Memorandum by the Deputy Director of the Office of Financial and Development Policy ( Spiegel ) to the Assistant Secretary of State for Economic Affairs ( Thorp )

[Here follows an exposition of the status of the tax treaty program.]

Tax treaty negotiations with American republics are close to definite collapse. The Treasury is firmly refusing to accept any treaty innovation designed to stimulate American private investment abroad by reductions in United States income tax rates on income derived by Americans and American corporations from investments abroad. So far there has been no public avowal that negotiations are proving or are likely to prove futile. The matter has not been thoroughly talked out between the State and Treasury Departments pending further trial of the possibility of drafting mutually acceptable treaties.1

Failure with the American republics would probably mean failure with underdeveloped countries elsewhere, such as India and Pakistan. If we get a treaty with Australia, it will result from Australia adopting [Page 690] a dynamic policy of economic expansion with the cooperation of American private investments.

  1. This situation is further discussed in the editorial note, infra.