551.2 A 2/8
Memorandum by Mr. Wallace McClure, Assistant to the Economic Adviser
Professor Adams called at the Office of the Economic Adviser on Thursday afternoon, March 10, 1927, for the purpose of discussing with officers of the Department of State certain questions suggested by Professor Adams’ mission to represent this Government at the forthcoming League of Nations Conference on double taxation. [Page 287] Those present were, besides Professor Adams, Doctor Arthur 1ST. Young, Economic Adviser; Mr. C. M. Barnes, Assistant Solicitor; Mr. F. D. K. LeClercq, of the Division of Western European Affairs, and Mr. Wallace McClure, Assistant to the Economic Adviser.
Professor Adams discussed briefly certain recent developments in the matter of double taxation among European countries, especially the considerable multiplication of bilateral treaties for the purpose of avoiding double taxation. He mentioned the fact that the program of the forthcoming Conference calls for the preparation of a model bilateral treaty for recommendation to countries which may desire to negotiate on the subject. Those present were inclined to the view that while a multilateral convention, open to signature by all countries, would theoretically, at least, prove a better solution to the problem of double taxation, such a solution might not now be practicable.
Professor Adams inquired concerning the attitude of the Department of State toward treaty provisions winch might have the effect of overruling Acts of Congress. He had in mind the possibility of a convention on double taxation later being negotiated that might contain provisions different from those of our national revenue laws. The representatives of the Department of State stated that as a matter of policy the Department undertook so far as possible to avoid placing in its treaties provisions which might be in conflict with existing statute law. It was suggested that it would be best to put in the next revenue law some general provision contemplating reciprocal agreements to avoid double taxation.
The possible usefulness of the most-favored-nation clause in solving the problem of double taxation was discussed. Professor Adams inquired particularly whether provisions in recent commercial treaties might have any relation to the problem in hand. The representatives of the Department of State were of opinion that the most-favored-nation clause in the treaty with Germany (December 8, 1923)32 and similar treaties subsequently concluded, did not apply to internal taxation, and that the provisions in Article I and Article VIII of the German treaty in regard to taxation did not provide for most-favored-nation treatment. It is customary in treaties to accord national rather than most-favored-nation treatment. It was further suggested that the most-favored-nation clause would probably not be useful in solving matters of double taxation at the present time. The practice of various countries, so far as the imposition of double taxation is concerned, is now so diverse as to make it of doubtful policy for a country to promise in advance to accord to any particular country as good treatment as it may bargain for in the future with [Page 288] some third country. It was thought that the right to make special bargains on the subject, without being committed in advance to generalize the concessions granted, would for the present, perhaps, be the appropriate policy for this Government to follow.
Professor Adams indicated that he expected concrete results from the forthcoming Conference and that, though at first dubious of the practical purposes of those backing it, he was now convinced that they intended to accomplish something, and that the countries of Europe were prepared to come to agreements on many points, reserving other points for the reconciliation of differences of opinion and probable agreement in the future.