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League of Nations Fiscal Committee: Report to the Council on the Work of the First Session of the Committee; C516.M.175.1929.II.

Contents

                           
Page 
Introduction 
I. Examination of recently concluded International Conventions for the Avoidance of Double Taxation 
II. General Position with regard to the Problems of Double Taxation and Tax Evasion 
III. Examination of the Questions left open by the General Meeting of Government Experts: 
A. Definition of the Terms “Autonomous Agent” and “Permanent I tablishment” 
B. Rules for Apportionment of Profits or Capital from Industrial or Commercial Enterprises operating in Several Countries, and Measures designed to avoid Double Taxation of International Trusts and Holding Companies” 
C. Study of the Principles involved in the Avoidance of the Double Taxation of Authors' and Inventors' Rights 
D. The Question of Reciprocity and of the Most-favoured-nation Clause as they affect the Problem of Double Taxation 
IV. Study of the Possibility of extending the Measures designed to avoid Double Taxation to turnover Tax, Stamp Duties and Various Charges in respect of International Commerce 
V. Study of the Possibility of concluding Multilateral Conventions for the Avoidance of Double Taxation on Points on which a Sufficient Number of Countries seen to be in Agreement 
VI. Taxation of Foreign Motor Vehicles 
VII. Representation of the Fiscal Committee on the International Conference on the Treatment of Foreigners 
VIII. Appointment of Corresponding Members 

INTRODUCTION.

The Fiscal Committee has the honour to submit to the Council the following report on the work of its first session, held in Geneva from October 17th to 26th, 1929.




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The following members of the Committee were present:

M. BORDUCE (Chairman).

Professor Th. S. ADAMS.

M. BLAU.

Dr. BOLAFFI.

M. CLAVIER.

Professor Dr. FLORES DE LEMUS.

Dr. Fel MLYNARSKI.

M. W. PAASCHE (in the place of Professor Dr. DORN).

Dr. Sinninghe DAMSTE.

Sir Percy THOMPSON, K.B.E., C.B.

Representing the International Chamber of Commerce:

M. R. JULLIARD.

I. EXAMINATION OF RECENTLY CONCLUDED INTERNATIONAL CONVENTIONS FOR THE AVOIDANCE OF DOUBLE TAXATION.

The Committee notes that, since the General Meeting of Government Experts held in Geneva in October 1928, a number of international agreements have been concluded for the prevention of double taxation in its widest sense.

In the first place, there is the Convention concluded on May 12th, 1929, between Hungary and Poland, which deals with direct taxation, in rem and in personam. The Convention is chiefly based on the system laid down in draft Convention Ia of 1928 (document C.562.M.178.1928.II); as regards the personal income tax and the permanent tax on total wealth, however, there is a difference between the system actually adopted and the system recommended in draft Convention Ia, inasmuch as, in the case of these taxes, the Treaty applies a system very like that of taxing at the source. It should also be remarked that in many cases it has been found useful to go into details of application which are not contained in draft Ia.

Administrative and judicial assistance is only provided for in the Convention in a provisional clause (Article 15), in virtue of which the countries undertake to lend each other mutual assistance and, if necessary, to conclude a special agreement.

On the same date, the two above-mentioned States concluded a Treaty dealing with succession duties. Its fundamental provisions are to the effect that immovable property and undertakings (or shares in undertakings) will only be taxed in the country in which they are situated, and that, as regards the other parts of the inheritance, it will be in the first instance the country of which the deceased was a national which will levy the tax, subject to an exception in the case of the deceased's having had his domicile in the other contracting State (Article 2). A special clause (Article 2d) refers to the possibility of taxing the deceased's heir.

Reference should also be made to the Agreement between the Free City of Danzig and Poland signed at Danzig on May 29th, 1929. It deals with taxes on income and total wealth and a few other taxes of the same kind. The Agreement follows the principles of draft Convention Ic, although there are a few changes, particularly as regards wages and salaries (compare Article VI of the Agreement with Article 5 of draft Ic).

The same Powers further concluded two Agreements referring respectively to succession duties and the tax on bills of exchange. The former corresponds to the principles of draft Convention II of 1928; in the second, the two States are obliged, in the event of their imposing a stamp duty on a bill of exchange, to deduct the duty already levied by the other State.

