Download - DOUBLE TAXATION - scopeArchiv · REPORT PRESENTED TO THE FINANCIAL COMMITTEE F THE LEAGUE OF NATIONS BY THE COMMITTEE OFTECHNICAL EXPERTS ON DOUBLE TAXATION AND TAX EVASION London,

[Distr ibuted to th e Council and to th e M em bers of the League.]

C. 2 1 6 . M. 8 5 . 1 9 2 7 II.

G e n e v a , A p r i l 1927.

L E A G U E O F N A T I O N S

DOUBLE TAXATIONA N D

TAX EVASION

REPORT

PRESENTED BY THE

Committee of Technical Experts on Double Taxationand Tax Evasion

Publications of the League of Nations

II. ECONOMIC AND FINANCIAL 1927. II. 40.

C O N T E N T S

Page

Coy in g L e t t e r ................................................................................................................................................................... 4

r f -, rt o f t h e C o m m i t t e e o f T e c h n i c a l E x p e r t s o n D o u b l e T a x a t i o n a n d

a x E v a s i o n : I n t r o d u c t i o n .............................................................................................................. 5

I . C on v e n tio n for the P re v en tio n of D oub le T a x a t io n :

A . T ex t of th e C o n v e n t io n ................................................................................ 10B . C o m m e n ta r y ........................................................................................................ 12

I . C onv e n tio n for the P re v en tio n of D ouble T a x a t io n in th e special m a t te r of Succession D uties :

A . T e x t of the C o n v e n t io n ................................................................................ 19B . C o m m e n ta r y ........................................................................................................ 20

i l . C onven tion on A d m in is t ra t iv e A ssis tance in M a tte rs of T a x a t io n :

A . T e x t of th e C o n v e n t io n ................................................................................ 22B . C o m m e n t a r y ....................................................................................................... 23

v . C onven tion on Ju d ic ia l A ssis tance in th e Collection of Taxes :

A . T ex t of the C o n v e n t io n ................................................................................ 26B . C o m m e n t a r y ........................................................................................................ 27

V . P roposa ls rega rd ing F u tu re O r g a n i s a t i o n ..................................................... . . . 31

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L E T T E R A D D R E S S E D BY T H E C H A IR M A N O F T H E C O M M IT T E E O F TEC \ ' ! -I

E X P E R T S ON D O U B L E T A X A T IO N A N D T A X E V A S IO N T O T H E C H A IR [AX

O F T H E F IN A N C IA L C O M M IT T E E

L ondon , April 1 2 th , 927

The C o m m ittee on D ouble T a x a t io n an d T a x E v as io n h ad been in s t ru c te d to d ra f t conven tions based on the reso lu tions a d o p te d b y the technical e x p e r ts in Febru; w ith a view to th e avo idance of doub le ta x a t io n an d th e p reven tion of ta x evasion, suance of these in s truc tions , th e four annexed d ra f t C onventions h av e been draw nI h av e now the h o n o u r to su b m i t th e m to the F inanc ia l C om m ittee ot th e L eague of N,

The C o m m ittee on D ouble T a x a t io n and T a x E v as io n is fully conscious t h a t t which i t h a s ju s t conc luded is im perfec t in th a t i t does no t p rov ide so lu t ions for all 1 culties w hich m a y arise in th is v e ry com plex ques tion . B u t , h a v in g regard to the 1 ot the leg isla tive sy s tem s rep resen ted in the C om m ittee , an d the necessity for finding capab le of accep tance b y everyone , i t will be recognised t h a t the ex p e r ts were b o u n d te them se lves to in d ica t in g genera l ru les, leav ing p a r t ic u la r po in ts of d ifficulty to be dt— in th e sp ir i t ot the accep ted genera l princip les — b y those on w hom th e ta s k ot neg the b i la te ra l conven tions will u l t im a te ly fall.

T he C om m ittee on D oub le T a x a t io n an d T a x E vas ion accord ing ly considers should no t d e lay p resen ting its conclusions, a n d th a t the resu lts which it h a s o b ta im uti l ised fo r th w ith b y G o v ern m en ts des irous of conc lud ing co n v en tions in the n e a r fu tur

I t is in th e l ig h t of these cons idera t ions t h a t the C om m ittee on D ouble T ax a t io n . E vas ion h as d ra w n u p th e an n e x ed repo rt , w hich it h as the h o n o u r to su b m i t herewit F in an c ia l C om m ittee .

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R E P O R T P R E S E N T E D T O T H E FINANCIAL C O M M IT T E E

F T H E LE A G U E OF NATIONS BY T H E C O M M IT T E E O F T E C H N IC A L E X P E R T S

ON DOUBLE T A X A T IO N AND T A X EVASION

L ondon, A pril 12th, 1927.I n t r o d u c t i o n .

In p resen ting its genera l an d final repor t, the C om m ittee of techn ica l E x p e r t s on D ouble ixation a n d T a x E v as io n th in k s i t des irab le brief ly to recall th e d eve lopm en t of th e L eague of itions w ork in th is m a t te r .

The I n te rn a t io n a l F in a n c ia l Conference held a t Brusse ls in 1920 recom m ended t h a t th e ague of N a t io n s shou ld ta k e u p th e ques tion of double ta x a t io n 1. The F in an c ia l C om m ittee , which th e q u es tion w as referred , to w a rd s th e end of 1920 e n t ru s te d the theo re t ic a l s tu d y of mble T a x a t io n to fou r econom ists , M. B r u i n s , M. E i n a u d i , M. S e l i g m a n a n d Sir Jo s iah am p , whose rep o r t (docum ent F. 19) was published in M arch 1923.

Meanwhile, th e In te r n a t io n a l E conom ic Conference, w hich h a d m e t a t G enoa in April 22, recom m ended t h a t th e L eague of N a t io n s should also ex a m in e the p rob lem of th e flight capital 2.

In J u n e 1922, th e F in an c ia l C o m m ittee decided to h av e b o th ques tions, nam ely , double xation and t a x evas ion , s tu d ie d from a n ad m in is t ra t iv e a n d p rac t ic a l p o in t of view. I t

rusted th is w ork to a g ro u p of h igh officials of the fiscal ad m in is t ra t io n s of va r io u s countries , mely M. C l a v i e r , M. B a u d o i n - B u g e t (subsequen tly rep laced b y M. B o r d u g e ), Sir P ercy

i m p s o n ( tem pora ri ly rep laced b y Mr. G. B . C a n n y ), Professor P a sq u a le d ’AROMA,

S i n n i n g h e D a m s t é , M. B l a u an d D r . V a l n i c e k .

N o tw ith s ta n d in g th e g rea t difficulties of th e ques tion , these expe r ts , a f te r ho ld ing several tings, agreed upon a series of R eso lu t ions which th e y su b m i t te d , to g e th e r w ith a general

ort, to the F in a n c ia l C om m ittee in February 1925 (docum ent F. 212).The F in a n c ia l C om m ittee , in i ts r ep o r t d a te d Ju n e 1925, expressed i t s a g re em e n t w ith the

in lines of th e e x p e r t s ’ R eso lu tions, b u t u rged the im portance , in a n y fu tu re enquiries , of m g in to cons idera t ion uth e d isa d v a n ta g e of p lacing a n y obstacles in th e w ay of th e

rna tional c ircu la t ion of ca p i ta l , w hich is one of the cond it ions of pub lic p rosper i ty and rid econom ic r ec o n s tru c t io n ’’.

1 R e c o m m e n d a t i o n s 0/ the B ru ss e l s Conference.R esolut ion proposed b y the C om m iss ion on Internat ional Credits, No. 12 :

Apart from the ab o v e -m en t io n e d proposals . . th e Conference be l ieves th a t the act iv it ieshe League of N a t io n s might useful ly be directed towards prom ot ing certain reforms and

iecting the re levant in form ation required to fac i l i ta te credit operations. In th is connection Conference considers it well to draw a t t e n t io n to the a d v a n tag e s of making progress under

h of the fo l low ing heads. . A n in ternat ional understanding which, while ensuring due p a y m e n t by everyon e of his full share of taxat ion , would avoid the im posit ion of double ition which is at present an obstac le to the placing of in v e s tm e n ts abroad .”

2 R e co m m e n d a t i o n s of ihe Genoa Co nf ere nc e .

Resolution proposed by the F inancial C ommission, No. 13 :"We have considered what action, if any. could be taken to prevent the flight of capita l in r to avo id ta x a t io n , and we are of th e opin ion th a t a n y proposals to interfere with the

dom of the m arket for exch an ge ; or to v io la te the secrecy of bankers' relat ions w ith their lOmers are to be condem ned . Subject to this proviso, we are of th e opinion th a t the question measures for in tern at io n a l co-operat ion to prevent ta x evas ion might be usefully s tudied in nect ion w ith the problem of double ta x a t io n which is now being studied by a C ommittee xperts on behalf of the League of N ations . W e therefore suggest that the League of N ations ild be in v i te d to consider it."

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As regards th e fu tu re progress ot th e i r w ork, th e exper ts suggested , in th e i r repor t F e b r u a r y 1925, t h a t th e C om m ittee shou ld be enlarged , a n d t h a t i t should be request p repa re p re l im in a ry d r a f t conven tions on th e bas is of the R eso lu t ions of 1925.

This reco m m en d a tio n w as su p p o r ted b y th e F inanc ia l C om m ittee a n d ap p ro v e d b Council, w hich au tho r ised th e S ecre tary -G enera l to issue th e necessary in v i ta t io n s . ( q u e n t ly th e following C om m ittee w as c o n s t i tu te d :

A rgentine : Dr. S a lv ad o r O r i a , la te S ec re ta ry of S ta te in the M inistry of F inance , Me-of th e B o a rd of th e N a tio n a l M ortgage B ank .

Replaced a t th e th i rd session b y M. Ju l ia n E n c i s o , Councillor ot Leg, G eneva.

Belg ium : M. C h . C l a v i e r , D irec tor-G enera l of D irec t T a x a t io n an d L a n d Suryth e M in is try of F inance .

Dr. V lad im ir V a l n i c e k , Chiet of Section in the M inis try of F inance. Replaced a t th e th i rd session b y H .E . Dr. B ohum il V l a s a k , M iniste r ]

p o te n t ia ry , H ead of D e p a r tm e n t in the M in is try of F inance.

M. B o r d u g e , Councillor of S ta te , D irec tor-G enera l of T a x a t io n a n d K

t r a t io n , M inis try of F inance.

Dr. H e rb e r t D o r n , D irec to r in the M inis try of F inance .

Sir P e rcy T h o m p s o n , D e p u ty C h a irm an , B o a rd of In la n d R evenue .

Professor P asq u a le d ’AROMA, Vice-Governor of t h e Bank of I ta ly .D irec tor-G enera l in the M inistry of F inance.

A ss is tan t : Dr. G ino B o l a f i i , H ead of Section in the M inis try of Fin; D e p a r tm e n t of D irec t T ax a t io n .

Mr. K engo M o r i , F inanc ia l C om m issioner of J a p a n in London. R ep laced b y Mr. T ak a sh i A o k i , R e p re se n ta t iv e in L ondon of the Bat

J a p a n .A ssis tan t : M. Y a m a j i , J a p a n e se D elegation to th e R e p a ra t io n Commi

Dr. J . H. R . S i n n i n g h e D a m s t é , D irec tor-G enera l of T ax a t io n .F o r Colonial ques tions : Dr. L. J . v a n d e r XVa a l s , D irec to r in th e Col D e p a r tm e n t .

P rofessor S tefan Z a l e s k i , Professor of Po litica l E co n o m y a t th e Unix: a t Posen.

A ssis tan t (for ques tions of succession duties): M. E d o u a rd W e r n e r , H D e p a r tm e n t , M in is try of F inance.

M. H a n s B l a u , D irec to r of th e F edera l T a x a t io n D e p a r tm e n t .

United Stales c l P rofessor T h o m a s S. A d a m s , P re s id en t of the A m erican E conom ic As Am erica : t ion , fo rm er E conom ic A dviser to th e U .S .A . T re a su ry D epart

Professor a t Y ale U nivers i ty .A ssis tan ts :Mr. M itchell B. C a r r o l l , Chief of T a x Section, D e p a r tm e n t of Comn Miss A n n ab e l M a t t h e w ' s , A tto rn ey , a t ta c h e d to the B oa rd of I

R evenue , T re asu ry D e p a r tm e n t .

Venezuela : Dr. Federico Alvarez F e o , Professor of F inance a t the U n iv e rs i ty of Ca

I t should be m en tioned here th a t , a l th o u g h the m em bers of th e C om m ittee a re nom; by th e i r respective G overnm en ts , th e y on ly speak in the ir c a p a c i ty as expe r ts , i.e., in own nam e.

Czechoslovakia

France :

G erm any :

Great B rita in

I ta ly :

Ja p a n :

Netherlands :

Poland :

Sw itzerland :

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The C om m ittee h as suffered a g rea t loss b y th e sudden d e a th in D ecem ber 1926 of Dr. yia.i mir V a l n i c e k , who h a d served on th e technical expe r t co m m it tee since i ts fo rm a tion in 102,3. T he m em bers of th e C om m ittee desire to ta k e th is o p p o r tu n i ty of pay in g a t r ib u te (0 their colleague an d friend, who, owing to his wide experience, afforded th e m o s t valuab le ass is ta n c e to the C om m ittee .

The C om m ittee h as held th re e sessions :

F irs t Session — G eneva , M ay 17th to 22nd, 1926.Second Session — G eneva , J a n u a r y 5 th to 12th , 1927.T h ird Session — L ondon , April 5 th to 12th, 1927.

W ith th e au th o r i s a t io n of th e Council of th e League of N ations , th e In te rn a t io n a l C ham ber of < immerce was in v i ted to send a delega tion to assist in an adv iso ry ca p ac i ty a t th e e x p e r t s ’ mei tings. T he de lega tion consisted of :

>1. Robert J u l l i a r d , P re s id en t of the C om pto ir d ’E sc o m p te of G eneva , C h a irm anof th e D ouble T a x a t io n C om m ittee of th e I n te rn a t io n a l C ham ber of Com merce.

