858.5123 P 34/3
The Secretary of State to the Minister in Sweden (Harrison)
Sir: Reference is made to your despatch No. 153, dated December 7, 1927,6 with regard to discrimination in taxation against Americans in Sweden, as reported by Consul General Osborne’s despatch No. 163 of November 28, 1927.6
The above despatches were brought separately to the attention of the Treasury Department with requests for its comments on the information contained therein.
The Department has now received two letters from the Treasury Department, dated January 11 and 13, 1928, commenting on your despatch No. 153 and the Consul General’s despatch No. 163, respectively, copies of which are transmitted herewith for your information.6
You are instructed to communicate again with the Minister for Foreign Affairs and to state that under American law, aliens—including Swedish nationals—are entitled to deduct from their gross income in computing their net income for the purpose of Federal income tax, the same deductions which are allowed to citizens of the United States residing therein. The only exception to this rule is found in Section 216 (e) of the Revenue Act of 19267 which provides, that no alien who is a nonresident of the United States is entitled to the credit of $400 allowed for each person (other than husband or wife) dependent upon and receiving his chief support from the taxpayer (unless such alien is a resident of Canada or Mexico).
You should also draw the Minister’s attention to the provisions of Section 222 of the Revenue Act which provides that a citizen of the United States is entitled to credit his Federal income tax with the amount of income, war-profits or excess-profits taxes paid or accrued during the taxable year to any foreign country. The benefit of this credit is extended to an alien residing in the United States providing his native country grants a similar credit to citizens of the United States residing in such foreign country. The Treasury Department having found that Sweden does not satisfy the similar credits requirement of Section 222, Swedish nationals residing in the United States are not entitled at the present time to the credit for foreign taxes allowed to citizens of the United States residing therein. You will, of course, point out to the Minister that this last exception to the general rule that resident aliens in the United [Page 886] States are for the purposes of income taxation treated in the same manner as resident citizens is merely due to the fact that the Treasury Department does not consider that Sweden satisfies the reciprocal requirements of the law.
You will express the hope, in view of the Minister’s assurances to which you refer to in your despatch under acknowledgment, and of the statements of the Treasury Department, that he will find it possible to arrange for the extension to American citizens residing in Sweden of the same deductions which are now granted to Swedish nationals. You will add that this Government of course will be pleased to consider extending to Swedish nationals the benefits of the provisions of Section 222 of the Revenue Act as soon as assurances are received from the Swedish Government that the deductions provided for in that section of the law are also available to American citizens residing in Sweden under the pertinent Swedish tax laws.
It is requested that you advise the Department of the result of your representations in the matter and that you inform the American Consul General at Stockholm of the general purport of this instruction.
I am [etc.]