811.512351 Double/112
The Ambassador in France (Edge) to the Secretary of State
[Received January 14, 1932.]
Sir: I have the honor to refer to the Department’s telegraphic instruction No. 485 of October 9, 2 p.m., in which you authorized me [Page 266] to endeavor to have the French Government approve the draft double taxation agreement of 1930 with Article X eliminated. The matter has been kept actively but informally before the French authorities ever since the receipt of the Department’s above-mentioned telegram. I have not however considered it advisable to present the matter officially to the French Government until these informal conversations with various officials were completed. These conversations also included many conferences with representatives of other governments similarly affected. On December 18, an official note was addressed to the Foreign Office. A copy of this note, No. 1463, is herewith enclosed,87 as well as a copy of the draft agreement88 without Article X which was attached to the note.
On December 21, I discussed the matter at length with M. Piétri, Minister of the Budget, at which conference I was accompanied by Mr. Howell, First Secretary of Embassy. I pointed out the increasing difficulties caused by the “quotité imposable” to American interests and urged the immediate settlement of the question. M. Piétri, who was not in office at the time of the 1930 negotiations, seemed sympathetic and assured me that he would give the matter prompt consideration. A copy of the memorandum of this conversation is herewith attached.87
I feel satisfied that the French authorities will decline to sign the draft agreement with Article X eliminated as Great Britain and all other countries affected have offered much better terms. In that event, if the Department still approves, I will make every effort to obtain French approval of the agreement with the American draft of the Article X included, which however is likewise less attractive to France than other proposals.
It is quite possible that the French authorities will insist upon a settlement of the question along the same lines of the adjustment which has been made with Italy and Belgium. Please see my despatch No. 2122 of December 28, 1931,87 reporting upon and enclosing copies of the recent French agreements with these two countries.
Mr. Mitchell Carroll, now in charge of certain studies on double taxation for the Fiscal Committee of the League of Nations, and who, as you will recall, was one of the experts representing the United States during the conferences in 1930 in Paris, had an interesting conversation with M. Borduge on this subject Saturday last (see [Page 267] despatch No. 2122). It will be recalled that M. Borduge has been the chief French negotiator on double taxation covering the entire period in which the Embassy has been engaged in endeavoring to reach an agreement. M. Borduge expressed to Mr. Carroll his personal opinion that the French Government would never accept the 1930 draft, either with or without Article X. He at the same time intimated that the principles embodied in the Belgian and Italian agreements (see despatch No. 2122 of December 28, 1931) must furnish the bases for any agreement with the United States; in other words, that the provisions in the treaties with Belgium and Italy regarding the taxation of foreign companies with branches or subsidiaries in France would be the standard clause in future double taxation treaties.
I was informed by M. Piétri that while M. Borduge was still on the committee passing upon double taxation treaties, he would no longer dominate the negotiations, and that M. Trochon had really succeeded Borduge as Director General of Taxation. Nevertheless, Borduge undoubtedly will still exercise considerable influence.
As I have stated in my despatch No. 2122 of December 28, 1931, if the provisions as contained in the Belgian and Italian treaties are fairly administered, without recourse to technicalities, it is my opinion that these treaties would fairly well meet our situation. To obtain this solution of the question, however, it is quite probable that we must give as a quid pro quo the American draft of Article X. Therefore, if we must grant the American draft of Article X, it seems better to obtain the American draft as a whole rather than to accept the Belgian and Italian solution regarding branches and subsidiaries. If the Belgian solution can be obtained at a cheaper price, it may be to our advantage to abandon the American draft agreement of 1930, but as to this I must withhold judgment until the negotiations further develop.
In despatch No. 2122, I have requested the reaction of the Treasury Department to the present situation.
Respectfully yours,
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- Same as draft quoted in telegram No. 257, August 13, 1930, 11 a.m., from the Ambassador in France, Foreign Relations, 1930, vol. iii, p. 32.↩
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