In virtue of the Treaty of July 12th, 1926, between Austria and Czechoslovakia, the two administrations have concluded a new arrangement with regard to the fiscal regime applicable to gainful enterprises carrying on their activities in the two States. This Treaty, together with the Treaty of the same date concerning the taxation of railway and shipping enterprises (see “Collection of International Agreements”, document C.345.M.102.1928.II, pages 224 and 120), entered into force on January 26th, 1929.

The Committee next draws attention to an Agreement (Protocol) of June 15th, between Hungary and Austria, aiming at the reciprocal exemption of foreign railway undertakings within a zone extending to 15 kilometres on either side of the frontier.

Lastly, it should be observed that the idea of a complete exemption of foreign shipping continues to make progress. Some of the above-mentioned Agreements contain clauses establishing such exemption. Moreover, three new Agreements deal solely with the subject: (a) the Arrangement dated January 11th, 1929, between Norway and the Netherlands (see Supplement No. 1 to the “Collection of International Agreements”, document C.365.M.134.1929.II, page 28); (b) the Agreement between Great Britain and Greece of July 31st, 1929; and (c), the Exchange of Notes between Great Britain and Japan on August 10th, 1929.




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II. GENERAL POSITION WITH REGARD TO THE PROBLEMS OF DOUBLE TAXATION AND TAX EVASION.

The Fiscal Committee, when examining the International Conventions designed to avoid double taxation concluded since the General Meeting of Government Experts held in Geneva in October 1928, noted that the number of documents signed was not very great. Nevertheless in any just appreciation of the position, account must be taken of the fact that the recommendations of the General Meeting of Government Experts have not yet had time to bear full fruit. The Committee has been semi-officially informed by its various members that numerous conversations are in progress, and that probably, in a relatively short time, several important Conventions will be signed.

III. EXAMINATION OF THE QUESTIONS LEFT OPEN BY THE GENERAL MEETING OF GOVERNMENT EXPERTS.

The General Meeting of Government Experts had pointed out that the Fiscal Committee ought to take up several of the questions submitted to it, which it had not had time to examine in detail, namely:

Measures to be taken to avoid double taxation of income derived from patents and from authors' rights;

Rules for the apportionment of profits or capital of industrial or commercial enterprises operating in several countries;

Measures for the avoidance of double taxation of trusts and companies owning large amounts of easily transferable securities.

The Fiscal Committee placed these various questions on its agenda, and decided to add to them the study of the definition of the terms “autonomous agent” and “permanent establishment”, which, if universally recognised, would greatly facilitate the application of the rules incorporated in the model Conventions relating to the taxation of foreign undertakings.

A. Definition of the Terms “Autonomous Agent” and “Permanent Establishment”.

The following text is an attempt to define the terms “autonomous agent” and “permanent establishment”. The Fiscal Committee adopted this text on a first reading, but reserved the right to examine it on a second reading at its next session, by which time it will have received the comments of its corresponding members.

In its endeavour to determine the principles which it might adopt as a guide in defining the terms “autonomous agent”note and permanent establishment”, the Committee found that four criteria were employed in different countries.

(a) The first is a criterion of a legal nature, it being considered that the only agents dependent on an enterprise are those having sufficient powers to conclude contracts binding upon that enterprise.

The Committee considered that this criterion was admissible but was not applicable to every case.

(b) According to the second system, there is no “permanent establishment” unless the agent has a fixed depot.

There are cases, however, in which the presence of an agent of an enterprise may connote, for that enterprise, the existence of a permanent establishment, although the enterprise undoubtedly has no fixed depot; this is particularly the case with insurance companies and certain buying agencies.

(c) The third system takes into account the relations between the agent and the enterprise, the only agents regarded as not autonomous being those in receipt of fixed emoluments.

This may be a determining but it is not an indispensable factor in deciding whether there is a non-autonomous agent, i.e., a permanent establishment.

(d) The fourth criterion is that of the continuity of the relations between the agent and the enterprise.

This criterion is not absolute and requires closer definition.

Taking the above systems into consideration, the Committee concluded that it would be advantageous to disengage a general principle governing the matter, and to list a number of indices which constitute a presumption in favour of the existence of a permanent establishment.




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The fundamental principle is:

When a foreign enterprise regularly has business relations in another country through an agent established there, who is authorised to act on its behalf, it shall be deemed to have a permanent establishment in that country.

