811.512351 Double/303

The Ambassador in France ( Straus ) to the Secretary of State

No. 2629

Sir: I have the honor to refer to the Department’s instruction No. 1142 of December 19, 1935,33 in response to the Embassy’s despatch No. 2238 of October 14,34 which conveyed the proposal of the French Government for the conclusion of an addendum to the Franco-American double taxation convention of April 27, 1932. The Department’s reply indicated that the whole question of the taxation of income derived by aliens from sources within the United States was under consideration by the American Government and that in consequence it was thought that definite action with regard to the suggested addendum should not be entered into until the study of the general subject is completed. The Department nevertheless felt that in considering the proposed addendum it would be useful to be in possession of such information as the French authorities might be in a position to make available relative to any loss of revenue which might be suffered by the French Government as a result of its proposed undertaking not to impose a tax on income derived from sources in France by American citizens residing in the United States.

Information of the nature envisaged above having been requested of the French Government, there is now enclosed a copy and translation of a note from the Ministry for Foreign Affairs, dated March 12, 1936.32 The note points out that it is impossible to furnish statistics concerning the loss of revenue to the French Government since income derived from French sources by American citizens not having residence in France is already exempt from the application of the general income tax. The note however includes a table showing the rates under the general income tax, the relative severity of which is apparently believed clearly to demonstrate the advantage afforded to American citizens by the present exemption.

The Department will clearly recall the great difficulty and long delay (over two years) which were experienced first in securing ratification [Page 103] and then promulgation of the convention. At one time M. Tardieu35 hinted at deferring action until the old Article X36 should have been reinserted, even though the engagement had been duly signed by both Governments and proclaimed by the United States. The old Article X, as is known, is similar to the formula which the French Government now proposes as an addendum. It may further be recalled that Parliament, in authorizing ratification, made a reservation (which however was not incorporated as a condition to ratification) whereby the Government of the United States should be approached with a view to obtaining certain further advantages for French interests. Moreover, it was not until M. Laval37 personally intervened, that final approval of the convention was obtained.38

The above facts are recited to make manifest, on the one hand, that after the numerous difficulties encountered in securing the putting into effect of the convention, the United States has no moral obligation to hasten to afford further taxation benefits to France. On the other hand the convention is here regarded as largely of unilateral advantage and hence is unpopular both with Parliament and the fisc. Bearing in mind this unpopularity and the circumstance that numerous provisions of the agreement are susceptible of more than one interpretation, there is reason to apprehend that the interpretation of the convention by the French authorities will not be as liberal in all cases as it might be. In consequence, in studying the merits of the French request for the negotiation of the addendum, and entirely aside from such merits, it may be well, purely from the standpoint of self-interest, likewise to give some consideration to the possibility of creating good will through sympathetic scrutiny of the French request, to the end that the French authorities may be encouraged to adopt a liberal attitude in the administration of the treaty. However, I strongly feel that no definitive action should be taken until the French Government shall have issued the regulatory circulars for the application of the convention, thus affording an opportunity for the Department to judge of the probable interpretation to be given the present provisions.

In this general connection, information has reached the Embassy to the effect that the Department has been approached by an American attorney with a view to amendment of the convention so as to delete the requirement for American companies making the declaration prescribed in Articles 6 and 10. The Embassy would be glad to be advised in the event that the opening of the convention to revision is seriously contemplated.

Respectfully yours,

Jesse Isidor Straus
  1. Foreign Relations, 1935, vol. ii, p. 253.
  2. Ibid., p. 251.
  3. Not printed.
  4. André Tardieu, member of the French Chamber of Deputies.
  5. For text of draft article, see Foreign Relations, 1930, vol. iii, p. 34.
  6. Pierre Laval, French Minister for Foreign Affairs.
  7. See telegrams Nos. 260 and 264, March 28 and 29, 1935, from the Chargé in France, Foreign Relations, 1935, vol. ii, pp. 247 and 248.