A t the first session on ly :

Mr, George O. M a y , Senior P a r tn e r in Messrs. Price, W a te rh o u se & Co., NewY ork , C ha r te red A cc o u n tan ts , m e m b er of the D ouble T a x a tion C o m m ittee of the N a t io n a l A m erican C om m ittee of the In te rn a t io n a l C h a m b e r of Commerce.

At the second and th i rd sessions :

M. fean D u c h f . n o i s , D octo r of Law , m e m b er of the D oub le T a x a t io n C om m itteeof th e I n te rn a t io n a l C ham ber of Commerce.

At the th i rd session :

Sir \ lgcrnon F i r t h , B a r t . , E x -P re s id e n t of th e Association of B r it ish C ham bers of C om merce, m e m b er for G rea t B r i ta in on the D ouble T a x a t io nC om m ittee of th e I n te rn a t io n a l C h a m b e r of Com merce,C h a irm an of the C om m ittee on D oub le T a x a t io n of the B rit ish N a tio n a l C o m m ittee of the In te rn a t io n a l C h a m b e r of C om merce.

The ex p e r ts th a n k the delega tion of the In te r n a t io n a l C ham ber of Com merce, whose pre- seii ■ a t th e ir d iscussions on doub le ta x a t io n was of m u ch v a lu e ; th e y g rea tly ap p rec ia te thespirit of w holehear ted co-opera tion d isp layed b y th e delegation and are g ra tefu l for the valu-abi assis tance given.

( he A dv iso ry and T echn ica l C om m ittee for C om m unica tions and T ra n s i t hav ing expressed th desire to exp la in its views w ith regard to m easu res for avoiding doub le ta x a t io n in connecté " with m a r i t im e an d in land n av ig a t io n com panies , th e C om m ittee of E x p e r ts , at its first s;> h ea rd th e following delega tes :

M. S v g i m v r a , C ha irm an o f th e A dvisory an d T echn ica l C om m ittee forC om m unica tions an d T ra n s i t ;

M : LEMINSON, D irec to r of th e C ham ber of Sh ipp ing of the U n ite d K ingdom ;M. P a l a n c a , M anager of the N av igazione G enera le I ta l ia n a ; an dM W e i n b r e n n e r , F inanc ia l M anage r of the D a n u b e N av ig a t io n C om pany.

The ex p e r ts m uch app re c ia te d the v a lu a b le assistance given b y these rep resen ta t iv es of -rge o rgan isa tions , p a r t icu la r ly well qua lif ied to ex a m in e the very special an d com plex qi - tions w hich ar ise in connection w ith th e ta x a t io n of nav iga tion com panies.

As a l re a d y s ta te d , th e new C o m m ittee of tech n ica l E x p e r ts was asked to consider w h e th e r i t would be possible to d raw u p p re l im in a ry d ra f t conven tions on th e bas is of the F e b r u a r y 1925 R eso lu tions. A t i ts first session, th e C om m ittee began its w ork b y reviewing th e R eso lu t ions proposed in F e b r u a r y 1925, an d ex am in ed these in de ta i l . I t ap p e a re d t i e r th e R eso lu t ions as a whole m e t w ith genera l ap p ro v a l , inc lud ing also th e ap p ro v a l of those; e x p e r ts who h a d no t ta k e n p a r t in th e p rev ious work. Such changes of te x t as seem- | des irab le re la ted to po in ts of d e ta i l only, a n d were, m oreover, u n an im o u s ly app roved .

F u r th e r , th e C om m ittee endeavoured to p rep a re d ra f t conven tions on th e bas is of the R eso lu tions. I t was considered ex p ed ien t to d iv ide u p th e su b je c t -m a t te r in to four séparai- conventions . The ques tion of doub le ta x a t io n h as to be t r e a te d in tw o conven tions :

(a) D ra f t C onven tion for th e P re v en t io n of D ouble T ax a t io n .

(b) D ra f t C onven tion for th e P re v en t io n of D ouble T a x a t io n in the sped; 'm a t t e r of Succession Duties .T he ques tion of t a x evasion h as also to be dea l t w ith in two conven tions :

(c) D ra f t Convention on A d m in is t ra t iv e A ssis tance in M atte rs of T ax a t io n ,

(d) D ra f t C onvention on Ju d ic ia l A ssis tance in the Collection of Taxes.

A ques tion discussed a t g rea t len g th b y the C om m ittee was, w h e th e r th e Conventioi shou ld be collective, t h a t is, s igned b y as m a n y S ta te s as possible, or w he the r th e y should b m ere ly bilateral.

I t w ould ce r ta in ly be desirable t h a t th e S ta te s should conclude collective convention^ or even a single conven tion em body ing a ll th e o thers . N evertheless , the C om m ittee d id no1 feel just if ied in recom m ending th e ad o p t io n of th is course. In th e m a t te r of doub le taxatioi in pa r t icu la r , the fiscal sys tem s of th e va r ious coun tr ies are so fu n d a m e n ta l ly different that i t seems a t p rese n t p rac tica lly im possib le to d ra f t a collective conven tion , unless it were worde< in such genera l te rm s as to be of no p rac t ic a l value. In th e m a t te r of t a x evasion also, althougl u n a n im i ty w ou ld n o t seem to be u n a t ta in a b le , the re is no d o u b t th a t the accession of a ll coun tries to a single C onven tion could on ly be o b ta in ed as th e resu lt ot prolonged an d délicat nego t ia t ions , while th e re is no reason to de lay the p u t t in g in to force of b i la te ra l convention- w hich would im m ed ia te ly sa tisfy the leg it im ate in te res ts of the ta x -p a y ers as well as those ui

t h e C o n tra c t in g S ta tes .F o r th is reason, the C om m ittee p referred to d raw up s ta n d a rd b i la te ra l convention-

If these te x ts are used b y G overnm en ts in conc lud ing such conven tions , a ce r ta in m easun of u n ifo rm ity will be in t ro d u c ed in in te rn a t io n a l fiscal law and , a t a la te r s tage of th e evolu t ion ot t h a t law, a sys tem of general conven tions m a y be es tab lished which will m a k e possible th e un if ica tion a n d codification of th e ru les prev ious ly la id down.

Such are th e four d ra f t b i la te ra l C onven tions which the exper ts h av e th e h o n o u r to subm i to th e F inanc ia l C om m ittee . D eta iled com m en ta r ie s 011 th e m will be found in the following pages, as well as in the R e p o rt (docum ent F . 212) a t ta c h e d to th e te x t of th e Resolution- a d o p te d in F e b r u a r y 1925. T his rep o r t con ta ins im p o r ta n t considerations on the basii princip les which h a v e gu ided th e C om m ittee in its work.

T he C om m ittee would, nevertheless , briefly recall the c ircum stances in w hich it h a s under ta k e n a n d carried o u t its w ork. I t was fully aw are of th e difficulties in h e re n t in the twofold p rob lem su b m i t te d to it, as well as of those which m a y arise when th e b ila te ra l convention^ com e to be concluded. I t felt com pelled to m ake every effort to overcom e these difficulties, in v iew of the im p o r ta n ce of th e resu lts i t is hoped to a t ta in .

D ouble ta x a t io n , w hich affects m a in ly u n d e r ta k in g s a n d persons who exercise th e ir trade or profession in several coun tr ies , or derive the ir incom e from coun tr ies o th e r th a n the one in w hich th e y reside, im poses on such ta x p a y e rs b u rd e n s which, in m a n y cases, seem t r u h excessive, if not in to lerab le . I t te n d s to pa ra ly se th e ir ac t iv i ty and to d iscourage initiative

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mi thus cons ti tu tes a serious obstacle to th e deve lopm en t of in te rn a t io n a l re la t ions an d worldproduction .

Yt the sam e tim e, a n y excessive ta x a t io n , b y its v e ry b u rd en , b r ings in its t r a m ta x y01L the n a tu re an d g rave consequences of which have been em phasised on earlier occa-

“ions ' the suppression of doub le ta x a t io n is therefore closely connected w ith the m easures for the system atic p rev e n tio n or checking of such evasion.

It ' ' for th is tw ofo ld purpose t h a t efforts will h ave to be m a d e to secure in te rn a t io n a l co- neratb'ii, w ith a view to m ak ing it possible to p u t a s top to an evil which h as becom e especially

acute i ; wing to the increase in the fiscal b u rd e n s consequen t upon th e w a r ; the m easu res ulvocan d b y th e expe r ts could n o t fail to b r ing a b o u t a reduc tion in, a n d a b e t te r d is t r ib u t i o n of such b u rdens .

\ ■ ■ ord of ex p lan a t io n should be ad d e d in regard to the m e thods used. T h e C om m ittee e n d e a v o u re d to reach com plete ag reem en t on all essential po in ts In view of the d iv e rs i ty of tiscai systems, of th e d ifferent econom ic in te res ts and the d ive rgen t conceptions, b o th in regard o theo ry an d to prac tice , ob ta in in g in the various countries , u n an im o u s agreem ent could ' >t be reached in rega rd to all th e ques tions which had to be dea l t w ith . P o in ts on which omplete u n d e rs ta n d in g could n o t be a rr ived a t h ave been left for nego tia t ion an d decisio to an y S ta te s w hen , in th e fu tu re , th e y seek to conclude b i la te ra l trea tie s . The Comm I ::ee h as s tr iven ea rnes tly to res tr ic t to the u tm o s t possible ex te n t th e n u m b e r of questions thus left open.

In order to a r r iv e a t p rac t ic a l resu lts w ith the leas t possible de lay a n d a t the sam e t im e not to .xceed i ts in s t ru c t io n s , th e C om m ittee refra ined from e x a m in in g in de ta i l several Ico-relaivd ques tions of in te rn a t io n a l law, such as the doctr ine of rec iprocity , the t r e a tm e n t ol foreign na t iona ls , an d th e princip le of th e m os t-favoured nation , in th e ir re la t ion to the p roblem of dou; taxa tion .

Tli C om m ittee is of op in ion , however, t h a t these prob lem s should be su b m i t te d to a detaik'i exam ina tion from the f inancial, economic and legal po in ts of view. I t considers, moreover, th a t th e fiscal law s th ro u g h o u t the w orld will undergo a g rad u a l evolu tion an d th a t this will, in th e fu tu re , m a k e it possible to s im plify the m easures it has recom m ended an d possibl even to un ify fiscal legisla tion.

In trder to m a k e systematic and continuous in te rn a t io n a l co-opera tion possible in th is field, t " C om m ittee suggests t h a t a b o d v shou ld be set u p u n d e r the auspices of the League of Nat; ns ; the powers and du ties of th is bo d y will be exp la ined in de ta i l in the final p a r t of the pr ent R eport .

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I D R A F T O F A B IL A T E R A L C O N V E N T IO N F O R T H E P R E V E N T I O N O F DOI BLK

T A X A T IO N .

A. T e x t o f t h e Co n v e n t i o n .

Article i.

The p rese n t Convention is des igned to avoid doub le ta x a t io n in th e sphere of < ! : rect im persona l or pe rsona l taxes, in th e case of th e ta x p a y e rs of the C on trac t in g P ar t ie s , w L ther n a t io n a ls o r otherw ise.

F o r th e purposes of th is C onvention th e following shall be regarded as im personal t; ;es :

( “ ) ................................................................................(6) .............................................................................................................( c ) ................................................................................................

F o r th e purposes of th is Convention, th e following shall be regarded as personal taxi

( « ) .................................................................................(b ) ................................................................................................(c ) .................................................................................

I . Impersonal Taxes.

Article 2.

The income from im m ovab le p roper ty , i.e., t h a t which corresponds to the ac tua l 01 ire- sum ed ren ta l va lue of such p ro p er ty , as well as a n y o th e r income from such p ro p er ty win q is n o t covered b y Article 5, sha ll be tax ab le in th e S ta te in which th e p ro p e r ty in questi 1 is s i tua ted .

This rule shall ap p ly to income from m ortgages or o the r s im ila r c laim s :

Article 3.

Incom e from public funds, bonds, including m ortgage bonds, loans a n d deposits o r cui ent accounts, shall be taxab le in the S ta te in which the deb to rs of such income are a t the une resident.

N evertheless, if such income is paid in one of the Contracting S ta tes to persons domi' led in th e o th e r C ontracting S ta te , the ta x applicable the re to shall be re funded upon p ro d u ion of p roper evidence. In such case th e said income m a y be taxed in the S ta te of domici of th e creditor.

Article 4.

Incom e from shares or sim ilar in terests shall be tax ab le in th e S ta te in which the va!

cen tre of m a n a g e m e n t of th e u n d e r ta k in g is s i tua ted .

Article 5.

Incom e from a n y in d u s tr ia l , com m ercial or ag ricu ltu ra l u n d e r ta k in g an d from any - ihvr trad e s or professions shall be ta x ab le in th e S ta te in which the persons controlling th e u nder ta ing or engaged in th e t r a d e or profession possess p e rm a n e n t es tab lishm ents.

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: he real cen tres of m a n ag e m en t , affiliated com panies , b ranches , factories, agencies, wari )uses, offices, depo ts , shall be reg a rd e d as p e rm a n e n t es tab l ishm en ts . The fact th a t all undertaking h a s business dea lings w ith a foreign co u n try th ro u g h a bnnafide- ag e n t of independent s ta tu s (broker, com m iss ion agen t, etc.), shall no t b e h e ld to m ean t h a t th e u n d e r take 1 in ques tion h a s a p e rm a n e n t e s ta b l ish m e n t in t h a t coun try .

■hould th e u n d e r ta k in g possess p e rm a n e n t es tab l ish m e n ts in b o th C o n tra c t in g S ta tes , each of the tw o S ta te s sha ll t a x the p o r t io n of th e incom e produced in its te rr i to ry .

a the absence of accounts show ing th is incom e se p a ra te ly a n d in p roper form, th e co m p e tent ad m in is t ra t ions of th e tw o C on trac ting S ta tes sha ll com e to a n a r ran g e m en t as to the rule for a p p o r t io n m en t .

