811.24591/17: Telegram

The Minister in Iran (Dreyfus) to the Secretary of State

1020. Reference to Department’s instruction No. 272, September 10. Iranian Government prepared and anxious to sign the agreement covering our troops in Iran but insist that inclusion of unrestricted words “agencies and employees” in article XI and subsequent articles opens way for serious abuse of taxation and customs exemptions. By such non-Iranians as Armenians, Syrians, Egyptians and others, both individuals and firms many of whom have been or may be employed on part-time contractual or other basis by our military establishment and who under agreement as now worded might insist upon claiming exemption from taxation on business other than that performed for or on behalf of United States armed forces. Other minor objections have been voiced but these probably would be dropped if use of above quoted words were clarified or adequately restricted.

While it is apparent that War Department does not wish to limit the kind or character of the agencies which may be employed by our [Page 481] armed forces in Iran I feel it is only just that any taxation or customs exemption which may be granted such unspecified agencies or individuals should be strictly and unmistakably limited to imports to state and monies earned or received solely during the period of and resulting from employment by or connection with our armed forces. This limitation could probably be established to the satisfaction of Iranian Government by the following changes in article III of draft agreement forwarded with Department’s instruction No. 272 of September 10:

In first sentence under first “provided” following the words “military personnel” line 13, page 3, change phrase to read “or of the agencies or employees aforesaid during the period of and strictly incident to their employment by or connection with the armed forces of the United States of America”.
Should foregoing change be approved and made, the second, “provided” would seem unnecessary and possibly confusing, and accordingly it is recommended that beginning with words “and provided” (line 14, page 3) the balance of first sentence of article III be eliminated.
In second sentence of article III (line 17, page 3) amend first phrase to read “No gross receipt, income, or like forms of taxes will be imposed, levied or collected by the Imperial Iran Government or any subordinate on the income heretofore earned or received by the agencies or employees aforesaid resulting from their employment by or connected with the armed forces of the United States of America;”

Department’s urgent consideration of these changes would be appreciated as I hope to leave here within a few days for the United States, for the Foreign Minister is most anxious that this agreement be finally concluded before my departure.