The French Embassy to the Department of State
The attention of the French Government has been called to the fact that, in the last few months, the Treasury Department has decided, in application of a rule which appears for the first time in the fiscal law of 1916,3 to levy taxes upon profits made in the United States since 1929 by non-resident foreigners.
The decision of the American Treasury Department has caused deep feeling in France. The heads of numerous commercial and financial establishments operating for their own account on the markets of the United States have pointed out that the profits made by them in this country were often apparent, and that they were offset by losses suffered as the result of transactions effected on a foreign market.
Furthermore, the middlemen who execute the orders of their clients in the United States believe that it is not possible for them to pay, for the account of the latter, taxes which they thought they were justified [Page 484] in not deducting, and which it would be difficult for them to recover today from their clients, many of whom have disappeared.
Moreover, they believe that the rules of professional secrecy do not allow them to reveal to the American authorities the names of third parties for whose accounts they have carried on transactions.
It is to be feared that, if the Treasury persists in its intention to tax all the profits made by nonresident foreigners in the United States, a large number of French firms will, in the future, discontinue doing business on the United States markets, which would bring about a material reduction of economic and financial exchanges from which our two countries have derived the greatest advantages in the past.
Finally, it must be noted that French legislation, in matters of taxes levied upon profits from stock market transactions, has always been of an extremely liberal nature. The capital earnings resulting from differences between purchase and sale prices of merchandise and values have always been tax-exempt in France. By virtue of Article 18 [sic] of the decree of July 20, 1934,4 reproducing previous legislative provisions, only the proceeds of stock market operations carried on habitually, by persons having a permanent professional installation in France, are subject to taxation.
Pursuant to the instructions which it has received, the French Embassy has the honor to request the Department of State to be kind enough to call the attention of the proper Federal authorities to the serious disadvantages involved in the application of the Federal fiscal law of 1916 to French nationals not residing in the United States.
The French Government hopes that it will be possible for the Federal authorities to consider a modification of the law in favor of its nationals.