Nevertheless, incom e from m a r i t im e sh ipp ing concerns sha ll be ta x a b le only in the S ta te in v ich the real ce n tre of m a n a g e m e n t is s i tu a te d .

Article 6 .

The fees of m a n a g e rs and d irec to rs of jo in t-s tock com pan ies sha ll be ta x ab le in accordai w ith th e ru le la id dow n in Article 4.

Article 7.

Salaries, wages or o th e r rem u n e ra t io n of any kind sha ll be ta x ab le in the S ta te in which the cipients c a r ry on th e i r em p loym en t.

Salaries of officials a n d public, em ployees who a re serv ing ab ro ad sha ll , however, be ta x ab le in v S ta te w hich p ay s these salaries.

Article 8.

'ublic o r p r iv a te pensions shall be ta x a b le in th e S ta te of th e d e b to r of such income.

Article 0.

Vnnuities o r incom e from o th e r c la im s n o t referred to in the prev ious p a rag raphs sha llbe xable in the S ta te of fiscal dom icile of th e c red ito r ot such income.

I I . Personal Taxes.

Article 10.

The personal t a x on th e to t a l incom e sha ll be levied by th e S ta te in which th e ta x p ay e r bar iis fiscal domicile, i.e., his no rm a l residence, th e te rm ‘"residence” being unders tood to me, a p e rm a n e n t hom e.

f the S ta te of dom icile does n o t im pose im persona l ta x es on i ts ta x p a y e rs domiciled the in, i t sha ll d e d u c t from its pe rsona l t a x th e lesser of the two following a m o u n ts :

(a) E i th e r the a m o u n t of th e t a x which would be levied exclusively on such p a r t >f the incom e as is ta x e d in the o th e r C o n tra c t in g S ta te , or

(b) The a m o u n t of th e ta x p a id in the sa id S ta te , includ ing the pe rsona l ta x when :or special reasons th e S ta te of origin h a s im posed such a ta x on income from im m ovab le p roperty or from indus t r ia l , com m erc ia l or a g r ic u l tu ra l un d er tak in g s s i tu a te d w ith in itserritory.

These d ed u c t io n s sha ll not in to ta l exceed x p e r cent of the to ta l personal ta x leviable in the S ta te of domicile.

When th e S ta te of domicile im poses im personal taxes , the deduc tions p rov ided for above sh no t include im personal ta x es which co rrespond o r re la te to incom e ta x ed in the o ther Co rac ting S ta te .

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Article n .

In th e case of ta x p a y e rs who possess a fiscal dom icile in b o th C o n tra c t in g State? the personal t a x sha ll be im posed in each of these S ta te s in p ro p o rt io n to th e period of s ta y during the fiscal year , or according to a d iv is ion to be d e te rm in e d b y ag reem en t b e tw e en th e compe tent ad m in is t ra t io n s .

I I I . M iscellaneous Provisions.

Article 12.

The princip les la id dow n in th e preceding articles shall be app licab le m utatis unit, y;i t o the rec u rren t ta x es on to t a l w ea lth , cap ita l , or inc rem ents of to ta l w ea lth , accordi as th e se ta x es a re im personal or personal.

Article 13.

As reg a rd s a n y special p rov is ions w hich m a y be necessary to enable th e p resen t C o n v c ion to be applied , m ore p a r t ic u la r ly in cases no t expressly p rovided for, the financia l adm in trat ions of the tw o C on trac t in g S ta te s shall confer to g e th e r and take the m easures requin 1 in accordance w ith the sp ir it of th is Convention .

Article 14.

Shou ld a d ispu te arise be tw een the C on trac ting S ta te s as to the in terpre t, ion or app l ica tion of th e provis ions of th e p resen t Convention , and should such d isp u te n< be se t t le d e i the r d irec tly be tw een th e S ta te s or b y th e em p lo y m e n t of a n y o th e r mean of reach ing ag reem ent, the d isp u te m a y be su b m i t te d , w ith a view to a n am icab le se t t le r nt, to such techn ica l b o d y as th e Council of the League of N a tions m a y ap p o in t for th is pur >se. This b o d y will give an adv iso ry opinion af te r hea r ing the pa r t ies and a rrang ing a me, ing b e tw een th e m if nccessary.

The C on trac ting S ta te s m a y agree, p r io r to the opening of such p rocedure , to re g a r the adv iso ry op in ion given b y th e sa id bo d y as final. In the absence of such an agreem ent the opinion sha ll no t be b ind ing upon th e C on trac ting S ta te s unless it is accep ted b y bo th tnd th e y sha ll be free, a f te r resort to such p rocedure or in lieu thereof, to h a v e recourse to my a rb i t ra l or jud ic ia l p rocedure w hich th e y m a y select, inc lud ing reference to th e P erm a ent C ourt of I n te rn a t io n a l Ju s t ice as regards a n y m a t te r s which are w ith in th e com pet nee of t h a t C ourt u n d e r its S ta tu te .

N e i th e r the opening of th e p rocedure before the body referred to above nor th e op ion which it delivers shall in a n y case involve the suspension of th e m easures complainev of ; th e sam e rule sha ll ap p ly in th e even t of p roceedings being ta k en before th e P erm a ent C ourt of I n te rn a t io n a l Jus t ice , unless th e Court decides o therw ise u n d er A rticle 41 of i ts Sta ate.

B . C o m m e n t a s v.

The ex p lan a t io n s g iven in th e in tro d u c t io n to th is repo rt a n d in d o cu m en t F. 211 of F e b ru a ry 1925, in d ica te th e essen tia l princip les b y which th e C om m ittee w as g u ided in fra ing th e d ra f t C onven tion on D ouble T a x a t io n ; the ex p e r ts th in k , therefore, th a t it will be suffi ent if, in the follow ing pages, th e y m ere ly com m en t on each article of the d ra f t .

A rticle 1.

This a r t ic le defines the purpose of the p resen t C onvention ; i t is designed to avoid d> :ble ta x a t io n in th e sphere of d irec t ta x es in the case of the taxpayers of th e co n tra c t in g P ar t ie

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The te n d en c y of m o d e rn fiscal law is to consider t h a t a ll persons dom iciled in a S ta te -j)01s!d be liab le to th e sam e ta x a t io n th e re in whatever their nationality m ay be. This is w hy \ r t i ‘.'!e i of the d ra f t speaks of all ta x p a y e rs , w h e th e r nationals or otherwise. Supposing, for instance, t h a t tw o S ta te s A and B h ave concluded a co nven tion on these lines, th e nationals of a th i rd S ta te C which h ad no t concluded a s im ila r ag reem en t will never the less be e n t i t l e d to th e benef i ts of th e t re a ty , if th e y are ta x p a y e rs of S ta te s A an d B, e i th e r because the have th e i r fiscal domicile in these S ta tes or derive incom e from them .

I f , for econom ic reasons, or w ith a view to induc ing ce r ta in S ta tes to conclude sim ilar COir ntions, the co n t ra c t in g p ar t ie s deem it p referable prov is iona lly to l im it the scope of the Cor r n tion to th e i r ow n n a t ionals , th e y need on ly delete in th e te x t of A rticle i th e w ords '-Yv ther n a t io n a ls o r o th e rw ise” . T h ey m ay , on th e o th e r h an d , ex ten d its app l ica tion to the nationals of S ta te s w ith w hich th e y h a v e concluded such conventions .

* *

\f te r s ta t in g th e genera l pu rpose of the Convention , Article i defines i ts scope : it governs dirt ■;! impersonal or personal taxes.

Desirous of avo id ing a n y con tro v e rsy on m a t te r s of doctrine , the expe r ts h ave n o t defined the iwo g rea t categories of d irec t taxes . T h ey m ere ly note , by w ay of ind ica t ion , th a t imi rsonal ta x es a re in m os t cases lev ied on all kinds of income a t th e source, irrespective of lie personal c ircum stances of th e ta x p a y e r (nationali ty , domicile, civil s ta tu s , fam ily rest .risibilities, etc.) th u s differing from personal taxes w hich ra th e r concern ind iv iduals and their aggregate income.

The C o n tra c t in g S ta te s will them se lves decide which of th e i r d irec t tax es th e y regard , for .if purposes of the C onven tion , as being im personal or personal taxes .

' im i la r fo rm s of ta x a t io n levied on beha lf of su b o rd in a te pub lic bodies (provinces, can tons or p a r tm en ts , m unicipa lit ies , etc.) m a y b e inc luded in the list, if c ircum stances just ify sue a m easure.

The ass ignm en t of in d iv id u a l ta x es to th e tw o categories of d irec t ta x es m en tio n ed above is ; r t icularly im p o r ta n t , as th e d ra f t lays down different provisions as rega rds each of thesecat' .ories.

I . Impersonal Taves..!> > 2.

Article 2 em bodies a generally accep ted princip le : t h a t incom e from im m ovab le p roper ty , i.e. he incom e w hich corresponds to th e a c tu a l or p resum ed re n ta l value , as well as every oth form ot incom e lrom im m ovab le p ro p e r ty n o t covered b y Article 5, shall be taxab le in ! iv S ta te in w hich th e p ro p e r ty in ques tion is s i tua ted .

The above princip le applies, ir respec tive of th e n a tu re of th e r igh t o r fac t (p roperty , usii ruct, possession, lease in p e rp e tu i ty etc.), from which the ta x ab le incom e is derived.

The te rm ‘‘o th e r incom e from such p ro p e r ty ” is on ly in ten d ed to cover incom e which is 1 t derived f rom indus t r ia l , com m erc ia l o r ag r ic u l tu ra l under tak ings , m en tioned in A rticle 5 of ? draft.

The second p a ra g ra p h of Article 2 lays dow n t h a t th e rule set forth in the first p a ra g ra p h shvj app ly to income from mortgage£ and other sim ilar claims.

This provis ion is in ten d ed to ap p ly to incom e from m ortgages or o the r s im ila r claim s, wl her i t is d ed u c te d from th e incom e derived f rom the im m ovab le p ro p e r ty or not. I f the dev ction referred to is n o t m ade , special m easures will h av e to be ta k en in order to p reven t th State of domicile from hav ing to g r a n t excessive relief.

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Article 3.

This clause deals w ith incom e derived from in v e s tm e n ts in t ransfe rab le securities c her th a n shares.

I t lay s dow n th a t incom e from pub lic funds, bonds, inc lud ing m ortgage-bonds , K ;ns an d deposits o r c u r re n t accoun ts sha ll be ta x a b le in th e S ta te in w hich the debtors of uch incom e are a t th e t im e resident.

B y " p u b l i c f u n d s ’' is m e a n t th e securities issued b y the S ta te or b y o th e r public b< ies (provinces or d e p a r tm e n ts , ca n to n s , m unicipa lit ies , o th e r pub lic es tab l ish m e n ts , etc.).

Thei bonds considered are those ot non-com m ercia l (sociétés civiles) o r commt ial com pan es, even if secured b y m ortgages.

As regards loans, deposits , o r cu r ren t accounts , these te rm s are here used w ith t ieir legal or cu s to m a ry m ean ing ; as a rule, th is clause will on ly be applied to incom e from uncommercial loans, deposits or c u r re n t accounts . In te res t on professional accoun ts op> ied for bus iness purposes b y t rad e rs or persons engaged in in d u s t ry is, in fact, inc luded u 1er profits of bus iness un d e r ta k in g s , which a re covered b y A rticle 5.

As regards in te res t on depos its or cu r ren t accounts , th e debtor is th e es tab lishm en or b ra n c h w hich p ay s th is in terest.

T he second p a ra g ra p h of A rticle 3 p rov ides for an exception to the ru le la id dow n in he first p a ra g ra p h : if th e incom e referred to in th is clause “ is p a id in one of th e contrac ng S ta te s to persons dom iciled in the o th e r co n tra c t in g S ta te , th e ta x app l icab le th e re to s all be re fu n d ed upon production of p roper evidence. In such case, the sa id incom e m a y be t;i ed in th e S ta te of dom icile of th e c re d i to r .”

This is a special clause to be discussed betw een th e co n t ra c t in g S ta tes . The refun< ng of th e ta x by th e S ta te of th e d e b to r will generally depend upon econom ic or budge, ry co nd it ions ; the levy ing of the ta x b y the S ta te of the c red ito r will in some cases, however be jus t if ied b y reasons of equ i ty , b u t will n o t be com pulsory . Such refund m a y be limite< to

e r ta in form s ot incom e and m a d e c o n t in g en t upon the app l ica tion of th e deduc tion prov ed cor u n d e r A rticle 10.f W here necessary, m easures will have to be ta k en to p rev e n t f raud b y m eans of affidv its or o th e r d o c u m e n ts signed b y or on beha lf ot the persons e n t i t led to th e incom e. In iis connection , reference should b e m ade to the d ra f t Convention on A d m in is tra t iv e Assis tanc

Article 4.

In co m e from shares or s im ila r in te res ts is th e sub jec t of Article 4 of the d r a f t ; un r th e p rov is ions of th is article , i t is tax ab le in the S ta te in which the real ce n tre of m an ag en nt of th e u n d e r ta k in g , t h a t is to say th e m a n a g e m e n t an d contro l of th e business, is s i tu a te d ?o th a t th e case of a pure ly nom inal cen tre of m a n ag e m en t is excluded.

This clause will h a v e to be sup p le m e n ted if i t is agreed t h a t the sy s tem of re funds cont n- p la ted in th e second p a ra g ra p h of A rticle 3 shall app ly also to d iv idends . Here, again, ne d e te rm in in g fac to rs will be economic o r b u d g e ta ry considerations, o r even polii al c ircum stances .

