702.0641/65
The Ambassador in Great Britain (Dawes) to the Secretary of
State
London, October 22, 1930.
[Received
November 4.]
No. 1317Sir: I have the honor to state that the
substance of the Department’s instruction No. 458 of August 1, 1930,
regarding the refusal of the British Government to exempt American
Consular officers in Great Britain from the payment of income tax on
that portion of their non-official income which is derived outside the
United Kingdom, was brought promptly to the attention of the Foreign
Office. There is enclosed a copy of the Embassy’s letter dated August
25, 1930, to the Foreign Office in this regard.
The Embassy has received a reply from the Foreign Office dated October
20, 1930, stating that there seems to be no possibility of meeting the
United States Government’s wishes, for certain stated reasons, and that
the Foreign Office would not regard it as in any way unreasonable if the
United States Government should tax the private income of British
Consular officers in the United States, although it would be very
concerned if British Consular officers were to be called on to pay
income tax on their official salaries.
Respectfully yours,
For the Ambassador:
Raymond E.
Cox
First Secretary of
Embassy[Enclosure 1]
The Counselor of the American Embassy
(Atherton) to the Head of the
Treaty Department of the British Foreign Office (Warner)
My Dear Warner: May I refer to your note
No. T 5005/1/373 of May 9, 1930,6 regarding
the treatment of consular officers in the matter
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of income tax, concerning which I have
been in correspondence with the Department of State. I venture once
again to invite this matter to your attention since, under existing
regulations in my country, British consular officers assigned to the
United States are regarded as non-resident aliens by the Bureau of
Internal Revenue and are accordingly taxed on only that portion of
their income which is derived from sources within the United States
(see Income Tax Regulations 74, Article 641). In requesting relief
from income tax in this country for American consular officers the
American Government desires such relief to apply only to that
portion of their non-official income as is derived from sources
outside the United Kingdom on a basis of reciprocity.
With the above facts in mind, may I point out to you my understanding
that in order to tax the income of foreign consular officers in the
United States derived from sources outside the United States it
would be necessary to classify them for taxation purposes as
resident aliens. It would appear that the matter of classification
is not one of law but of regulation within the determination of the
United States Treasury Department and that the classification of
foreign consular officers as resident or non-resident aliens could
accordingly be made on a reciprocal basis.
My object in asking your consideration of the matter once again is
that you may understand the arguments that are being presented to
the Department of State and the possible trend of the deliberations
in the question of the classification of British consular officers
in the United States.
Yours sincerely,
[Enclosure 2]
The Head of the Treaty Department of the British
Foreign Office (Warner) to the Counselor
of the American Embassy (Atherton)
[London,] 20 October, 1930.
No. T11499/1/373My Dear Atherton: The considerations put
forward in your letter of August 25th, regarding the treatment of
consular officers in the matter of income tax, have been carefully
examined but I am sorry to say that there seems to be no possibility
of meeting your Government’s wishes, however much we might wish to
do so, for the following reasons.
The extra-statutory relief referred to in the third paragraph of my
letter of the 9th May last was only unassailable by reason of its
age, and it could hardly have been extended as a matter of
administrative
[Page 146]
action and
without legislation. It has now been given the force of law by
Section 20 of the Finance Act 1930, and it is thought to be quite
out of the question, immediately after that Act has given legality
to a practice of over eighty years standing, to introduce further
amendments of the law in quite a new direction.
It seems possible that the authorities at Washington do not really
appreciate how little tax is in practice payable in these cases. A
Consul’s official income is not merely exempt from income tax but is
entirely disregarded in determining the amount of his income, so
that he gets the full benefit of ordinary personal reliefs against
his private income. That is to say, he does not pay tax unless his
private income exceeds one hundred and thirty-five pounds if he is
unmarried, and two hundred twenty-five pounds if he is married, and
a considerably larger sum if he has children. It is only if his
private income exceeds four hundred pounds or five hundred pounds a
year that he is called upon to pay any substantial amount.
We should not of course regard it as in any way unreasonable that
your Government should tax the private income of British consular
officers in the United States, though we should naturally be very
concerned if they were to be called on to pay income tax on their
official salaries.
Yours sincerely,
[In a letter to the Secretary of the Treasury, dated December 1,
1930 (702.0641/65A), the Secretary of State wrote: “Under the
circumstances you may feel free to tax the private income of
British consular officers in the United States and I should be
glad to be informed of the attitude of the Treasury Department
in the premises.”
The Acting Secretary of the Treasury wrote on December 27, 1930
(702.0611/400): “In reply you are advised that it has been the
consistent policy of this Department to treat foreign consular
officers in the United States as nonresident aliens and
therefore to tax them only with respect to their income from
sources within the United States, other than their official
compensation received for services rendered in the United States
which is exempt from Federal income tax on the basis of
reciprocity. The Department prefers to adhere to its policy of
treating British consular officers in the United States as
nonresident aliens and to tax their private income only if such
income is derived from sources within the United States.”]