A permanent establishment may be presumed to exist:

  • (1) When the agent carries out the whole or part of his activities in an office or other premises placed at his disposal by the enterprise;
  • (2) When the office or premises where the agent carries out the whole or part of his activities are designated by outward signs as being an establishment of the enterprise itself;
  • (3) When the agent is habitually in possession, for the purposes of sale, of a stock of goods belonging to the enterprise, exclusive of samples;
  • (4) When the agent, having a business headquarters in the country, is a duly accredited agent (fondé de pouvoirs) who habitually enters into contracts on behalf of the enterprise for which he works;
  • (5) When the agent is an employee who habitually transacts commercial business on behalf of the enterprise in return for remuneration.

A broker who places his services at the disposal of an enterprise in order to bring it into touch with customers does not, in his own person, constitute a permanent establishment of the enterprise, even if his work for the enterprise is continuous or carried on at regular periods.

Similarly, a commission agent (commissionnaire) who acts in his own name for any number of undertakings and receives the normal rate of commission does not constitute a permanent establishment of any of the undertakings he represents.

Lastly, there cannot be held to be any permanent establishment in the case of commercial travellers not coming under any of the above-mentioned categories.

Commentary.

The essential elements of the relationship between the agent and the foreign enterprise which constitutes a permanent establishment are:

  • (1) The authorisation given the agent to act for the foreign enterprise; and
  • (2) The fact of his carrying out these transactions regularly; and
  • (3) The fact of his carrying them out in an establishment.

In connection with the application of such a principle, it is immaterial where the contract is concluded, or where title to property passes.

This concept excludes:

  • (1) Casual or even frequent transactions through a broker, because such an intermediary merely brings the parties together;
  • (2) Sales through a commission agent who acts in his own name for any number of parties;
  • (3) Travelling salesmen who have no establishment.

It is important to distinguish the agent who constitutes a permanent establishment from the commission agent (commissionnaire) who acts in his own name and not in that of the party for whose account he acts. The commission agent is, under the law of many countries, an independent person in business for himself and is responsible to persons buying from him the products which the real vendor has shipped to him to sell.

In most instances, the buyers do not know the real seller and the latter do [?] not know the buyers. Each looks to the commission agent, whose primary role is that of a responsible intermediary between sellers and buyers who would otherwise have difficulty in entering into communication. He usually disposes in wholesale of consigned stocks and keeps no permanent stock on behalf of any one seller.

The commission agent (commissionnaire) in this sense is not to be confused with the so-called commission gent (agent à la commission) who has a stock of goods belonging to a foreign enterprise on consignment and makes retail sales out of it continuously for the account of the foreign enterprise.

Such a “commission agent” usually acts expressly, if not in fact, for the foreign enterprise, inasmuch as the contract of sale or invoice usually bears the name of the foreign enterprise and the agent usually signs on its behalf.

B. Rules for Apportionment of Profits or Capital from Industrial or Commercial Enterprises operating in Several Countries, and Measures designed to avoid Double Taxation of International Trusts and “Holding Companies”.

The General Meeting of Government Experts on Double Taxation and Fiscal Evasion, held in November 1928, recommended that the Fiscal Committee should examine the possibility of establishing “rules for the apportionment of the profits or capital of undertakings operating in several countries” and “measures for the avoidance of the double taxation of trusts and companies possessing a large number of transferable securities”.

The General Meeting has not itself entered into the details of this question. In the three alternative model bilateral Conventions which it prepared, it made the following proposal on this point:

“Should the undertaking possess permanent establishments in both contracting States, each of the two States shall tax the portion of the income produced in its territory. The


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competent administrations of the two contracting States shall come to an agreement as to the basis for apportionment.”

In the commentary on this article, the General Meeting mentioned various methods of apportionment:

“These bases will vary essentially according to the undertakings concerned; in certain States account is taken, according to the nature of the undertakings, of the amount of capital involved, of the number of workers, the wages paid, receipts, etc. Similarly, in cases where the products of factories are sold abroad, a distinction is often made between ‘manufacturing’ and ‘merchanting’ profits, the latter being the difference between the price in the home market and the sale price abroad, less cost of transport. These criteria are, of course, given merely as indications.”

At its first session, the Fiscal Committee held a preliminary discussion of the whole question. It soon came to the conclusion that, in order to do any useful work, it would be essential to have a detailed knowledge of the present practice in the various countries.

With this object in view, the Committee has sent a letter to all its members and corresponding members, requesting the to supply it with detailed information on the subject. The Committee has further asked the representative of the International Chamber of Commerce whether that body would find it possible to co-operate in this enquiry and, if so, to inform it what, in the opinion of the members of the Chamber, would be the best methods of apportionment.

