The_Open_Door_deel1

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The possible depletion of the ore deposits on the other hand,
incited those in favour of a firmer grip on the Company to even
greater impatience and to an even greater demand for Government
intervention (62).
LIBETH
In accordance with the Tax Agreement of April 28, 1960 Bethlehem
Steel paid a corporate income tax amounting to 50? of the net
income derived from the sale of its share of the LAMCO J.V, 's
ore production. In the years 1963 through 1977 these payments
totalled $ 36.6 million (63).
Net income is here the difference between Gross Income and a
series of deductions, Gross Income being defined as the
difference between (I) the total costs of Bethlehem's share of
the Joint Venture's ore (f.o.b.) plus Bethlehem's costs of
shipping the ore from Liberia - Buchanan - to the U.S.A. and
(II) the value of the ore calculated on the basis of the iron
ore market prices of the northern U.S. Atlantic Coast Ports of
the date the ore was shipped from Liberia minus the costs of
freight, insurance and other customary charges (64). Bethlehem
Steel is allowed to deduct from this Gross Income the same type
of expenses as LAMCO had been allowed. In addition, they were
also allowed to deduct (i) annual interest charges on any
borrowed capital or - in the absence of interest bearing loans -
one third of the amount which LAMCO deducts each year as
interest charges, and (ii) an annual depletion allowance of an
amount equal to 15? of its Gross Income, or 50? of the Net
Income derived from the sale of the ore without deductions for
depletion. The official explanation for this artificial
percentage depletion deduction was to provide the Bethlehem
Steel Corporation with an incentive to contribute cash to G.I.M.
to cover its share (25?) of the capital needed by the managing
company to finance the annual operating and investment expenses
of the LAMCO Joint Venture (65).
Although full details concerning the granting of this
"incentive" are not available it is reported that one official
of the Bethlehem Steel Corporation, when asked to provide an
explanation, recalled that at that time - when the Tax Agreement
was negotiated - the Government was in the mood for giving away
free benefits, and "...thus Bethlehem took its chance and
requested a depletion allowance and Bingo! the Government
granted our company's request" (66).
In any case it may be said that through this depletion allowance
the owner of the subsoil and its contents pays the concessionaire
a royalty, instead of the other way round. To make things worse,
prior to 1973 Bethlehem Steel duplicated the artificial
percentage depletion deduction by writing off certain
expenditures made in the early 1960's in connection with the
acquisition of its interest in the LAMCO concession. During the
review of the 1960 Tax Agreement in 1972 it was therefore decided
to eliminate this duplication (67).