Memorandum by the Egyptian Chargé (Khalil Bey)18

Nicolas Khalil Bey, Chargé d’Affaires of Egypt, called on the Director of the Near Eastern Division of the Department of State to-day in accordance with instructions received from the Egyptian Government, and made the following communication:—

The Egyptian Government possesses French State bonds bought in dollars on the New York Stock Exchange, and deposited in a bank in that City. The said bank collects payment in dollars on the coupons due thereon and converts these amounts into pounds sterling. These sums are then sent to the London correspondent of the National Bank of Egypt to be credited to the Egyptian Government.

These bonds, being payable to the bearer, are not registered.

The Egyptian Government has been informed lately that when the coupons were presented for payment in New York difficulties arose at the paying bank, which believes that the American income tax should be paid on the coupon revenue, though until the last payment no tax has been paid.

As the income or redemption of these bonds is not the result of commercial operations in the United States, but is derived from payments made by the French Government; and as the Egyptian Government is not a commercial organisation dealing in commercial operations in the United States; it cannot be said that the Government should pay income tax.

The competent authorities have requested the Chargé d’Affaires to investigate the exact situation regarding these bonds and to find out whether any tax is due by the Egyptian Government, either to the State of New York or to the Federal Government in connection with revenue from French bonds deposited in a New York bank.

The Chargé d’Affaires of Egypt has been requested also to enquire whether the Egyptian Government would owe any tax on bonds issued [Page 493] by American Corporations, Foreign States or Governments bought under the same conditions and deposited in the same manner in the future.

  1. Left at the Department by the Chargé on September 27, 1935.