811.512351 Double/278
The Chargé in France (Marriner) to the Secretary of State
[Received October 22.]
Sir: In my despatch No. 2214 of October 2, 1935,52 I had the honor to report that the Ministry for Foreign Affairs had indicated that after the completion of the formalities for putting into effect the Franco-American double taxation convention of April 27, 1932, it would send a note asking consideration of a rider to the convention. The convention having been promulgated on October 2, the anticipated note has now been received by the Embassy. The note, which is dated October 12, 1935, is enclosed in copy and translation.52
As the Department may observe the Ministry for Foreign Affairs suggests in effect the negotiation of an addition to the Convention whereby, in recognition of the circumstance that American citizens residing in the United States are exempt from the French general income tax, French citizens resident in France be reciprocally exonerated [Page 252] from the American surtax on all income from sources within the United States54 or, if this is not acceptable, that they at least be exonerated from the surtax as regards dividends and interest from American sources. The first suggestion is similar to the French text of the proposal for Article X (old numbering) made during the course of the double taxation negotiations, while the alternative suggestion corresponds with the text of the American counter proposal for that Article.
In order to throw light on how much or how little this concession would mean to the American Treasury it is convenient to recall the figures submitted by the Secretary of the Treasury in a letter addressed to the Secretary of State on January 27, 1932.55 It is therein stated that for the year 1929 there were 1, 969 individual income tax returns filed by or in behalf of French citizens, non-residents of the United States (but not all of whom were necessarily residing in France). On only 360 of these returns were surtaxes computed. The total surtaxes levied on the basis of these returns amounted for the year 1929 to $748,974.00. The taxes were computed from the following sources of revenue as shown by the returns:
| Interest | $1,218,878.00 |
| Dividends | 5,275,277.00 |
| Other income | 4,887,332.00 |
| Total income | $11,381,487.00 |
| Deductions | 590,365.00 |
| Net income | $10,791,122.00 |
| Surtaxes | $748,974.00 |
Analysing these figures the Embassy has found that, if it may be assumed for purposes of estimate that the amounts which were due in surtaxes respectively on interest, dividends and other income bear the same ratio to the total surtaxes as the individual items of income declared do to the total income so declared, the surtaxes collected are attributable as follows:
| To interest | $80,209.88 |
| To dividends | 347,147.20 |
| To other income | 321,616.92 |
| $748,974.00 |
In other words, France asks on behalf of French citizens under the first suggested formula, namely the waiving of the surtax on all sources [Page 253] of income, an exemption amounting to some $748,974.00, or under the second formula, to wit, the waiving of the surtax on dividends and interest only, an exemption amounting to approximately $427,357.08.
In making the request the Ministry for Foreign Affairs orally asks the Embassy to emphasize to the Department a situation which it could not appropriately discuss in the official note. The Ministry states that the Ministry of Finance and the Parliamentary finance commissions had, as is known, been strongly opposed to the Double Taxation Convention which was considered of materially greater value to the United States than to France. It was, in consequence, only under the exercise of the heaviest pressure by the Ministry for Foreign Affairs that French ratification was secured and even then only upon the condition that the French Government subsequently undertake to secure an addition to the convention, such as the present proposal, which would accord relief to certain classes of French citizens deriving income or profits from the United States. The Ministry for Foreign Affairs therefore feels that it is on trial before both the Ministry of Finance and the pertinent committees in the Chamber of Deputies and Senate. Unless success is attained in securing some sort of exoneration from the American surtax the Ministry alleges its position will be prejudiced and it will be open to the charge of not sufficiently protecting French interests. It states that in many matters it has frequently had to go before the Ministry of Finance and fight on behalf of American interests and that Finance will be in a much more receptive mood for such future good offices should the present overture prove acceptable to the American Government. Finally it asserts that it attaches very particular importance to the request now being made and that it would be most grateful if the American Government were to examine the proposal sympathetically and in the light of the good neighbor policy.
Respectfully yours,
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- For additional correspondence on taxation by the United States of nonresident aliens on income derived from sources within the United States, see vol. i, pp. 481 ff.↩
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