In regard to th is article , th e B rit ish exper t h as expressed d issent. In his view, a sec id m a n d a ta r y p a ra g ra p h ough t to be added to Article 4, iden tica l w ith th e second parag r >h of A rticle 3. T he p rincip le of ta x in g business p rofits in the S ta te in w hich th e y are ear d has been conceded in Article 5, an d provis ion has been m ade in A rticle 10 for a d educ tion of le ta x so charged from th e personal t a x in th e S ta te of domicile. In the view of th e Bri h ex p e r t i t is un reasonab le th a t th e financial b u rd e n of g ra n t in g relief from double taxa tio i n respect of th e ad d i t io n a l ta x on d iv idends should also fall on th e S ta te of dom icile .

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Article 5-

This clause h a s reference to incom e from a n y indus t r ia l , com m erc ia l or ag r icu ltu ra l UIn -rtakings, a n d from a n y o th e r t rad e s or professions ; it is to be ta x a b le in th e countries in hich the persons con tro l l ing the u n d e r ta k in g s or engaged in the t r a d e o r profession, possess p0 uancnt establishments.

The w ord “ u n d e r ta k in g s ” m u s t be u n d e rs to o d in its w idest sense, so as to cover all Un r tak ings , inc lud ing m ines and oilfields, w ith o u t m ak in g a n y d is t in c t io n betw een n a tu ra l an legal persons.

The second p a ra g ra p h gives a list of the e s tab l ish m e n ts w'hich are considered as p e rm a n e n t ; th are : real cen tres of m a n ag e m en t , affilia ted com panies, b ranches , factories, agencies, w, houses, offices, depo ts , no m a t t e r w h e th e r such es tab l ish m e n ts a re used b y th e t ra d e rs Hi mselves, b y th e i r pa r tn e rs , a t to rn ey s , o r th e i r o th e r p e rm a n e n t represen ta tives .

N evertheless, th e ta c t th a t an u n d e r ta k in g h a s business dea lings w ith a foreign co u n try th mgh a bona fide ag e n t of independent status (broker, com m ission agen t, etc.) sha ll n o t be hi ! to m ean th a t th e u n d e r ta k in g in ques tion has a p e rm a n e n t es tab l ish m e n t in t h a t coun try . T1 words “ bona fide ag e n t of inde p en d e n t s t a t u s ” a re in tended to im p ly abso lu te independence , hi i from th e legal an d econom ic p o in t of view'. T he a g e n t ’s rem u n e ra t io n m u s t n o t be bt iw w'hat would be regarded as a n o rm a l rem u n e ra t io n . T h e C om m ittee h as n o t ex -ressed a n opinion o n th e p o in t w h e th e r pu rchas ing offices o r sales offices are to be c< ddered as places of business , th is be ing a ques tion of fact.

P a ra g ra p h s 2 an d 3 of th is clause govern th e case in which th e u n d e r ta k in g possesses pt j i a n e n t e s tab l ish m e n ts in b o th co n tra c t in g S ta te s ; in t h a t even t, “ each of th e two S ta te s sli: II ta x th e po r t ion of the incom e p roduced in its t e r r i to r y ” . T h is is an app l ica t io n of th so-called sys tem of appo r t io n in g the incom e accord ing to i t s source.

" I n the absence of accoun ts show ing th is incom e sep ara te ly a n d in p roper io r m , the co ipe tcn t ad m in is t ra t io n s of th e tw o co n t ra c t in g S ta tes shall com e to an a r ra n g e m e n t as to he rules for a p p o r t io n m e n t .”

These rules will v a r y essentially accord ing to the u n d e r ta k in g s concerned ; in ce r ta in Si 1 es accoun t is ta k en , accord ing to the n a tu re of the u n d e r tak ings , of th e a m o u n t of ca p i ta l in lived, ot the n u m b e r ot workers , the wages paid , receip ts , etc. S im ilarly , in cases where th, p roducts of factories arc sold ab road , a d is t inc t ion is often m ade b e tw een “ m a n u fa c tu r in g ” ai: “ m e rc h a n t in g ” profits , the la t te r being th e difference b e tw een th e price in the hom e m a rk e t ;u the sale price ab road , less cost of t r a n sp o r t . These c r i ter ia a re , of course, m ere ly given a? ndications.

T he la s t p a ra g ra p h of Article 5 c o n ta in s an express exception to the principle la id down in he first p a ra g ra p h : i t p rov ides t h a t incom e from m a ri t im e sh ipp ing concerns shall beta able on ly in the S ta te in which th e real ce n tre ot m a n a g e m e n t is s i tu a te d .

This p a ra g ra p h m a y , according to c ircum stances , be de le ted o r its provisions l im ited . T v m ay also be ex tended to cover river, lake o r air nav iga tion . S hould the la s t p a ra g ra p h ot Vrticle 5 be o m i t te d , the rules for a p p o r t io n m e n t la id dow'n in th a t article would rem ain a| ilicable.

A iclc 6.

This ar tic le p rov ides th a t the fees of m a n ag e rs an d d irec to rs of jo in t stock com pan ies ?i .1 be ta x ab le in accordance w ith th e rule la id dow n in Article 4, t h a t is, in the S ta te in which t : real cen tre of m a n a g e m e n t of the u n d e r ta k in g is s i tu a te d .

This prov is ion is des igned to cover th e special t a x on var iab le fees, which are ded u c tedfi 1 profits and hence c o n s t i tu te a p a r t of th e la t te r . F ix ed sa laries, on th e co n tra ry , comeVi bin the ca tego ry of general exp e n d itu re an d a re governed b y the following article.

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Article 7.

Salaries, wages a n d o th e r rem u n e ra t io n of a n y k ind (with th e excep tion of the fe(5 m e n tio n e d in Article 6) shall b e ta x a b le in th e S ta te in which th e rec ip ien ts ca r ry on fheir

em ploym en t.T he incom e is a c tu a l ly p roduced in t h a t S ta te an d th e t a x can easily be levied a t the sourceNevertheless , special clauses m a y b e in se rted to m ee t th e case of persons w orking ii the

v ic in i ty of th e f ron tie r or engaged in a n y i t in e ra n t occupation , em p lo y m e n t or trade.T he second p a ra g ra p h of A rtic le 7 lays dow n th a t sa laries of officials an d pub lic empli \.-ee?

who are se rv ing a b ro a d sha ll be ta x a b le in the S ta te w hich pays these sa laries.T he fiscal regim e for d ip lo m a t ic or consu la r agen ts is, how ever, a t p resen t the o' ject

of special s tud ies which are be ing ca rried on in con junction w ith th e C om m ittee of Jirist; for the Progressive Codification of I n te rn a t io n a l Law

Article 8.

This a r t ic le p rov ides t h a t public or p r iv a te pensions sha ll be ta x a b le in th e S ta te 01' ihe d e b to r of such income.

I t ap p e a re d b o th r igh t an d p rac tica l th a t all pensions should be m ade subject to ihe sam e ru les .

Article 9.

C on tra ry to th e ab o ve -m en tioned provisions, an nu i t ie s or incom e from o th e r claim s not

referred to in the prev ious p a ra g ra p h s shall be ta x a b le in th e S ta te of fiscal dom icile oi ihe c red ito r of such income.

The excep tion which is th u s m a d e for an nu i t ie s is just if ied b y the special n a tu re of iis fo rm of incom e, since th e rec ip ien t is free to select the c o u n t ry w hich is to be liab le for he p ay m en t .

I I . Personal 'luxes.Article 10.

U n d er th e te rm s of th is artic le , the personal ta x on to ta l incom e is to be lev ied bv Instate in w hich th e ta x p a y e r has his fiscal domicile, i.e., his n o rm al residence, th e te rm “ résider being u nders tood to m e an a p e rm a n e n t hom e.

This p rovis ion is of double im p o r t : i t specifies th e place a t which th e personal or gen- al t a x shall be levied and , fu rthe r , gives a defin ition of fiscal dom icile in te rm s w hich w re discussed a t g rea t le n g th an d are those accep ted b y th e m a jo r i ty of th e ex is t ing codes of 1 v.

T h e w ords “ permanent hom e" convey th e idea of an e s ta b l ish m e n t in ten d ed to ! st for some t im e. E v en a person who s tays a t an hote l for several m o n th s m a y be considi -d as n o rm a l ly residing there . M oreover, a S ta te is alw ays free to ta x an y of its own natioi Is who would not be ta x ed because th e y are con t inual ly m oving a b o u t .

A rtic le 10 p rov ides for a m odification of th e rule which it lays down.In order to avoid double ta x a t io n , the S ta te of domicile, if it does no t l e w im p e ls .al

ta x es on persons res iden t the re in , will m ake a d ed uc tion from its personal ta x w ith reg rd to the incom e ta x e d in the c o u n t ry of origin. B u t w h a t should be the a m o u n t of s h ded u c t io n ? I t is to be l im ited to th e lesser of the two following am o u n ts , i.e. :

(«) T he a m o u n t of th e ta x which would be pa id in the S ta te of dom icile exclusiv ivon such p a r t of th e incom e as is l iab le to ta x a t io n in th e S ta te of origin ; or

(/») The a m o u n t of th e ta x pa id in th e S ta te of origin.

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W here, for specia l reasons, w h e th e r economic o r fiscal, one of the co n tra c t in g S ta te s decides to impose, in a d d i t io n to its im personal taxes, a personal or su p p le m e n ta ry ta x on incom e from im m ovable p ro p e r ty and from in d u s t r ia l , com m erc ia l or ag r ic u l tu ra l u n d e r ta k in g s produced w ithin th e c o u n try , the reduc tion prov ided for under (6) above sha ll a p p ly n o t on ly to im personal ta x e s p a id in the c o u n t ry of origin on such income, b u t also to th e add i t iona l personal ta x p a id th e re un d er th is head , sub jec t to the l im ita t io n a lready referred to.

Moreover, the two deduc tions m a y no t in to ta l exceed x p e r cent 1 of the to ta l a m o u n t of the personal ta x levied in th e c o u n t ry of domicile.

T his restr ic tion is des igned to p rev e n t a ta x p a y e r whose whole incom e is de r ived from abroad from escaping all t a x a t io n in his c o u n t ry of domicile.

T he following exam ple will exp la in th e app l ica tion of th e sys tem of d ed u c t io n s a d v o c a ted by the expe r ts : A ta x p a y e r dom iciled in S ta te A draw s a to ta l incom e of 100,000 francs, 20,000 of which are derived from an in d u s t r ia l or com m erc ia l u n d e r ta k in g s i tu a te d in S ta te R, which, under th is head , levies an im personal ta x of 3,000 francs an d a personal t a x of 1,000 francs, i.e., a to ta l of 4,000 francs.

T h e ta x in S ta te A, which does n o t levy im personal taxes , will be ca lcu la ted on the to ta l of the incom e (for ins tance , a t th e r a te of 20 per cent), i.e., 100,000 x 20 = 20,000 francs, b u t

100the fiscal au th o r i t ie s will ded u c t the re from th e sum of 4,000 francs m e n tioned above, so t h a t the ta x will be reduced to 20,000 - - 4,000 = 16,000 francs.

If, how ever, in th e S ta te of domicile the personal t a x only a m o u n ts to 3,000 francs on an incom e of 20,000 francs, 3,000 francs will be deduc ted an d the ta x will th e n be reduced to 20,000 — 3,000 = 17,000 francs. A S ta te will th u s no t suffer loss ow ing to th e fac t t h a t its na t iona ls engage in business in o th e r S ta tes .

T he relief p rov ided for above will be g ran te d in p a r t icu la r in cases in w hich the S ta te of domicile on ly levies a general incom e ta x . If th is general t a x is of a p u re ly com plem en ta ry n a tu re , and is add i t iona l to im personal taxes , the re will be no need for relief, o r a t any ra te such relief will h av e to b e lim ited . F o r th is reason, th e la s t p a ra g ra p h of A rticle 10 lays down th a t , if th e S ta te of domicile levies im personal taxes , the deduc tions p rov ided for un d er(a) or (b) in A rtic le 10 shall n o t include the im personal taxes corresponding or re la t ing to the income taxed in the S ta te of origin.

T h e ex p e r ts h av e fu r th e r co n tem p la te d an o th e r m e th o d of avoid ing double ta x a t io n . The t a x in th e S ta te of domicile of th e ta x p a y e r would be ca lcu la ted a t th e r a te applicab le to th e whole of his income, b u t i t would only be levied on th a t p a r t ot his incom e w hich is taxab le in t h a t co u n try , t h a t is to say, exclusive of the incom e ta x e d in th e co u n try of its origin. T h u s a ta x p a y e r dom iciled in S ta te A draw ing a to ta l incom e of 100,000 francs, 20,000 of w hich is der ived from im m ovab le p ro p e r ty s i tu a te d in S ta te B, w ould only be ta x ed in S ta te A on 80,000 francs, b u t at th e r a te applicab le to 100,000 francs.

Article 11.

This ar tic le is des igned to cover a special case, nam ely , t h a t of ta x p a y e rs w ith a fiscal domicile in b o th co n tra c t in g S ta tes . In this case, th e ta x will be im posed in each of these S ta tes in p ro p o rt io n to th e period of s ta y d u r ing th e fiscal year, o r according to a div ision to be d e te rm in ed b y agreem en t betw een the com peten t ad m in is t ra t io n s , for instance, in p roportion to the a m o u n t of incom e p roduced in each coun try . This clause m igh t, if necessary, be applied to ta x p a y e rs w ho change th e i r domicile d u r ing the fiscal year.

1 The percen tage is to be de te rm in ed by the con trac t ing par t ies

I I I . Miscellaneous Provisions,Article 12.

A rticle 12 p rovides t h a t the princip les la id dow n in th e preceding ar ticles sha ll be applicable m uta tis m utandis, to th e rec u rren t ta x es on to t a l w ea lth , c a p i ta l or in c rem en ts of t o t a l w ealth accord ing as these ta x es a re im personal or personal.

