The Ambassador in France (Bullitt) to the Secretary of State
[Received March 31.]
Sir: I have the honor to refer to my telegram No. 286 of February 14, 1939, relating to the forthcoming negotiation of an addendum to the Convention of April 27, 1932 between the United States and France relating to Double Taxation, and to recommend the amendment of the Protocol to that Convention for the purpose of relieving American representatives and employees other than diplomatic or consular officers from payment of certain direct French taxes.[Page 549]
The Department’s attention is invited to the fact that French fiscal legislation now authorizes, on the basis of comity, the exemption of American diplomatic officers duly accredited as such to the French Government from the payment of direct taxes. If an officer has more than one residence he is exempt from taxes only on the principal residence at the capital. The exemption, of course, does not apply to commercial business in which the official engages.
Article II of the Consular Convention between the United States and France, concluded on February 23, 1853,77 authorizes the exemption of American consular officers duly accredited in France from the payment of “all direct and personal taxation, whether Federal, State or Municipal.”
Other Officers and Clerks
Officers of the American Government other than diplomatic and consular officers, such as Trade Commissioners, Treasury representatives, etc., as a matter of law enjoy only the limited immunity from taxation accorded them by the terms of the Double Tax Convention. Under the law they are liable to the payment of the impôt général sur le revenu, a form of income surtax, and also to the payment of the apartment tax (contribution mobilière).
By an exchange of notes between the Embassy and the Foreign Office, ending with the Foreign Office’s note of May 12, 1932,78 as a matter of courtesy and reciprocity, and considering them as Chancery clerks, other officers and American clerks are exempt from the payment of direct personal taxes (impôts directs à caractère personnel). This is a privilege, of course, which may be withdrawn at any time in the discretion of the French authorities. The exoneration is established on the basis of a list of the names of such officers and employees sent from time to time to the Foreign Office.
There are at present seven United States Army officers and five United States Navy officers assigned to Paris for study. These officers are detailed administratively to the Military and Naval Attachés’ offices, respectively, but they are not included in the diplomatic list. They, of course, benefit by the provisions of Article 7 of the Double Taxation Convention, but they are subject to the apartment tax (contribution mobilière) and, of course, to the general income tax mentioned [Page 550] above. Their names are not included in the list transmitted to the Foreign Office.
The allowances which these officers receive are frequently insufficient to pay for the quarters they are obliged to rent during their sojourn in Paris, and that is particularly true in the case of married officers. With their low salaries they often find it extremely difficult to make both ends meet in Paris. The payment of an apartment tax running upwards of $100 annually is in the nature of a penalty from which they should be relieved.
Addendum to Convention
In the negotiations which should take place in the near future, looking to an addendum to the Double Taxation Convention, we should propose an amendment of the Protocol to the Convention which would relieve officers and American employees, not diplomatic or consular officers, from the payment of direct taxes such as the apartment tax (contribution mobilière), and the general income tax (impôt général sur le revenu).
Article 7 of the Convention and also the 3d paragraph of Paragraph (b) of Article 1 of the concluding Protocol are quoted as follows:
Compensation paid by one of the contracting States to its citizens for labor or personal services performed in the other State is exempt from tax in the latter State.
3d paragraph of Paragraph (b) of Article 1 of Protocol:
In Articles 7, 8 and 9, the tax on wages and salaries, pensions and life annuities (impôt sur les traitements et salaires, pensions et rentes viagères), and other schedular taxes (impôts cèdulaires) appropriate to the type of income specified in said articles.
To obtain the desired exemption it is desired that the 3d paragraph of Paragraph (b) of Article 1 of the Protocol to the Convention be amended as follows:
In Articles 7, 8 and 9 the taxes on wages and salaries, pensions and life annuities (impôt sur les traitements et salaires, pensions et rentes viagères) and other direct and schedular taxes (impôts cédulaires), the apartment tax (contribution mobilière) and the general income tax (impôt général sur le revenue) appropriate to the type of income specified in said articles.
(New wording underscored).
The rates of the French general income tax are as follows: [Here follows schedule of rates.][Page 551]
Foreign Office Comment
In its note of January 11, 1939,79 the Foreign Office stated that the Protocol of the Convention in paragraph (b), third paragraph of Article 1 lists limitatively the taxes to which the exemption provided under Article 7 applies. The general income tax does not appear in this list and it must be concluded that the 1932 negotiators did not intend to exempt from it functionaries (neither diplomatic nor consular) of one of the two countries stationed in the other country.
In its note of August 1, 1936,80 the Foreign Office said that during the course of the negotiations which terminated in the conclusion of the Double Tax Convention the American delegation did not feel enabled to accept the proposals made by the French Government relative on the one hand to the American surtax, and on the other hand, to the general income tax. It said that if the American Government attaches importance to having its officers and employees serving in France exonerated from the general income tax on their remuneration, the question could be adjusted by a joint accord between the Governments. Negotiations to this end could be included in the negotiations which the French Government proposed in its note of October 12, 1935,81 with a view to concluding a rider to the Convention of April 27, 1932. The French Government would not refuse to extend the exoneration cited in Article 7 to the general income tax if on its side the American Government would agree to give satisfaction to the French Government in the matter of surtax. Awaiting this accord the French Administration is prepared to suspend, by measure of reciprocity, application of the general income tax to the remuneration referred to in Article 7.
On the basis of reciprocity the French Administration was prepared to suspend application of the general income tax to the remuneration referred to in Article 7 and said that instructions were being given in this sense insofar as it concerns American functionaries designated on the list sent by the Embassy to the Foreign Office. This list includes American employees of the Embassy, the Office of the Agriculture Attaché, the Office of the Building Superintendent, the Office of the Commercial Attaché, the District Accounting and Disbursing Office, the Office of the Military Attaché, the Office of the Naval Attaché, the National Advisory Committee for Aeronautics, the Office of the Public Health Service, and the Office of the Treasury Attaché.
- Hunter Miller (ed.), Treaties and Other International Acts of the United States of America, vol. 6, p. 169.↩
- Foreign Relations, 1932, vol. ii, p. 275.↩
- Not found in Department files.↩
- Not printed.↩
- Not printed, but see despatch No. 2238, October 14, 1935, from The Chargé in France, Foreign Relations, 1935, vol. ii, p. 251.↩