The Secretary of State to the British Chargé ( Mallet )
Sir: I refer to the Ambassador’s note of August 7, 1937 concerning the desire of the Governor of Newfoundland that similar benefits be extended on a reciprocal basis to Newfoundland holders of American securities to those embodied in the convention between the United States and Canada of December 30, 1936, concerning income taxation, and advise you that a communication concerning this matter has been received from the Treasury Department. In this communication the Acting Secretary of the Treasury states that the Treasury Department will be glad to consider any proposals which you may see fit to advance along the lines suggested in the Ambassador’s note. However, the Acting Secretary of the Treasury suggests that there is now under consideration another tax convention with Canada supplementary to that of December 30, 1936.2 The scope and terms of such a supplementary convention have not yet become clearly defined and hence their effect upon the existing convention cannot at this time be accurately determined. The Acting Secretary concludes that when the situation in this regard has become clarified the Treasury Department will be better prepared to give further consideration to a tax convention with Newfoundland.
[A note dated August 25, 1938, from the Secretary of State to the British Ambassador quoted a letter from the Treasury Department stating that the policy of the Department regarding tax conventions with other countries had become more clearly defined and that it was not contemplated that such conventions would reduce rates of taxation unless such reductions were authorized by revenue acts. The letter of the Treasury Department concluded:
“For these reasons this Department is at present unable to entertain favorably suggestions for negotiations looking to adoption of a tax convention by which is contemplated a reduction in the rates of taxation imposed under existing law upon income from United States sources flowing to residents of Newfoundland.” (811.512343 Double/15)]