Succession d u t ie s fo rm the su b je c t of a se p a ra te C o n v e n tio n .As regards taxes of a n excep t ional n a tu re , special ag reem ents m a y h av e to be concluded

h a v in g due reg a rd to the n a tu re of these taxes.T h is p rovision of Article 12 is, m oreover, n o t com pulsory , in asm u ch as countries which

conclude a conven tion will h ave th e op tion of om it t in g th i s article.

Article 13.

A n y special p rov is ions which m a y be necessary to enable th e C onven tion to be applied m ore p a r t icu la r ly to cases n o t expressly prov ided for sha ll be se t t le d b y ag reem en t between th e financia l ad m in is t ra t io n s of the co n tra c t in g S ta tes in accordance w ith the sp ir i t of the Convention .

Article 13 is des igned to give effect to th is principle.

Article 14. «

T here sti ll r em a ined to d e te rm ine the procedure which should be followed in the even t of a d isp u te as to th e in te rp re ta t io n or app l ica tion of the C onvention ; th is p rocedure is laid dow n in Article 14, w hich is b ased upon th e te x t in se rted in o th e r in te rn a t io n a l conventions , in p a r t ic u la r th e C onvention for the S im plification of Custom s F o rm a li t ie s signed a t Geneva on N ovem ber 3rd, 1923. I t seem ed advisab le , however, to s ta te t h a t the co n t ra c t in g S ta tes will h av e th e o p tion of accep ting the op in ion of the adv iso ry bo d y in advance .

O ne m ore obse rva tion : T he d ra f t C onven tion applies m ore p a r t icu la r ly to countrieswhich levy im persona l ta x es an d also a personal or general t a x ; b u t the ar tic les proposed could also be m a d e to serve in the ev e n t of the s im ultaneous exis tence of a general ta x in the c o u n t ry of domicile an d schedu la r taxes in the co u n try of origin ; m oreover, these articles could be ab r idged if the fiscal sy s tem s of th e tw o con trac t ing S ta te s were sufficiently s im ilar to one ano ther .

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I I . D R A F T B I L A T E R A L C O N V E N T IO N F O R T H E P R E V E N T I O N O F D O U B L E

T A X A T IO N IN T H E S P E C IA L M A T T E R O F S U C C ESSIO N D U T IE S .

A . T e x t o f t h e C o n v e n t i o n .

Article i .

The pu rpose of the p resen t C onven tion is to p rev e n t ta x p a y e rs of the C on trac tin g S ta te s from being sub jec ted to doub le ta x a t io n in the m a t t e r of succession du ties .

F o r th e purpose ot th is C onvention , th e following sha ll b e regarded a s succession du ties :

( « ) ..............................................................................( b ) ..............................................................................(c ) ..............................................................................

Article 2.

Succession du t ie s shall b e lev ied by th e co u n try of domicile of the deceased, t h a t is to say, b y th e co u n t ry in which the deceased, a t the tim e of his d ea th , h ad ta k e n u p his residence w ith the m a n ife s t in ten tion of rem a in in g there . These du t ie s m a y be levied on th e to ta l of the p ro p e r ty left b y th e deceased, inc lud ing p ro p e r ty s i tu a te d in a n o th e r co u n try , b u t , where necessary, the deduc tions p rov ided for in Article 4 sha ll be effected and only th e difference shall be collected.

In th e absence of a domicile as defined in the preced ing p a ra g ra p h , the co u n try of which the deceased w as a n a t iona l sha ll be considered his co u n try of domicile.

Article 3.

If th e deceased was dom iciled in one of th e C on trac ting S ta tes a n d leaves p ro p e r ty in the o th e r C on trac t in g S ta te , the la t t e r S ta te m a y le v y succession du t ie s on such p roper ty , b u t on ly a t th e r a te applicab le to the ir value, exclusive of the o ther assets s i tu a te d in a n y o the r S ta te .

Article 4.

In o rder to o b v ia te the doub le ta x a t io n w hich w ould resu l t from the s im u lta n eo u s a p p l i ca tion of th e tw o preceding ar tic les , th e co u n try in which th e deceased w as dom iciled sha ll allow the lesser of the tw o following am o u n ts to be ded u c ted in respect of th e categories of p ro p e r ty specified below :

(a) T h e a c tu a l am o u n t of d u ty levied b y the co u n t ry of domicile on assets s i tu a te d in an o th e r c o u n t ry ;

(b) T h e ac tu a l a m o u n t of d u ty payab le on such assets in the co u n t ry in which the assets are s i tu a te d .The ca tegories of p ro p e r ty referred to above are th e following :

(«) Im m o v a b le p ro p e r ty , fu rn i tu re and f i t t ings;(b) M ortgages ;(c) C ap ita l inves ted in in d u s t r ia l , com m erc ia l or ag r icu ltu ra l u n d e r ta k in g s , exc lu

sive of shares ;

w ................................and a n y o th e r fo rm of p ro p e r ty which is or m a y su b sequen tly be ta x e d b y th e two countries s im u ltaneously in th e co u n t ry in w hich it is s i tu a ted .

Article 5.

D eb ts chargeable to or secured on specific p ro p e r ty shall be deduc ted from the value of

t h a t p roper ty .

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O ther d e b ts shall be d iv id ed am o n g specified classes of asse ts in accordance w ith special ag reem en ts to be conc luded be tw een th e C on trac t in g P ar t ie s .

Article 6.

Should a d isp u te 'a r ise be tw een th e C on trac ting S ta te s as to the in te rp re ta t io n o r app l ica tion ^of the p rovis ions of th e p re se n t C o n v e n tio n , and shou ld such d isp u te n o t be se t t led e i the r /d irec t ly be tw een th e S ta te s or b y the em p lo y m e n t of a n y o the r m eans of reach ing ag reem ent, th e d isp u te m a y be s u b m i t te d , w ith a view to an am icab le se t t le m e n t , to such techn ica l bo d y as th e Council ot the L eague of N a t io n s m a y ap p o in t for th i s pu rpose. This b o d y will give an adv iso ry opinion a f te r hearing th e p a r t ie s an d a rrang ing a m eeting be tw een th e m if necessary .

T h e C o n tra c t in g S ta te s m a y agree, p r io r to th e open ing of such p rocedure , to rega rd the adv iso ry op in ion given b y the sa id b o d y as final. In th e absence of such an ag reem en t, the opin ion sha ll n o t be b in d in g upon th e C on trac ting S ta te s unless it is accep ted b y b o th , an d th e y sha ll b e free, a f te r reso r t to such procedure or in lieu thereof, to h a v e recourse to an y a rb i t ra l or jud ic ia l p rocedu re w hich th e y m a y select, inc lud ing reference to th e P e rm a n e n t C ourt of I n te rn a t io n a l Ju s t ic e as rega rds a n y m a t te r s w hich a re w ith in th e com petence of t h a t C ourt u n d e r i t s S ta tu te .

N e ith e r the open ing of th e p rocedu re before th e b o d y referred to above nor th e opinion which it delivers shall in a n y case involve th e suspension of the m easures com pla ined of ; the sam e ru le sha ll a p p ly in th e e v e n t ot p roceedings being ta k en before the P e rm a n e n t Court of I n te r n a t io n a l Ju s t ice , unless th e Court decides o therw ise u n d e r Article 41 of i ts S ta tu te . ■*

B . C o m m e n t a r y .

T he p rob lem ot dev is ing su i tab le m e th o d s of avo id ing doub le ta x a t io n in the m a t t e r of d e a th d u t ie s is as difficult as th e co rrespond ing p rob lem in re la t ion to incom e ta x . H ere , aga in , doub le ta x a t io n arises f rom th e fac t th a t b o th the dom icile of th e deceased an d the s i tu a t io n of his assets c o n s t i tu te g rounds u p o n which S ta te s a re in the h a b i t of levying a d u ty on th e occasion of dea th .

Article 1.

A rtic le 1 defines th e ob jec t of the C onven tion an d m akes prov is ion for in d ica t in g w h a t taxes are to be regarded as succession d u t ie s in each of the co n tra c t in g S ta te s for th e purpose of the C onven tion .

The laws of th e var ious S ta te s , indeed, p rov ide for var ious k inds of succession du ties . T here are, for in stance, succession du t ie s levied on th e whole of th e e s ta te w ith o u t ta k in g in to accoun t th e n u m b e r a n d degree of re la t ionsh ip of the heirs , succession du t ie s levied on the shares ot the heirs, du t ie s on t ra n s fe r of p r o p e r ty .

Article 2.

Artic le 2 se ts fo r th the princip le th a t it is the S ta te in which the deceased w as dom iciled which m a y assess for ta x a t io n th e whole of th e e s ta te of the deceased, regardless of w here it m a y b e s i tu a te d b u t su b je c t to ce r ta in ded u c tio n s w hich are prov ided b y A rticle 4. I t also defines th e te rm “ dom icile” and it will be observed th a t the defin ition differs from the defin ition of domicile adop ted for the purpose of personal tax es on income.

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It is c lear t h a t th e concep tion of domicile ap p ro p r ia te to a d u t y w hich is lev ied once and for all on th e occasion of d e a th m u s t im p ly a g re a te r degree o f pe rm anence th a n the conception on w hich an a n n u a l ta x such as th e incom e ta x is based . I t is un like ly t h a t a n y State would c la im th e r ig h t to levy a d e a th d u ty on th e whole p ro p e r ty of a deceased person on the g round th a t , a t th e t im e of h is d e a th , h e w as te m p o ra r i ly re s id e n t w ith in its borders , it Ins p e rm a n e n t hom e a n d t r u e econom ic allegiance lay elsewhere. B u t w hen i t i s so u g h t to je h - the precise ch a ra c te r a n d degree of p e rm anence of th e residence w hich shou ld ex is t in ( der to ju s t i fy a c la im to t a x on the g ro u n d ot dom icile, wide d ivergencies of v iew are found t o ex is t in th e d iffe ren t legal sy s tem s of th e various coun tr ies of th e world. In these circ’iinstances, i t h a s n o t been found possib le to d o m ore th a n f ram e a defin ition w hich seem s to c o m m a n d th e g re a te s t com m on m e asu re of ag reem en t in the various codes of law.

I t is h o p ed t h a t the concep tion of dom icile w hich the C om m ittee h a s a d o p ted will c o m m a n d a \v : le m easure of ac cep tance a m o n g th e va r io u s S ta tes . If so, th e conclusion of b i la te ra l aer ments, a n d possib ly general ag re em e n ts for th e avo idance of doub le d e a th du ties , will be arc tly fac il i ta ted , an d in its absence it is difficult to see how sa t is fac to ry a r ra n g e m e n ts could be .de to a t t a i n th e ob jec t in view.

Article 3.

Xrticle 3 s ta te s th e princip le th a t the S ta te in which assets belonging to a deceased person arc im ated , w h a te v e r m a y be the dom icile of th e deceased, m a y le v y a d u ty on such assets . Of < trse, i t in no w ay l im its th e r igh t of the S ta te to d e te rm in e according to its own law w hat assc m ust be rega rded as s i tu a te d w ith in its jurisd iction .

Article 4.

Article 4 co n ta in s a prov is ion w hich will avo id doub le ta x a t io n in the case of those classes of a ts rega rd ing th e s i tu a t io n of w hich th e re is a com m on concep t ion in b o th the C on trac tin g St at The C om m ittee h a s e a rn es t ly en d e av o u re d to reach a n ag re em e n t on this v e ry difficult mat T here w ere som e differences of op in ion , b u t a m easu re of ag reem en t h as been a r r iv edat ( the clauses w hich th e C o m m ittee h as th e h o n o u r to su b m i t herew ith .

he m easures w hich h ave been u n an im o u s ly recom m ended will solve the difficulty of double dea' duties in reg a rd to som e very im p o r ta n t ca tegories of assets and , as regards th e re m a in der, is to be ho p ed th a t a m u tu a l ap p re c ia t io n of the a d v a n ta g e s w hich accrue f rom thedim; ition of doub le ta x a t io n in the sphere in w hich th e C om m ittee h as been ab le to agreewill 1 S ta tes to co n cer t reciprocal m easu res for ex ten d in g th e re m e d y in to spheres in whichvan : legal co n cep t ions a t p resen t c o n s t i tu te too serious a difficulty.

order to p re v e n t m isap p reh e n s io n , i t is des irab le to exp la in t h a t the te rm “ m or tgages" used 11 this artic le does n o t inc lude m o r tg a g e bonds.

A rt h ' 5.

t ide 5 deals with the question of d eb ts . It provides that debts which are secured on or i! hr 1 specific assets shall be deducted from the value of the assets. \ s regards other debts,tht i itracting States are left to make such detailed administrative arrangements as may suit n ir particular circumstances. It is intended that normally the term “debts” shall incli legacies'".

A r t L n.

> ’«is article is identical with the last article in the draft Convention relating to T a v s on 11 itiv- and is intended to serve a similar purpose.

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I II . D R A F T O F A B I L A T E R A L C O N V E N T IO N ON A D M IN IS T R A T IV E ASSISTANCE

IN M A T T E R S O F T A X A T IO N .

A . T e x t o f t h e C o n v e n t i o n .

Article i .

W i th a v iew to ob ta in in g a b e t te r a p p o r t io n m e n t of fiscal b u rd e n s in th e in terest >oth of G o v ern m en ts and ta x p ay e rs , th e C on trac ting S ta te s u n d e r ta k e , su b je c t to reciprocit to give each o th e r ad m in is t ra t iv e ass is tance in regard to all m a t te r s requ ired for th e p u ; .>ose of t a x assessm ent.

Such assistance m a y consis t in :

(a) The exchange of fiscal in fo rm ation ava ilab le in e i ther of the c o n t ra c t in g coun : ies, The exchange will ta k e place following a request concerning concrete cases, or, wit out a n y special request, for the classes of p a r t ic u la rs defined in Article 2 ;

(b) Co-operation be tw een th e a d m in is t ra t iv e a u th o r i t ie s in c a r ry in g o u t cc•■■air m easures of p rocedure .

Article 2.

