811.512342 Double/15
Memorandum by Mr. Francis Colt de Wolf of the Treaty Division
A meeting took place at eleven o’clock on Friday November 27 in the office of Special Deputy Commissioner of Internal Revenue, Eldon P. Bang, to discuss informally the proposed draft treaty on taxation between the United States and Canada. There took part in that meeting Sir Herbert Marler, the Canadian Minister, Mr. Hume Wrong, Counselor of the Canadian Legation and Mr. Ronald Macdonnell, Third Secretary of the Canadian Legation. The Department was represented by Mr. Bonbright of WE and Mr. De Wolf of the Treaty Division. The Treasury Department was represented by Mr. King, Mr. Siegrist, Records Division, Mr. Armstrong, attorney in General Counsel’s office and Mr. Lusk, head of the Division of Legislation and Regulations.
A copy of the Treasury Department’s counter draft of the proposed treaty was given to the Canadian representatives and it was explained to them why it was thought preferable to conclude a convention on the basis of the Treasury draft rather than that of the Canadian Legation. The Treasury draft follows exactly the provisions of the Revenue Act of 1936 with regard to a treaty with Canada i. e. Section 211 provides that the withholding rate in the case of a resident of Canada could be reduced from ten to five percent and Section 231 provides that the withholding rate on dividends paid to nonresident foreign corporations in the case of Canadian corporations could be reduced from ten to five percent. The Canadian draft on the other hand contained several reductions which were not contemplated in the Revenue Act. It was pointed out to the Canadian representatives that the Executive has the power to conclude a treaty going further than was contemplated in the above-mentioned Sections of the Revenue Act especially in view of Section 22 (b) (7) of the Revenue Act which exempts from taxation “income of any kind to the extent required by any treaty obligation of the United States”.
In view of the fact, however, that the Canadian Government is anxious to conclude the treaty as soon as possible to obtain the reduced rates for Canadian interests as well as refunds for taxes already paid, it is believed that it would be much easier to get a treaty through the Senate at this time which would not depart from Sections 211 and 231 of the Revenue Act. After some discussion on this point the Canadian representatives concurred in this point of view and accepted the Treasury draft with practically no changes. They are transmitting [Page 794] this draft to the Government in Ottawa and expect to have its answer within the next three weeks.
There are attached herewith the original Canadian draft14 and the Treasury draft to which reference is made in this memorandum. The text of Sections 211 and 231 of the Revenue Act will be found on the first page of the copy of the memorandum of October 26, 1936, also attached.
- Not printed.↩