Current Economic Developments, Lot 70D467

Extract From Bulletin No. 242, February 20, 1950


Interest Increases in Tax Treaties With the United States

Increasing recognition by foreign countries of the role which private US capital can play in their economic development and of the importance of tax assurances as an inducement to that investment has resulted in heightened interest by these countries in negotiating tax conventions with the US. US tax treaties with other governments are designed to avoid double taxation of income and estates and to promote administrative cooperation in the assessment and collection of taxes. We expect to begin tax discussions in March with Uruguay at the latter’s request to consider whether a basis exists for income and estate tax conventions. Discussions already have been initiated with Argentina, Brazil, Colombia, Cuba and Mexico. We are also discussing supplemental treaties with Canada. Colombia has indicated its eagerness to sign draft treaties on income and estate taxes as well as the proposed Treaty of Friendship, Commerce and Navigation. However, since the tax treaties involve a liberalization of our standard form which would become a precedent for future treaties, further action awaits the determination of a US position thereon.

Pakistan, Austria and Switzerland have raised informally the possibility of undertaking tax negotiations with us. Israeli officials too have indicated interest in such negotiations, and also in the possibility of executive agreements for reciprocal exemption from taxation of shipping and aircraft earnings. The initiation of formal negotiations with Australia is still under discussion following informal correspondence between high tax officials of the two countries. Embassy New Delhi feels that, since the Indian Economic Ambassador at Large has been impressing on his government the importance of concluding a tax treaty with the US, this might be a good time for us [Page 689] to resume tax conversations with India which were begun during his visit to Washington and which have been held up pending our instructions.

At the present time nine tax conventions with six different countries are in effect. We have treaties dealing with income taxes with Sweden, France, Canada, the Netherlands, the UK, and Denmark; and those covering death taxes with Canada, France and the UK. Treaties have been negotiated and signed during the past year with Belgium, Norway and Ireland and are awaiting approval by the US Senate. Income and estate tax conventions have just been signed with Greece and will also be submitted to the Senate in the near future. The Senate Foreign Relations Committee also has before it treaties with South Africa and New Zealand.2

  1. Later in 1950 supplementary income tax and estate tax treaties were signed with Canada (June 12) and supplementary protocols were signed to the income tax and estate tax treaties with the Union of South Africa which were then before the U.S. Senate (July 14). For Department of State announcements concerning these signatures, see Department of State Bulletin, June 26, 1950, p. 1056, and August 7, 1950, p. 218, respectively. On July 20 notes were signed and exchanged, constituting an agreement, between the United States and Argentina for the avoidance, on a reciprocal basis, of double taxation on earnings derived from the operation of ships and aircraft, and entered into force immediately. For texts of the notes, see ibid., August 7, 1950, pp. 216–217.