The exchange of in fo rm ation as co n tem p la te d in p a ra g ra p h (a) of A rticle 1 sha ll r ate to n a tu ra l or ju r is t ic persons ta x a b le in one of the tw o co n tra c t in g countries. The p a r t i r lars given sha ll include th e nam es, su rn am e s and dom icile or residence of the persons concc; vd, an d th e ir fam ily responsibilit ies , if any , an d sha ll h ave reference to 1 :

(1) Im m o v a b le p ro p e r ty (capita l va lue or income, r igh ts in rein, charges by vay of m o r tg a g e or o therw ise) ;

(2) Mortgages o r o th e r s im ila r claim s (description of th e m ortgaged prop- tv a m o u n t a n d r a te of in te res t) ;

(3) In d u s tr ia l , com m erc ia l or ag r ic u l tu ra l un d er tak in g s (ac tua l or convent nal profits , business tu rn o v e r , or o th e r fac tors on w hich ta x a t io n is based) ;

(4) E a rn e d incom e and d irec to rs ’ fees ;

(5) T ransferab le securities, c la im s, deposits a n d cu rren t ac co u n ts (cap ita l t. lue an d income) ; a n y in fo rm atio n collected b y an a d m in is t ra t io n , m ore especially in coi icc- t io n w ith exem ption or relief g ra n te d b y th a t a u th o r i ty b y reason of the ta x p a t ’s domicile o r n a t io n a l i ty ;

(6) Successions (nam es and addresses of deceased an d heirs , d a te of dea th , es ite, sha res of heirs a n d o th e r bases of th e tax).

Article 3.

In no case shall the effect of app ly ing th e provis ions of the preced ing ar t ic les be to in ose upon e i th e r of the C on trac ting S ta te s th e ob ligation of supp ly ing p a r t icu la rs w hich its >wn fiscal legisla tion does no t enable it to p rocure, or of ca rry ing o u t a d m in is t ra t iv e measui at v a r ia n ce w ith its own regu la tions or practice.

1 The fol lowing liM m ay be curtai led or added to, according to circumstances.

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A rticle 4.

The S ta te to w hich app l ica tion is m ade m a y refuse to ca r ry o u t such app l ica t io n if it c0n- ders t h a t i t is c o n t ra ry to public policy.

Article 5.

The ap p ro p r ia te a d m in is t ra t iv e a u th o r i t ie s shall be em powered to co m m unica te w ith eacl other d irec t for the purpose of g iv ing effect to th e provisions of the presen t Convention.

Article 6.

adm in is tra t ive assis tance sha ll b e g iven w ithou t p ay m en t , sub ject to the re fund of any exo >tional ex p e n d itu re (investigations, e x p e r t opin ions, etc.) w hich m a y be incurred inspot al cases.

Article 7.

fhe ad m in is t ra t io n s sha ll from t im e to t im e co m m u n ic a te to each o th e r s ta te m e n ts reg ding th e ir powers of inves tiga tion a n d con tro l in fiscal m a t te rs and th e i r ad m in is t ra t iv e pri dures.

Article 8.

Ih e h ighest a u th o r i t ie s o£ the financial a d m in is t ra t io n s of the two S ta te s sha ll concert me 'ires to im p lem en t th e p resen t C onven tion .


rom th e v e ry o u tse t , the C om m ittee rea lised the necessity of dea ling w ith th e questions of x evasion a n d doub le ta x a t io n in co -o rd in a t io n w ith each other. I t is h igh ly desirable tha States should com e to a n ag reem ent w ith a view to ensuring th a t a ta x p a y e r sha ll no t be ’ xed on the sam e income b y a n u m b e r of different countries , and it seem s equa lly desirable tha 'Uch in te rn a t io n a l co-operation shou ld p rev e n t ce r ta in incom es from escaping ta x a t io n alt< ther. The m ost e lem e n ta ry an d u n d isp u te d princip les of fiscal jus t ice , therefore , req red t h a t the ex p e r ts should dev ise a schem e w hereby all incom es would b e ta x e d once, anc nee only.

he C om m ittee realised, how ever, t h a t i t m u s t avoid th e risk of the d ra f t C onvention app ring in som e q u a r te r s as an ex tens ion b ey o n d n a t io n a l fron tie rs of a n organised sys tem of ! al inqu is ition . The em p lo y m e n t of techn ica l m e th o d s to dea l w ith f ra u d in m a t te r s ot tax ion is no d o u b t w holly to be recom m ended , b o th for the good of th e co m m u n it ies reap ing the nefit of such ta x a t io n a n d in th e in te res ts of th e ta x p a y e rs them se lves , since a n y f raud whi 1 goes un p u n ish e d leads to an un fa ir d is t r ib u t io n of the b u rd e n of public exp en d itu re arv. 0 the p a y m e n t b y one se t of persons of sum s p roper ly due b y o thers.

in the first place, the C om m ittee desires to observe th a t , where relief is sough t b y a ta x p a y e r in j rsuance of a r ran g e m en ts m a d e be tw een tw o co u n tr ie s for th e avo idance of doub le incom e tax it is c learly necessary th a t the c o u n t ry g ran t in g th is relief should h av e full in fo rm ation in zard to th e as sessm en t a n d the a m o u n t of t a x pa id in the o the r c o u n try , and provis ion to thi ffect h a s generally been m ade in the conven tions w hich h av e h i th e r to been concluded.

Knowing b y experience, how ever, how th a n k less a n d difficult is th e ta sk of p rev en t in g fra i in each c o u n t ry se para te ly , the ex p e r ts were anx ious th a t th e i r schem e shou ld in no ca present th e a p p e a ra n c e of a n o rgan ised p la n of a t t a c k on th e ta x p a y e r .

11 p rep a r in g th e a t ta c h e d d ra f t C onven tion , the C om m ittee h a s so u g h t to o b v ia te a n y mi- id e rs tand ing b y fram ing th e p rov is ions dea ling w ith ta x evasion in th e form of a schem e

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ot a d m in is t ra t iv e assistance. A rrangem en ts for such ass is tance a re a l re a d y in force bel ' -,ril s evera l countries in respect of ce r ta in classes of incom e, and m a y w ithou t difficulty be extei: led su b je c t to the cond it ions re ferred to in R eport F. 212, 1925, an d w ith in th e l im its la id dov n in the d ra f t Convention . F u r th e rm o re , as will be exp lained la ter , such assistance is a con arv of th e general princip les w hich h av e been a d o p ted for the avo idance of double taxatio i

Article 1.

W e m a y now consider how, in the view of the exper ts , such a schem e of ass is tance sb ild w ork in practice. F irs t of all i t m u s t be reciprocal, t h a t is to say, S ta te s will be boui i to afford each o th e r assis tance on ly u n d e r iden tica l cond itions ; in o th e r words, sub jec t to improvisions to the c o n tra ry , a c o u n t ry will on ly be en t i t led to d e m a n d in fo rm ation of a nul w hich it is itself in a posit ion to supply .

Such ass is tance m a y w ork in tw o w ays, accord ing as i t takes the form ot co-oper, ion betw een a d m in is t ra t iv e d e p a r tm e n ts , w hich will u n d e r ta k e , on each o th e r ’s behalf , enq ir ies verifications a n d e x p e r t v a lu a t io n s as requ ired for the assessm en t of the va r ious taxes or as it consists in th e exchange of in fo rm ation , which will be e i th e r supplied on reques t in spt .fie cases or fu rn ished as a m a t te r of regu la r rou tine in connection w ith cer ta in sub jec ts v rh will be specified in th e conven tions to be concluded.

Article 2.

W ith respect to the supp ly of in fo rm ation , Article 2 of the d ra f t C onven tion lays d ,vn general ru les w hich G o v ern m en ts a re advised to follow. The provis ions govern ing immov. ole p roper ty , indus t r ia l , com m erc ia l or a g r ic u l tu ra l un d er tak in g s and ea rned income raist no serious difficulties, an d some of th e m h av e a l re ad y been em bodied in conven tions conch ed be tw een various countries . T h is also applies to successions, for th e G ov ern m en t d ep a r tm its in th e different coun tr ies a l re a d y possess th e requisi te in fo rm ation a n d ce rta in of tl -se d e p a r tm e n ts a l re a d y exchange in fo rm ation regularly .

A m ore difficult ques tion arises in th e case of transfe rab le securities, w hich th e Com m i :ee discussed a t le ng th in i ts rep o r t of F e b ru a ry 7 th , 1925. T he difficulty is due, first, to he fac t t h a t th e m eans a t the d isposal of G overnm en ts do no t afford as effective a check in iis case as in t h a t of o th e r ta x a b le w ea l th ; an d secondly, to th e fac t t h a t every a t t e m p t to impr ve th e m e th o d s of a sce r ta in ing th e cap i ta l va lue of an d th e incom e derived from m ovab le propc y, in p a r t ic u la r from b ea re r securities a n d cu r ren t accounts , p roduces a serious an d complice ed t r a in of consequences w hen such m easures a re app l ied w ith in the n a t io n a l boundar ie s , and T at these effects wTould be g rea tly in tensif ied if a n y a t t e m p t were m a d e to c a r ry investigate ns across th e frontiers.

T here seems, how ever, to be no objection to inse rt ing a clause in th e C onven tion to he effect t h a t a c o u n t ry w'hich, in th e n o rm a l course of its fiscal a d m in is t ra t io n , ob ta in s posses m of in fo rm atio n in reg a rd to transfe rab le securities, c laim s, deposits a n d cu r ren t accou is, shou ld im p a r t , on a reciprocal basis , t h a t in fo rm ation to a foreign S ta te w hich is intereste- in th e m a t t e r from th e po in t of view of th e equ i tab le d is t r ib u t io n of tax a t io n .

In some cases, e.g., in cases where relief is sought, th e ass is tance which it m a y be pos- >le for th e relieving S ta te to afford m a y be considerable. F o r instance, ta x p a y e rs m a y aj ly to a given co u n try , on g rounds of domicile, for exem ption or a b a te m e n t as rega rds ce r ta in U .es on stocks an d shares. In t h a t case, i t m u s t be a d m i t t e d t h a t th e p referen tia l t r e a tm e n t clai ed b y such persons can n o t , in a ll fairness, be e x ten d e d to th e m unless the ir c i rcum stances re ly en t i t le th e m to such t r e a tm e n t ; since, m oreover, th e y a re app ly ing for relief in respec- of ta x es levied in one c o u n try , on th e g round th a t th e y are a l re ad y ta x ed on th a t sam e inc- ne b y a n o th e r c o u n try , i t is only n a tu ra l t h a t th e la t t e r shou ld be in fo rm ed th a t certa in of Is

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citizens h ave ad v a n ce d th e p lea of domicile, an d th a t it should be enabled to verify t h a t th e y an- d u ly taxed . In such cases, th e ta x p a y e r can a lw ays o b ta in the app lica tion of o rd in a ry law ; by Ms ac tion in seeking to benefit b y th e ex e m p tio n which has been p rov ided in order to avo id jo iv’le ta x a t io n , he agrees to ab ide b y th e consequences of his choice, an d canno t ob jec t to th: accuracy of his s ta te m e n t being su b se q u en t ly checked.

Arl cles 3 and 4.

These articles l im it th e r igh t to a d m in is t ra t iv e assistance in such a w ay as to ensure th a t n0 m ntry shall be c o m m it te d to u n d e r ta k e enquiries or proceedings a t var iance w ith its o\\ laws o r practice.

A1 oles 5 8.

Articles 5 to 8 deal solely w ith m easures of execution.

The above are the cons idera t ions b y w hich th e C om m ittee h as been guided in f ram in g the dr, t C onvention on A dm in is tra t iv e Assistance. W hile fully recognising the difficulties of th; delica te sub jec t an d th e necessity of m ak ing such a m en d m e n ts to the te x t as m a y be nci sgary to allow for specia l c ircum stances , the C om m ittee , viewing the m a t te r solely from the angle of p rac tica l a d m in is t ra t io n , is of th e opinion th a t th e clauses i t has d ra f te d and ad' nted a re ca lcu la ted to ensure a m ore equ i tab le d is t r ib u t io n of fiscal bu rdens .

In conclusion, the C om m ittee would aga in po in t o u t t h a t the ad o p t io n of its recom m en- da> ms could no t, in a n v circum stances , h a m p e r th e free circu la tion of w ea lth or the working of onomic laws ; on th e c o n tra ry , the p u t t in g in to force of these provis ions should m ake it po ible to p rev e n t the course of t r ad e an d th e m o v e m en t of cap i ta l from being influenced b y fisc 1 considerations ar is ing o u t of the d iv e rs i ty of laws on the sub jec t . The ag reem en ts to be coi hided in regard to a d m in is t ra t iv e assis tance should, howrever, secure th e accession of th e mu irity of the S ta tes , as was p o in ted ou t b y th e expe r ts in th e ir R e p o r t F. 212 of F e b r u a r y to. ~ The C om m ittee desires, th e re fo re , once aga in to lay special s tress on th e im p o r ta n ce of thi part of i ts resolutions.

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IV . D R A F T B I L A T E R A L C O N V E N T IO N ON J U D IC IA L A SS IS T A N C E IN 1 HE

C O L L E C T IO N O F T A X E S .

A. T e x t o r t h e C o n v e n t i o n .

Article i .

T he C o n tra c t in g S ta te s u n d e r ta k e to give each o th e r m u tu a l ass is tance in th e collet ion of th e following taxes 1 :

( « ) ..............................................................................( b ) ..............................................................................« ' ) ........................................................................

Article 2.

The ass is tance in ques tion shall app ly b o th to th e principal of th e ta x an d to cha -es in c iden ta l th e re to (costs, in terest) 2. •

Article 3.

A ssistance sha ll on ly ap p ly to fiscal deb ts which are res iudicat e, a p a r t from the - ise p rov ided for in Article n .

Article 4.

The recovery ot fiscal deb ts , a s p rov ided in the prev ious articles, shall be effected at he r e q u e s t of the c red ito r G overnm en t (Sta te m ak ing th e applica tion) addressed to th e S ite h a v in g ju r isd ic tion over the person or th e p ro p e r ty of th e deb to r (S ta te to which applica on is made).

