811.512351 Double/184

Memorandum by the First Secretary of Embassy in France (Howell)2

On February 20th, I called to see M. Campana3 at the Foreign Office with regard to the French ratification of the double taxation convention. I showed him a recent extract from Time, the American weekly magazine, to the effect that there had been included in the general tax legislation by the House of Representatives a provision authorizing the President, in his discretion, to increase by 50% income taxes on any foreign corporations whose native countries impose discriminating taxes on American companies.4 It was stated in the article that the act was retaliation against France on account of its double taxation. M. Campana had already informed himself about this legislation and on February 1st the Foreign Office officially communicated this information [Page 168] to the Ministry of Finance. There is no question but what this proposed retaliatory tax legislation in America is of considerable concern to the Foreign Office, and will be of much importance in obtaining French ratification of the double tax convention.

As is his custom, M. Campana was very frank in his discussion of this entire question with me. He said that all the permanent officials at the Ministry of Finance were against the ratification and he suggested that certain alterations be made in the treaty. To this I replied that I was reasonably certain that the United States Government would not agree to any alterations; that we felt that France was morally obligated to ratify, and that failure to ratify or to take action at this time, coming on top of debt default,5 would aggravate the bad feeling existing generally in the United States against France.

I reminded him that, besides important concessions regarding trade matters, the United States had given to France in the convention the following tax advantages:

Important exemptions from the United States income tax for French enterprises;
A prompt and definite method of assessing local branches of American enterprises in France;
Greater rights than under present French law for the prevention of tax evasion of American companies; and,
Protection, should the case arise, of French enterprises against extraterritorial taxation.

The substance of the Department’s telegram No. 41, January 27, 4 p.m., was also made known to M. Campana.

After nearly an hour’s conversation, in which I brought forward very strongly and emphatically the American position, at my suggestion, M. Campana and I went down to see M. Rochard, chef de cabinet of M. Barthou.6 I had discussed the matter the previous day with M. Rochard. As a result of this conversation, these two gentlemen agreed that a note should be sent immediately by the Ministry of Foreign Affairs to the Ministry of Finance on this subject. M. Campana was to draft the note, and it was decided that it should be substantially, as follows:

After some weeks of negotiation of this treaty an impasse was reached. When M. Tardieu7 came into office, he saw that the United States was on the point of taking severe retaliatory measures against France on account of certain French tariff increases against American goods. In an effort to avoid this retaliation, he signed the double taxation convention. Furthermore, the American Embassy would [Page 169] not have agreed to the quota agreement signed May 31, 1932, between the United States and France,8 unless the double taxation convention had been signed a few weeks before. The United States ratified the double taxation convention a short time after it was signed. The French Ministry of Finance refused to submit the document to Parliament for ratification because it felt that an adequate quid pro quo had not been given by the United States. The Foreign Office understands that certain tax advantages were actually granted by the United States in the convention and its feeling is that the United States has given adequate concessions of another nature (those above described). Therefore, it urgently suggests to the Ministry of Finance that it favorably recommend to Parliament the ratification of the convention at the present session. It was also to be pointed out in the note that the feeling in the United States was becoming increasingly unfriendly to France, and if the Ministry of Finance declined to do what it could to obtain immediate ratification, the full responsibility for the future general relations between the two countries would have to rest upon the Ministry of Finance.

I have just learned from M. Campana that the note, as drafted by him in the above sense, had been signed by M. Barthou and sent to the Ministry of Finance about February 23rd. He said that the note would probably be brought up in Cabinet at an early date.

Wm. S. Howell, Jr.

  1. Copy transmitted to the Department by the Ambassador in France in his despatch No. 678, March 1; received March 15.
  2. César-Rizio Campana, Minister Plenipotentiary and head ad interim of the commission tripartite des économies.
  3. See 48 Stat. 680, 703.
  4. See vol. i, pp. 565 ff.
  5. Louis Barthou, French Minister for Foreign Affairs.
  6. André Tardieu, French Premier and Minister for Foreign Affairs, February–June, 1932.
  7. See telegram No. 342, May 31, 1932, 7 p.m., from the Ambassador in France, Foreign Relations, 1932, vol. ii, p. 232.