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The Development of International Tax Law: Franco-American Treaty on Double Taxation—Draft Convention on Allocation of Business Income

Published online by Cambridge University Press:  12 April 2017

Mitchell B. Carroll
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Extract

The exchange of ratifications on April 9, 1935, of the Franco-American Convention on Double Taxation by Ambassador Straus and Foreign Minister Laval calls attention to the development of a new field of law in which the United States has been participating since the post-war depression. International double taxation had existed for some time before the World War as the result of countries taxing income whether derived by non-residents from local sources or by residents from foreign sources, but it did not become a serious problem until the budgetary exigencies of the World War had caused such an increase in rates that the payment of taxes to the foreign country, as well as to the home country, resulted in taking practically all of the income from carrying on business in the two. Likewise, serious double taxation existed in the field of property and estate or inheritance taxes as the result of countries taxing property having a local situs as well as property having a foreign situs but belonging to persons domiciled within their territory.

Type
Research Article
Information
American Journal of International Law , Volume 29 , Issue 4 , October 1935 , pp. 586 - 597
Copyright
Copyright © American Society of International Law 1935

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References

1 Report of the General Meeting of Government Experts on Double Taxation and Tax Evasion, League of Nations Document C.562.M.178.1928.II.

2 Collection of International Agreements and Internal Legal Provisions for the Prevention of Double Taxation and Fiscal Evasion, League of Nations.

3 Taxation of Foreign and National Enterprises, Vol. I, pp. 81 and 95, League of Nations.

4 Surville and Arthuys, Droit International Privé (1916), par. 470 III, p. 688.

5 Sirey, 1917,1, 142.

6 Revue de I'Enregistrement, March, 1928, 8698, pp. 159-164; La Semaine Juridique, January 26, 1928, pp. 124-126.

7 Revue de I'Enregistrement, May, 1928, 8734, pp. 329-333; La Semaine Juridique, May 3, 1928, pp. 567-568.

8 If an American corporation does not make the declaration, it may be subjected to the dividend tax by direct assessment under Article 3 of the decree of December 6,1872, but it is nevertheless protected against bearing the double burden of the French tax by virtue of the last paragraph of Article VI, which provides that it will enjoy the same benefits as a French corporation with a French subsidiary under Articles 27, 28 and 29 of the French law of July 31,1920, and Article 25 of the French law of March 19,1928, allowing an exemption for dividends distributed by the parent company to the extent they are paid out of dividends or interest received in the same year from its subsidiary, provided the shares or bonds remain registered in the name of the parent. Except for preventing the double payment of the dividend tax, this régime is the same as the one the treaty is intended to remove, and the paragraph in question was included in the treaty merely to protect corporations which failed to make the declaration in the prescribed period.

9 League of Nations Document C.399.M.204, 1933, F/Fiscal 76.

10 Fiscal Committee Report to the Council on the Fifth Session of the Committee, June 17, 1935 (C.252.M.124.1935.II.A).