Article 5

T he reques t 01 th e S ta te m ak ing the app lica tion shall be issued b y th e h ighest au thc ity of i t s f inancial ad m in is t ra t io n or b y an a u th o r i ty des ignated u n der th e ag reem ent contem pl ed in Article 12, a n d sha ll be accom pan ied b y an o rder of execution (titre exécutoire’) certific< by t h a t a u th o r i ty . I t m u s t be addressed d irec t ly to th e corresponding a u th o r i ty of th e S xte to w hich app l ica t ion is m ade.

T h e a u th o r i ty of th e S ta te m ak ing th e applica tion shall fu r th e r certify th a t the liab ity in ques tion is res judicata.

Article 6 3.

The S ta te m ak ing th e app l ica t ion sha ll fu rnish a t ran s la t io n of the d o cu m en ts transm i ed in th e language ol the S ta te to which app l ica t ion is m ade.

1 The Contracting States shall decide in agreement with one another whether the Con 11- t io n is applicable to State taxes only or to provincia l, com m unal and other ta xes also.

2 P ena lt ies of a fiscal nature, etc., m ay also be inserted.3 May be dele ted or modified according to circumstances.

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Article 7.

The S ta te to which app l ica t io n is m a d e sha ll com ply as soon as possible w ith the request ad d ressed to it. N evertheless , i t m a y refuse to do so if i t considers t h a t i t is unab le to com ply with this reques t fo r reasons of public policy. I n such case it shall in fo rm th e S ta te m ak ing the applica tion as soon as possible.

Article 8 !.

Prosecutions and other measures of execution shall be carried out without exequatur.

Article 9.

l'he fiscal d e b t w hich form s the su b je c t of th e request shall be collected in accordance wi n the laws of th e S ta te to w hich app l ica tion is m ade , b u t th is does n o t oblige the la t te r St ■' to em p loy a m e an s of execu tion which is no t p rov ided for b y the laws of the S ta te m ak ing the application .

Nevertheless, a t th e reques t of th e S ta te m ak ing th e app l ica tion , th e S ta te to which application is m ade m ay, if i t th in k s fit, a d o p t a special form of procedure , even if n o t provided for by its laws, sub jec t to the cond it ion th a t such procedure is no t co n tra rv to its laws.

Article 10.

The tax es w hich it is sough t to collect sha ll n o t be r ega rded as priv ileged d eb ts in the S ta te to v hich app l ica t io n is m ade.

.4 rticle 1 1 .

If a fiscal d e b t is sti l l liab le to be appealed ag a in s t , the S ta te m a k in g the app lica tion ma' reques t the S ta te to w hich app lica tion is m ade to ta k e conserva to ry m easures , to which the above provis ions shall be app l icab le m utatis m utandis.

Article 12.

The h ighes t a u th o r i t ie s of the financial ad m in is t ra t io n s of the tw o S ta te s sha ll concert me: -ures to im p lem en t th e p resen t C onvention . In p a r t icu la r , th e v m a y , b y a g re e m e n t , dr? up ru les for th e d isposal of the sum s collected , for the d e te rm in a t io n of an average ra te of change for th e conversion of these sum s and for th e expenses of collection.


In the in t ro d u c t io n to its repor t, the C o m m ittee exp la ined the reasons why, in regard to t h; collection of ta x es also, it preferred th e form of a s im ple b ila te ra l C onvention.

A r i d e 1.

The ta x es w hich it is des ired to collect will be en u m era ted , so t h a t 110 d o u b t will ex is t as to vie scope of the C onvention . Moreover, th i s m e th o d enables S ta te s to include in the Convention if th e y deem it desirable, all k inds of tax es in ad d i t io n to d irect taxes. T he question wh'-iher the C onven tion will a lso ap p ly to p rov inc ia l o r co m m u n a l taxes a n d to tax es levied by ther public bodies is left to r decision to th e con trac t in g P ar t ie s . As it was no t considered ess ntial to ex ten d the C onven tion in th is d irec tion , th e C om m ittee th o u g h t it bes t only to

May be dele ted or modified according to c ircum stances .

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m e n tio n these taxes in a footnote . As regards th e “ centim es ad d i t io n n e ls” , it. is well known th a t , b v th e ir very n a tu re an d in accordance w ith genera lly recognised princip les, these arc collected w ith the p r inc ipa l ta x , and there is no need for a n y special rule in regard to them .

Article 2.

T he w ord “ co llec tion” is used in a fair ly wide sense in th is C onvention. I t is in ten d ed > cover n o t on ly th e ac tu a l m easures of execution b u t also p re l im in a ry m easures , such as tl ' se rv ing of th e do cu m en ts of execu tion , etc. On th e o the r h a n d , i t would seem necessary ■ s ta te defin itely w h e the r th e C onven tion is to ex ten d to in c iden ta l charges, such as costs execution , in te re s t on ar rea rs , etc . I t will be for th e S ta te s concerned to decide, in agreeme: w ith one an the r , h o w fa r it is necessary to e n u m era te these in c iden ta l charges an d a l to consider th e ques tion , referred to in a footnote , of fiscal pena lties , which a re prov ided f. in m a n y codes of law’.

Article 3.

A rticle 3 co rresponds to R u le 3 in the 1925 R eso lu t ions (docum ent F. 212, page 35), th g ro u n d s for which will read ily be unders tood . I t w ould h a rd ly be des irab le to in v i te a foreign a d m in is t ra t io n to ta k e m easures to collect a d e b t w hich was still liable to be cancelled on appeal. As regards te m p o ra ry m e asu res . th is ar tic le gives a reference to Article 11.

Article 4.

Article 4 defines th e n a tu re of the assistance in ques tion . This will be g ran te d b y t h S ta te in which th e d e b to r is l iv ing or in which h is p ro p e r ty is s i tua ted . I t should be noted th a t th e jurisd ic tion of the S ta t e is the t ru e criter ion and th a t the n a t io n a l i ty of the deb to r is n o t to be considered.

In ta k in g th is view, the C om m ittee h ad in m ind th e principle s ta te d in d o c u m e n t F. 21. (page 35, R u le 1) which lays dow n t h a t the S ta te m u s t also afford ass is tance in respect of taxe- due f rom persons o th e r th a n na t iona ls of the S ta te m ak ing th e app l ica tion . This rule, which has a l re a d y been ad o p te d in regard to double ta x a t io n , is fu lly in accord w ith th e principl. of in te rn a t io n a l so lidar ity , b y w hich the expe r ts h av e c o n s ta n t ly been guided. In theii s e p a ra te trea tie s , however, the S ta te s will be free to in troduce excep tions to th is rule, when th is m a y be necessary in order to avoid runn ing co u n te r to public opinion in th e ir own countries , as m igh t be the case, for instance, where th e m easures in ques tion would h a v e ti be ta k e n ag a in s t th e na t iona ls of the S ta te to which app l ica tion is m ade.

T he te rm s “ S ta te m ak ing the a p p l ica t io n ” an d “ S ta te to w hich app l ica tion is m a d e ” wen used w ith a view to sim plify ing th e d ra f t in g ot the su bsequen t articles.

Article 5.

A lthough the principle of m u tu a l assistance is fully recognised, it is equally ce r ta in tha; th is p rincip le should only be applied sub jec t to c e r ta in safeguards. There is a lw ays a possibility of ad m in is t ra t iv e errors, and if these occurred in an in te rn a t io n a l ques tion of th is k ind they m ig h t give rise to serious and aw kw ard s i tua tions . I t is necessary , therefore , to ta k e al: possible p recau tions , and in p a r t ic u la r to require th a t the h ighest a u th o r i ty in each of tlu fiscal ad m in is t ra t io n s , o r a n o th e r a d m in is t ra t iv e a u th o r i ty des ignated b y com m on consen in accordance w ith Article 12, is to ta k e the necessary m easures , in order to ensure as fa r a- possible th a t the do cu m en ts p roduced shall be correc t an d th a t the a d m in is t ra t io n collecting the d eb t shall ta k e p roper action . As regards t in 1 second p a ra g ra p h , Article 3 should be referred to.

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|Article 6 -

phis article is based on th e sam e pr inc ip le as Article 5. I t m a y h ap p e n th a t th e S ta te- whi,'h applica tion is m ade , in o rder to com ply w ith a request for execution , will require

translation of the do cu m en ts sen t to it . As, however, th is necessity will n o t arise in every State, the Com m ittee th o u g h t it b es t to p o in t o u t in a foo tno te t h a t the provision could beo m i t t e d or modified.

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1 rticle S.

This article, w hich is of a su b s id ia ry ch arac ter , em phasizes th e principle, a l re ad y se t fo rth In ArtirSc 5, of d irec t co m m unica tion be tw een the fiscal au th o r i t ie s of th e two countries con- Terned w ithout th e need for using d ip lom atic or judicia l channels . In some S ta tes , however, Ihe law- would n o t allow a reques t pu t fo rw ard in accordance w ith Article 5 to be com plied lrith unless accom pan ied b y a w ri t of execu tion issued b v a jud ic ia l au th o r i ty . In order to fleet th’s special case, the foo tno te ind ica tes t h a t the ar tic le m ax- requ ire to be modified.

fu n dam en ta l princip le of the assis tance to be g ran te d h av ing a l read y been s ta te d s 1 an d 4, th e first sen tence of A rticle 7 is m ere ly in ten d ed to ind ica te the necessity

np t assistance. The need for d esp a tc h is m en tioned aga in in th e la s t sentence, which, r with th e second, p rovides for th e possib ility ot a refusal on g rounds ot public policy. , of th is k in d are so m e tim es p resen t an d induce th e fiscal au th o r i t ie s to exercise a indulgence.the S ta te m a k in g th e app lica tion c a n n o t possib ly foresee, o r even be aw are of, all the ■neral consequences to w hich its request m a y give rise, the S ta te to w hich app lica tion must h av e the r igh t to refra in from m easures w hich would pre jud ice its v i ta l in te res ts , ite m ak ing th e ap p l ica tion m u s t , how ever, be im m ed ia te ly in fo rm ed of the fac t so nay be able, if c i rcum stances a d m it , to choose a n o th e r m e th o d ot procedure.

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s article exp lains th e sys tem by which th e fiscal d e b t will be recovered. This sys tem will be found in R u le 1, page 35, of do cu m en t F. 212 provides th a t , in principle,

iis of execu tion em ployed will be those p rov ided for in th e S ta te to w hich app lica tion and th is for tw o reasons. In th e first p lace, the enfo rcem ent of a foreign law would involve the revenue officials in difficulties an d would hence becom e a source

venience, v ex a tion a n d com pla in t for b o th p ar t ies . In the nex t place, pub lic opinion ;< ct to the ta k in g of m easures foreign to th e laws of the S ta te to which app l ica tion

Im agine, for exam ple , the position ot a S ta te which h as never know n the prac tice isonment for d e b t a n d w h ic h , u n d e r th e te rm s of a t r ea ty , is never the less forced to someone (perhaps one of i ts own nationals) who h a s no t p a id his taxes a b ro a d and in say ing th a t all his p ro p e r ty h as d isappeared .

m ust also be ta k en to respect th e scruples w hich the public in th e S ta te m ak ing the ion m a y feel on accoun t of differences in th e m easures ta k e n to execute ju d g m en ts , i ce r ta in ly ofiend pub lic o p in io n if the S ta te to which app l ica t io n is m ade were to icthods of co n s t ra in t a l ie n t o t h e la w s of the c red ito r S ta te . T he people of would say : ‘ W h y does Im eria im p riso n a fe l lo w -co u n try m an of ours who, if hv had

1 in our te rr i to ry , w ould m ere ly h a v e h a d his p ro p e r ty seized ?"iew of these considerations, the C om m ittee proposes a rule b ased to som e ex te n t on

: st com m on factor, i.e., t h a t no m eans of execution should be em ployed unless it is ' in the laws ot bo th S ta tes concerned. I t is clear, of course, th a t this res tr ic tion only

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app lies to m eans of execu t ion in th e general sense ; th e deta ils m u s t in all cases be governed b y th e law s of th e S ta te to w hich app l ica t io n is m ade.

T he sys tem th u s la id dow n in th e first p a ra g ra p h of Article 9 is on ly subject to a v e r y

sl igh t excep tion , which is exp la ined in th e second p a rag raph , and m a y be considered from tw o

po in ts of view. I t is possib le ,on th e o n e h an d , th a t th e tw o S ta tes in ques tion h av e s e v e r a l

m odes of procedure a t the ir disposal, w hich are com m on to th e m bo th ; in such cases the S ta te

m a k in g th e app lica tion m ay , in m a k in g i t s request for assis tance , specify th e p rocedu re which h a v in g rega rd to the object, i t d eem s the m ost app rop r ia te . On the o the r h a n d , i t m a v ha open t h a t the S ta te m a k in g th e app l ica t io n m a y a t ta c h some im portance to fo rm alit ies of e x e c u t i o n

w hich, a l th o u g h n o t em ployed in the S ta te app l ied to, are no t inc o m p a t ib le w ith its laws. F o r exam ple , in the S ta te to w hich ap p l ica tion is m ade no tification m a y be va l id if i has

been served a t th e domicile of the deb to r , wrh ereas the laws of th e S ta te m a k in g th e applic t io n

require t h a t no ti fica t ion should be se rved on th e d eb to r in person. In such a case the (a te

m a k in g th e app l ica tion m a y express th e desire th a t the la t t e r p rocedure should be fo il w ed

in serv ing the notification . T he S ta te to w hich app lica tion is m a d e is free to accede t o th is

req u e s t o r to refuse it. The req u e s t m ig h t be refused on the grounds t h a t th e law s of the S ta te

to w hich app lica tion is m ade explic i tly p ro h ib i t th e m easure asked for (not a v e ry l ikely r e a s o n

in the ex a m p le chosen), o r t h a t i t would be too difficult to serve th e no tif ica t ion in th e

m a n n e r in d ica ted .

