTRACTS PRIOR TO NOVEMBER 15. WERE ENTERED INTO WITH THAT INTERPRETATION IN MIND.

B-125992, NOV. 29, 1955

TO GENERAL GEORGE C. MARSHALL, CHAIRMAN, THE AMERICAN BATTLE MONUMENTS COMMISSION:

REFERENCE IS MADE TO LETTER OF OCTOBER 3, 1955, FROM COLONEL CHARLES B. SHAW, OFFICER IN CHARGE, RELATIVE TO THE ITALIAN PURCHASE TAX WHICH LASA, A GOVERNMENT CONTRACTOR, WAS REQUIRED TO PAY ON MATERIALS PURCHASED BY THAT FIRM IN CONNECTION WITH THE FURNISHING OF HEADSTONES FOR THE COMMISSION. THE MATTER PREVIOUSLY HAD BEEN QUESTIONED IN A LETTER OF NOVEMBER 17, 1954, ADDRESSED TO YOU BY THE DIRECTOR OF OUR AUDITS DIVISION, AND WAS ALSO REFERRED TO IN A REPORT TRANSMITTED TO YOU BY OUR LETTER OF DECEMBER 13, 1954.

COLONEL SHAW ENCLOSED WITH HIS LETTER A COPY OF A REPORT DATED SEPTEMBER 9, 1955, FROM THE LEGAL OFFICER ATTACHED TO THE AMERICAN EMBASSY IN ROME AND STATES THAT, IN VIEW OF THE CIRCUMSTANCES SET FORTH THEREIN, THE COMMISSION SEES NO ALTERNATIVE TO PAYMENT OF THE LASA CLAIM FOR REIMBURSEMENT FOR SUCH TAX.

THE EMBASSY REPORT QUOTES FROM AN EXCHANGE OF NOTES BETWEEN THE GOVERNMENTS OF THE UNITED STATES AND ITALY DATED SEPTEMBER 13 AND 24, 1946, CONCERNING WAR MEMORIALS AS FOLLOWS:

"ANY SITES ACQUIRED, INCLUDING IMPROVEMENTS THERETO AND BUILDINGS CONSTRUCTED THEREON, SHALL BE EXEMPT FROM ANY AND ALL FORMS OF TAXATION, DIRECT OR INDIRECT.'

IT IS STATED THAT THE COMMISSION ORIGINALLY INTERPRETED THE FOREGOING TO MEAN THAT THERE WAS AN EXEMPTION NOT ONLY ON TRANSACTIONS BETWEEN THE COMMISSION AND ITS CONTRACTORS BUT ALSO TRANSACTIONS BETWEEN THE CONTRACTORS AND THEIR SUPPLIERS. OTHER INFORMATION OF RECORD HERE INDICATES THAT BIDDERS WERE SO INFORMED IN ALL INVITATIONS TO BID AND ALL CONTRACTS PRIOR TO NOVEMBER 15, 1950, WERE ENTERED INTO WITH THAT INTERPRETATION IN MIND. THE CONTRACTS HERE INVOLVED WERE EXECUTED PRIOR TO THAT DATE. HOWEVER, THE ITALIAN MINISTER OF FOREIGN AFFAIRS, IN A LETTER DATED MAY 9, 1951, ADVISED THAT THE MINISTRY OF FINANCE HAD INTERPRETED THE PROVISION AS EXEMPTING ONLY TRANSACTIONS BETWEEN THE COMMISSION AND ITS CONTRACTORS. IT IS REPORTED THAT THE COMMISSION HAS HAD TO ACCEPT THE ITALIAN INTERPRETATION IN ALL TRANSACTIONS AFTER 1951. LASA RELYING UPON THE COMMISSION'S ORIGINAL INTERPRETATION SUPPLIED MARBLE AT A PRICE WHICH DID NOT TAKE INTO ACCOUNT THE PURCHASE TAX ON TRANSACTIONS BETWEEN A CONTRACTOR AND SUPPLIER, BUT, NEVERTHELESS, IT WAS SUBSEQUENTLY FORCED TO PAY THE TAX.

THE EMBASSY REPORT STATES THAT THE MATTER HAS BEEN ARGUED WITHOUT EFFECT WITH THE ITALIAN GOVERNMENT, THAT THE INTERPRETATION PLACED UPON THE PROVISION BY THE ITALIAN GOVERNMENT IS NOT UNREASONABLE AND THAT THE COMMISSION HAS FOLLOWED THAT INTERPRETATION FOR FOUR YEARS. THEREFORE, IT IS SUGGESTED THAT NO FURTHER REPRESENTATION BE MADE TO THE ITALIAN GOVERNMENT.

IN VIEW OF THE INFORMATION NOW FURNISHED, YOU ARE ADVISED THAT WE WILL RAISE NO FURTHER QUESTION CONCERNING OTHERWISE PROPER PAYMENTS TO CONTRACTORS COVERING REIMBURSEMENT FOR THE TAXES CONSIDERED HEREIN.