855.5123 Goodyear/4
The Ambassador in Belgium (Morris) to the Secretary of
State
No. 193
Brussels, May 23, 1934.
[Received June
1.]
Sir: I have the honor to refer to my
despatch No. 124 of February 12, 1934, concerning the taxation of
American firms in Belgium and outlining the taxation difficulties of
the Goodyear Tire and Rubber Export Company of Akron, Ohio.
There are enclosed copies of two notes from the Belgian Ministry of
Foreign Affairs and translations thereof,25 which set
forth the attitude of the Belgian Government in substantiation of
its claim that
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the American
firm maintained an establishment in Belgium and therefore is subject
to taxation on its profits from this business. The firm’s attitude,
which was developed fully in my despatch referred to above and in
enclosures to the Department’s instruction No. 47 of February 8,
1934,26 is that it only consigns
merchandise to its distributor here and therefore it does not
maintain an establishment, which would render it liable to the
taxation claimed by the Belgian Government.
In the last paragraph of the note from the Ministry of Foreign
Affairs of April 18, 1934 (copy enclosed), the Company is given the
alternative of entering legal proceedings against the Government in
support of its contentions or of accepting to be taxed.
The Company has not yet decided to take the case to law. A lawyer
representing the American firm has been to Brussels to see the
Acting Commercial Attaché to seek advice as to the best policy to
adopt. The Embassy has felt that it could not advise the Company to
enter legal action and has refrained from so doing. However, in view
of the definite stand taken by the Belgian Minister of Finance,
there is little that can be accomplished by repeating the
representations which have been made time and again by the Embassy
in the firm’s interests.
The matter is brought to the Department’s attention in answer to the
last paragraph of its instruction No. 47 of February 8, 1934 and
with the request that I be instructed as to how to proceed further
in the matter.27
Respectfully yours,
[Enclosure—Translation]
The Belgian Minister for Foreign
Affairs (Hymans) to the
American Ambassador (Morris)
Brussels, April 18,
1934.
Mr. Ambassador: Referring to note No.
82 which Your Excellency was so good as to address to me under
date of December 4, 1933, I have the honor to inform Your
Excellency that the dossier relating to the taxability of the
American firm, “The Goodyear Tire Rubber Export & Co.” has
been examined again by the Ministry of Finance.
The facts gathered from this dossier concerning the activities
pursued in Belgium by the American Company in question have led
the Bureau of Internal Revenue (“Administration des
Contributions”) to conclude that in the case of this firm there
exists an establishment in Belgium.
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Under this heading the American Goodyear firm unquestionably
falls under the Belgian income tax law, and the Administration
may not renounce the collection of the taxes in question.
In communicating this decision to me, the Minister of Finance
observes that it had not been possible for him to agree with the
argument upheld by the firm in question, which claims that it is
engaged exclusively in trade on a consignment basis in
Belgium.
The Belgian Administration agrees to consider that the
consignment of merchandise, pure and simple, by a foreign firm,
does not permit of the conclusion that there exists in Belgium
an establishment on the basis of which a professional income tax
might be assessed. But it does not seem possible to consider the
case of the “Goodyear” firm as being confined to consignment
trade.
The daily sending of copies of invoices and of a stock-statement,
the continual intervention of the American firm in price-fixing
and the conditions of sale, its special participation in
advertising expenses, the semi-annual verification of stocks,
their sales in Belgium in any quantity, all these circumstances
show that the American firm is engaged in this country in
transactions similar to those in which a Belgian firm could be
engaged.
Moreover, the fact that the Belgian firm, “Belgian Tire Company,”
presents itself to the public under the heading “Goodyear” which
covers its trucks and the façade of its head office, permits of
the conclusion that the Belgian firm is in reality a
sales-house* of the
American company.
The Belgian firm, it is true, obtains merchandise on consignment
and is remunerated by a commission which covers the general
expenses, risks and other expenditures. But these are means of
remuneration which are dictated by the Commercial interest of
the contracting parties; besides, this is the conclusion to be
drawn from a passage from a letter addressed by the American
firm to the division controller on November 16, 1932:
“by granting the consignment (of goods)
to such a distributor with the guarantee of a certain
bank and with personal guarantees,” says this letter,
[“] we are able to place our distributor on a basis
allowing him to extend the sale of our goods.”
Such are, Mr. Ambassador, the facts that have come out and those
on which the Minister of Finance has based his decision.
He has added that in case the firm in question is unable to agree
with this point of view, he can only advise it to have the
question of principle settled by the competent judicial
authorities; or, if the firm accepts the principle of the
taxation, to prove by means of an objective
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documentation that the profits which
are attributed to it are exaggerated.
I avail myself [etc.]
For the Minister:
The Secretary
General
F. Van
Langenhove