Article 10.

This ar tic le s im ply expresses the idea a lready con ta ined in Rule 2 of d o cum en t F 212 (page 35). The g ran t in g of a p re fe ren t ia l position to foreign tax es would a t once g iv e n . to legal difficulties ; m oreover, i t would in m a n y cases be a cause of loss b o th to public a 1 to p r iv a te cred ito rs , an d would therefore in e v i ta b ly render th e execu tion of ju d g m e n ts v. der th e C onvention an u n p o p u la r measure.

Article i r .

The rule la id dow n in A rtic le 3, th o u g h f ram ed in the in terests of m od e ra t io n , n :ght never the less h a v e th e cffect of en a b ling th e d eb to r to evade the c la im s m a d e upon him. It is the re fo re des irab le t h a t th e c red ito r S ta te should be able, th ro u g h the S ta te to w hich a 'plica tion is m ade , to h av e recourse to co n se rv a to ry m easures , w hich would be carried or ; in

accordance w ith the laws of the S ta te to w hich applica tion was m ade.

Article 12.

In view of the d ive rs i ty of th e d ifferent sys tem s of law an d the m ore or less general ch a ra c te r of th e above provis ions, i t will be necessary to d raw up regu la tions for th e applic; 1 ion of th e C onvention . In the C o m m ittee ’s op in ion , it would be bes t t h a t these rules si uld n o t be la id dow n in the C onventions them selves. T hey are of too special a n a tu re , and , more; ' ver, th e fac t t h a t th e y were em bodied in a conven tion m igh t de lay th e in t ro d u c t io n of ch; ges w hich c ircum stances or experience h ad show n to be necessary. A ccordingly, th e Committee proposes t h a t th e h ighest fiscal a u th o r i t ie s should b e left free to agree upon the p ra t teal m easu res necessary to im p lem en t the Convention . In order to m ake th is in ten tion clear, a second sen tence g iving a few exam ples h as been added to Article 12.

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V. P R O P O S A L S R E G A R D IN G F U T U R E O R G A N IS A T IO N .

The ta sk of th e C om m ittee ot techn ica l E x p e r ts is now concluded w ith th e subm ission ,,{the d ra f t C onventions w hich it was asked to prepare . The C om m ittee desires, nevertheless, to ,: id a few observa tions on th e necessity of c rea ting a p e rm a n e n t o rgan isa tion for the fu ture .

The com pletion of these d r a f t C onven tions b y no m eans solves th e problem s of double t a x tion a n d a d m in is t ra t iv e an d jud ic ia l ass is tance , no r w ould even th e a p p ro v a l of th e C onven tion by a general Conference h av e t h a t resu lt . The p re l im in a ry w ork done a n d the tex ts wh' h h ave been e s tab l ished are on ly th e first s tep . Clearly, the va lue of these tex ts will dej nd upon the ex te n t to which th e G o v ern m en ts ta k e th e m as a bas is when nego t ia t ing bil oral conventions .

A list will be found below of m easu res likely to p rom ote th e conclusion of conven tions of ! iis kind. F u r th e rm o re , the m odel C onven tions m u s t be rev ised and sup p le m e n ted a t regu la r int vais in order to keep pace w ith th e changes w hich m a y ta k e place in th e fiscal system s, anii to em b o d y such a l te ra t io n s as experience alone can suggest.

In a d d i t io n to conven tions , a n u m b e r of o th e r in te rn a t io n a l m easu res would be useful in 1 rder to e l im inate double ta x a t io n and to secure a more equ i tab le d is t r ib u t io n of fiscal bui icns. I t would be well, for exam ple , to d raw up a p rocedure of conciliation a n d a r b i t ra - tiot , to w hich reference w as m a d e in th e Technical E x p e r t s ' R ep o rt of F e b r u a r y 1925 (docum ent F. 12, page 30) ; to d ra w u p m odel rules for the a p p o r t io n m en t of ta x a t io n applicable to iie p rofits or c a p i ta l of un d er tak in g s w orking in several countries ; to s ta n d a rd ise the fiscal clauses in com m erc ia l t r e a t ie s ; and , las tly , to give advice when requ ired to ad m in is t ra t io n s eng. iged in p rep a r in g fiscal reforms.

F or these reasons the C om m ittee suggests th a t a s ta n d in g c o m m it tee on ta x a t io n ques tions shi ild be se t up as a p a r t of th e League organ isa tion . T h is com m ittee should be com posed of a liri: ted n u m b e r of m em bers selected for th e ir ind iv idua l technical qua lif ica tions ; it would me t once or twice a year, or m ore often as c i rcu m stan ces m igh t d ic ta te .

Its chief ta sk would be to h a s te n th e so lu tion of th e prob lem s of doub le ta x a t io n and adm i- nis a t ive a n d jud ic ia l assistance. T he co m m it tee m igh t, in p a r t icu la r , give its a t te n t io n to th following po in ts :

(1) Periodical inves tiga tions a n d rep o r ts on th e general s i tu a t io n in regard to these p roblem s ;

(2) The p rep a ra t io n of model b ila te ra l conven tions or collective conventions and revised te x ts the reo f ;

(3) The p re p a ra t io n of a n y o the r in te rn a t io n a l m easures ca lcu la ted to e l im inate double ta x a t io n and to secure a m ore eq u i tab le d is t r ib u t io n of fiscal b u rd en s ;

(4) C om parison of fiscal sy s tem s ;

(5) P re p a ra t io n of general conferences, shou ld such be co n tem pla ted .

Such a com m ittee , if es tab lished , m igh t also be of service to the Council as a n adv iso ry co im ittee on ta x a t io n ques tions , even a p a r t f rom th e problem s of doub le ta x a t io n an d ad ministrative a n d jud ic ia l assistance.

T he resu lts of the w ork ju s t m en tioned m ig h t be em bodied in a series of pub lica t ions is; ted u n d e r the d irec tion of th e com m ittee . W e give below ex p lan a t io n s regard ing these pi l ications, and these ex p lana tions a t th e sam e tim e will ind ica te th e gu id ing principles or which th e co m m it tee 's work should be based . These pub lica t ions m ig h t b e as follows :

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(a) A n n u a l Collection of Conventions on Double Taxation and A dm inistra tive and Judi^ A ssis tance '

T he conclusion of b i la te ra l conven tions would be m a d e easier if all the fiscal a d i : inistr- t ions th ro u g h o u t th e world h a d access to th e te x ts of the conven tions a l re a d y conclude T h ey would th e n be able to ta k e a d v a n ta g e of th e w ork done a b ro a d a n d to keep abreast of the progress m ade in th is m a t te r in o th e r countries. T he pub lica t ion of these tex; - would h av e th e fu r th e r effect of s t ren g th en in g the ten d en cy tow ards u n ifo rm ity in fu tu re com

W ith th is ob jec t, it would be well to pub lish an an n u a l collection of th e origii 1 of th e t rea tie s and , if necessary , of the F rench an d E ng lish t ran s la t io n s . The first v0|Ur> m igh t c o n ta in all th e trea tie s , ag reem ents , conven tions , exchanges of no tes an d oth intl, n a t io n a l engagem en ts now in force, an d each a n n u a l vo lum e th e re a f te r m igh t inchid all the in te rn a t io n a l engagem en ts s igned d u r ing the prev ious year.

A yearbook of th is k ind could be pub lished w ith v e ry l i t t le t roub le or expense, it Wj[i be rem em b ered th a t th e Legal Section of th e S ecre ta r ia t of the League a l re a d y p- blishts a Treaty Series con ta in ing , in the orig inal language or languages and in F rench and i nglish th e te x ts of all in te rn a t io n a l engagem ents reg is tered w ith th e Secre tar ia t. T hus enga, ments concern ing doub le ta x a t io n h ave to be t ra n s la te d in a n y case. If th e vo lum es of the special collection of conven tions re la t ing to double ta x a t io n were p roduced in th e sam e form as the general Treaty Series, the sam e ty p e m igh t be used for bo th , and th is would consi rah!v reduce p r in t in g costs.

T he p ub lica t ion of a special series of double ta x a t io n conven tions w ould no t im n any d up lica t io n of the general series. The la t t e r is very vo lum inous ; it d id no t begi; to be pub lished u n t i l 1920, b u t it a l read y consists of 50 volum es, con ta in in g 1,218 trea t ie s a r i other in te rn a t io n a l engagem ents . Of all these, a b o u t 20 conven tions or groups of conventio ~ deal w ith double ta x a t io n and a d m in is t ra t iv e a n d jud ic ia l assistance.

F u r th e rm o re , trea tie s are no t pub lished in th e genera l series u n t i l th e y h av e been m -tered w ith th e S ecre tar ia t , an d ca n n o t be p resen ted for reg is t ra tion u n ti l th e y h av e been 0 .1 ciallv ratified . On acco u n t of the considerab le period w hich som etim es elapses b e tw een si; lature an d ra t i f ica t ion , an d aga in be tw een ra t i f ica t ion and p resen ta t io n for reg is t ra t ion , th* Secret a r i a t is f re q u en t ly unab le to pub lish conven tions in th e general series for a consi -rablc t im e a f te r s ignature . In the special collection, conven tions on doub le ta x a t io n an d . ’mini- s t ra t iv e an d jud ic ia l ass is tance could be pub lished im m ed ia te ly a f te r s igna tu re , i.e., in th' ourse of the following year. These conven tions becom e of in te re s t to ta x a t io n exper ts as soon s the; a re signed, an d con tinue to be of in te res t , even in the u n u su a l even t of th e i r fa il ing subsec entlv owing to considerations of hom e or foreign policy, to be ratified.

(b) M em oranda on E x is ting System s 0/ Taxation.

F o r an y ad m in is t ra t io n w ishing to n ego t ia te w ith the ad m in is t ra t io n of an o th e r c untry a b i la te ra l co nven tion for th e p reven tion of doub le ta x a t io n , i t is e ssen tia l to h a v e an at urate a n d d e ta i led knowledge of the ta x a t io n sy s tem of th a t coun try . I t would be m ost .sefui w ith th is object, fo r the fiscal ad m in is t ra t io n s of all coun tr ies to d raw u p su rveys of the: fiscal sy s tem s on u n ifo rm lines. These su rveys — w hich would i l lu s tra te th e s im ila r i t ie s and liffer- ences of the fiscal b u rd e n s in different countries , exc lud ing pu re ly fo rm al difference^ as ot te rm ino logy — w ould l igh ten to a considerable ex ten t th e work of a n y nego tia to rs who night be called u p o n to b r ing th e var ious fiscal sy s tem s in to h a rm o n y .

I n th is connection , th e C om m ittee of E x p e r ts recalls the fac t th a t Article IX I the

K ecom m endations of the Brussels F in an c ia l Conference 1 advoca ted a series of ana logous publications. This a r t ic le has so far n ev e r been fully applied , owing to the f req u en t changes which h av e occurred since th e w ar in th e fiscal legisla tions of m a n y S ta tes . A t th e presen t time a ce r ta in s ta b i l i ty seems to h a v e been achieved, an d the m o m en t ap p e a rs to h a v e a rr ived when th e ta s k w h ich w as first proposed in 1920 m igh t be begun.

The surveys d raw n u p b y the ad m in is t ra t io n s of the different coun tr ies m ig h t be pub lished under th e d irec tion of th e com m ittee , w hich would need to p roduce a q u es tionna ire or d e ta i led- heme in order to h av e th e m f ram ed on un ifo rm lines. The com m ittee should be em pow ered to suggest to th e a u th o rs of th e su rveys a n y ad d i t ions or a l te ra t io n s it m igh t th in k desirable .

(,-) A n n u a l Report.

Once a y ea r the c o m m it tee m igh t d raw up a repo r t on the progress m a d e du r in g the y e a r v th regard to doub le ta x a t io n and a d m in is t ra t iv e and jud ic ia l assis tance . A tte n t io n m ig h t 1: draw n in th is repo r t to th e special charac ter is t ics of the conven tions concluded d u r in g the p.ist yea r an d a n y new principles th e y m ig h t contain , to the s igna tu re or ra t i f ica t ion of collect- 1 -v conven tions an d to the cha rac te r is t ics of th e evolu tion of the pr inc ipa l fiscal system s. ] ne repor t m igh t pe rhaps be pub lished as an in troduc tion to the an n u a l collection of conventions.

Lastly , it w ould be useful to pub lish a ha l t-yearly bu lle t in in which the ad m in is t ra t io n s of Vie var ious countries w ould announce a n y changes in the ir legislation or procedure . This3 illetin m igh t also con ta in a b ib l iog raphy of the books an d pub lications appear ing w ith regard t double ta x a t io n , ad m in is t ra t iv e a n d jud ic ia l ass is tance and co m p ara t iv e fiscal law.

1 Article I X of th e R e co m m e n d a t io n s of th e Brussels F inancia l Conference reads as follows :“ IX. In order to enlist public in terest, i t is essentia l to g ive the greatest public ity poss ib le

t : the s i tu a t io n of the public finances of each State .“ The Conference is therefore of the opin ion th a t the work already accom plished by the

S- cretariat in it s com p arat iv e s tudy of public finances should be continued, and it suggests t at the Council of the League of N a t io n s should request all its Members and all the n at ion s r presented at th is Conference to furnish it regularly not on ly w ith budget e s t im a tes and final 1 :dget figures b u t also w ith a half -yearly account of actual receipts and expenditure . A t t e same t im e, countries should be urged to supply as co m p le te in formation as is poss ib le on i e ex is t ing sy s t e m of taxat ion , and an y suggest ions which m ay appear t o each Sta te t o be 1. eful for the financial educat ion of the public opin ion of the world.

“ W ith the aid of the inform ation thus obta ined , the League of N a t io n s would be enabled t prepare p am p h le ts for periodical publication se t t ing out the comparat ive financial posit ion of t e countries of the world, and making clear the various system s of taxat ion in force.”