The Chargé in Great Britain (Atherton) to the Secretary of State

No. 747

Sir: I have the honor to refer to the Department’s instruction No. 147, dated July 28, 1932,30 directing me to inform the Foreign Office of the views of the American Government with regard to the taxation of the [Page 30] private incomes of American Consular officers in Great Britain and to express the hope that an exemption would be accorded to American officers with respect to income derived from sources outside Great Britain.

The substance of this instruction was conveyed to the Foreign Office by an official note as well as orally in the course of a conversation which a member of the Embassy staff had with the responsible officer in the Foreign Office on September 12, 1932. I now have the honor to enclose a copy of a note, dated March 11, 1933, which has been received from the Foreign Office.

It will be noted that the British Government expresses its inability to grant “foreign consular officers wider exemption than the Act (Finance Act, 1930) accords to them where income tax is concerned”.

The argument that American Consular officers should be accorded exemption on the basis of reciprocity has apparently had no weight with the British Government; for in a private letter which I have received from the responsible officer in the Foreign Office statement was made that “we cannot claim for our consuls in the United States privileges which we are unable to concede to your consuls in this country”.

I do not feel that the negotiations on this particular matter are at an end, nor do I believe that all possible arguments in favor of granting exemption have been exhausted. It is my impression that discussions can be protracted for some considerable period of time, at the end of which the British authorities might be disposed to take a more generous view. If it should meet with the Department’s approval, I shall give the Foreign Office to understand that this Government does not consider the matter to be closed and desires to continue the discussions.

Respectfully yours,

Ray Atherton

The British Secretary of State for Foreign Affairs (Simon) to the American Ambassador (Mellon)

No. T 2692/224/373

Your Excellency: I have the honor to inform you that His Majesty’s Government have given careful consideration to the representations made by Mr. Atherton in his note No. 197 of the 12th August last concerning the treatment of United States consular officers in this country in the matter of income tax on their private incomes as distinct from their official emoluments.

As Your Excellency is doubtless aware, the exemption enjoyed by foreign consular officers in this country from payment of income tax in respect of their official emoluments is secured to them by the provisions [Page 31] of Section 20 of the Finance Act, 1930, which gave legality to a practice of over eighty years standing. During that period the view was consistently maintained that a relief confined to official emoluments was appropriate to foreign consular officers. That view, which formed the subject of careful deliberation before the enactment of the Statute referred to, may be said to have been endorsed by the legislature through the passing of the Act, and His Majesty’s Government regret that they are not able to contemplate any further amendment of the law in the direction of granting to foreign consular officers wider exemption than the Act accords to them where income tax is concerned.
In Mr. Atherton’s note under reply it was suggested that the practical effect of charging British income tax on the private incomes of United States consular officers would be to limit appointments in Great Britain to those officers who happen to be without independent income. This suggestion is one which His Majesty’s Government find it difficult to appreciate, and they feel that it may be due to some misunderstanding on the part of the United States Government as to the amount of tax payable in these cases. In the semi-official correspondence which passed between the Embassy and this Office in regard to this question in 1930 it was pointed out that a consular officer’s official income is not merely exempt from income tax but is entirely disregarded in determining the amount of his income for taxation purposes, with the result that he enjoys the full benefit of ordinary personal reliefs against his private income. This means that at the present time he does not pay income tax unless his private income exceeds £100 if he is unmarried, £150 if he is married, and a considerably larger sum if he has children, while the first £175 of any excess income is liable at only half the standard rate of tax.

I have [etc.]

(For the Secretary of State)
G. R. Warner
  1. Not printed.