I confined my efforts, however, to the transmission of the protest to the
ministry for foreign affairs, with the simple request that it might
receive the attention of the proper department.
I inclose herewith a translation of the verbal note of Count de Smet de
Naeyer, minister of finance, in reply to the protest.
The original in the French text has been forwarded to the Anglo-American
Chamber of Commerce.
The reply of Count de Smet de Naeyer seems to me to be convincing and
conclusive.
[Inclosure.]
Verbal note from the ministry
for foreign affairs of Belgium to Mr. Wilson for transmission to the
Anglo-American Chamber of Commerce at Brussels.
The Anglo-American Chamber of Commerce at Brussels has requested the
elimination of paragraph 3, article 6, of the proposed bill relative
to the licensing of insurers and limited companies.
This paragraph reads as follows:
“Deduction on account of expenses of administration, or otherwise,
will only be admitted when such expenses have been incurred in
Belgium.”
The petitioners’ claim is that the effect of this stipulation will be
to compel limited foreign companies located in Belgium to bear a
heavier burden of taxation than similar Belgian companies, the
latter being authorized to deduct from their gross profits all
expenses of administration, including those made outside the limits
of Belgium. From this it is concluded that the proposed bill makes a
discrimination contrary to the principle of commercial treaties.
The argument is not sound.
The proposed bill taxes the foreign limited companies located in
Belgium at the same rate as that levied upon similar Belgian
companies and upon the same fundamental principle.
If the proposed bill limits the expenses in the manner indicated
above, it is only because no other system is practicable.
It would be opening the door to abuses to permit foreign companies to
deduct from profits realized in Belgian establishments expenses
incurred for administration purposes at the home offices for Belgian
branches. The statement of expenses made by the agents of the
companies could be wholly arbitrary in the absence of means for the
Belgian authorities to determine its accuracy.
[Page 72]
It is conceivable that the Belgian fiscal authorities should be bound
to make investigations at London, New York, Paris, Hamburg, etc., of
the expenses of administration of the English, American, French, and
German companies located in Belgium.
On the one hand, the acceptance without investigation of the
taxpayer’s declaration would be contrary to the essential principle
underlining the whole of our fiscal legislation; in no case does the
latter admit the undisputed acceptance of the taxpayer’s
declaration. On the other hand, the Belgian administration has
neither the power nor practical means to verify abroad the
exactitude of expenses of administration which it might be claimed
had been made for the Belgian branch.
The Belgian legislator, in deciding a question closely related to the
fundamental principle of taxation, can and must take into account
these special considerations.
As a matter of fact, the expenses referred to in the petition of the
Anglo-American Chamber of Commerce are generally very slight, so
that their exclusion will have very little weight in the
determination of the sum total of taxable profits.
In support of its position the Anglo-American Chamber of Commerce
cites the fact that the Province of Brabant will admit its
contention, so far as the proportion of tax for the Province is
concerned. The provincial resolutions do not mention such decision
and the argument is, moreover, irrelevant.
In the conception and application of their fiscal regulations the
Provinces are more active in securing resources than in observing
the rules of law, to which the State, on the contrary, must remain
faithful in order to be consistent.
The provision established by paragraph 3, article 6, is moreover so
rational and so equitable that it will be applied to foreign
branches of Belgian companies in the determination of the profits
realized in these establishments. (Art. 9 and following of the
bill.)
For these reasons the Government can not take into consideration the
protest of the Anglo-American Chamber of Commerce.