The Committee decided to add to the study of this question the examination of a resolution voted by the International Chamber of Commerce at its Congress held at Amsterdam in July 1929. This resolution provides that:

“The fact of an undertaking having business relations with a foreign country through a local company holding some or all of the shares does not imply that the undertaking has a permanent establishment in that country.”

This question was examined in detail by the Committee. After discussion, it became clear that the principle at issue, though of great importance, only affected a small number of cases. The Committee also found that this question formed but a part of the general question of the distribution of the profits of industrial or commercial undertakings.

It was therefore decided to postpone consideration of this point and to take no decision until the replies to the questionnaire relating to the principal question had been received and analysed.

C. Study of the Principles involved in the Avoidance of the Double Taxation of Authors' and Inventors' Rights.

The General Meeting of Government Experts has suggested that the Fiscal Committee should endeavour to discover a method for the avoidance of double taxation levied on the income derived from patents and authors' rights. During the present session, it has conducted a preliminary enquiry into this subject.

Certain members were of opinion that the regime had been fixed by Article 9 of the draft Convention No. Ia, which is worded as follows;

“Annuities and income from other sources not referred to in the previous paragraphs shall be taxable in the State of fiscal domicile of the creditor of such income.”

Other members pointed out that, at previous meetings, no decision had been taken either with regard to authors' rights or the income derived from patents. This argument seemed to be confirmed by the fact that the Government experts' report recommended the Fiscal Committee to study the question.

Certain members of the Committee also observed that the above-mentioned Article 9 contained a primer's error, since the word “sources” should have been “créances”. In support of this argument, they advanced the following reasons:

  • (1) In all previous documents the word “créances” had always been employed (document F.212, page 32, (h); document C.216.M.85.1927.II, pages 11 and 16);
  • (2) The text of Article 9 had been taken from the above documents and had been adopted without alteration by the General Meeting of Government Experts;
  • (3) The last part of the article refers to creditors (créanciers), which implies the existence of a “créance.”;
  • (4) The commentary on this article twice employs the expression “créances” but makes no mention of “sources” (document C.562.M.178.1928.II, page 13);
  • (5) Article 8 of Draft Ic, based on the Article 9 referred to above, also contains the word “créances” (document C.562.M.178.1928.II, page 20), so that, if the word “sources” is maintained in Article 9, Draft Ia, the provisions of Draft Ic would differ from those of Draft Ia, which would be contrary to the intention expressed by the Government experts.

Lastly, certain members of the Fiscal Committee thought that, in certain cases, the income derived from authors' rights or patents might come under Article 5 of the draft Convention, which


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refers to industrial, commercial or agricultural undertakings and any other trades or professions ed [?] on in the person's own place of residence.

While not wishing to express an opinion on the text of the Article 9 of Draft Ia adopted by the Government experts, the Fiscal Committee thinks that, before any decision is taken with [?] to the method of avoiding double taxation in the case of authors' and inventors' rights, it [?] be desirable to institute an enquiry into the fiscal regime at present applied to them in the [?] countries. For this purpose, it has drawn up a questionnaire to be sent to the regular and corresponding members of the Fiscal Committee. It proposes to resume its enquiries at its next [?] when it will have had time to analyse the replies received.

D. The Question of Reciprocity and of the Most-favoured-nation Clause as they affect the Problem of Double Taxation.

The General Meeting of Government Experts had also recommended that the Committee should proceed with “the examination of all points of international law connected with questions of double taxation, such as reciprocity and the relations between the most-favoured-nation clause and questions of double taxation”.

A preliminary exchange of views on these points showed that they were very complex. The Fiscal Committee therefore proposes to study them again at its next session.

IV. STUDY OF THE POSSIBILITY OF EXTENDING THE MEASURES DESIGNED TO AVOID DOUBLE TAXATION TO TURNOVER TAX, STAMP DUTIES AND VARIOUS CHARGES IN RESPECT OF INTERNATIONAL COMMERCE.

At its Congress at Amsterdam, the International Chamber of Commerce expressed the wish that the study of the best means of avoiding double taxation should be extended to the following:

“Turnover tax: duties, stamps, and various charges on instruments of international commerce (such as cheques, bills of exchange, letters of credit, etc.).”

The Fiscal Committee has no information as to the reasons which led the International Chamber of Commerce to adopt this resolution. The Committee realises the undesirability of asking States to agree to limit their sovereignty in fiscal matters unless the unfettered exercise of such sovereignty obviously causes real hardship to taxpayers or is attended by serious economic disadvantages. The Committee is unaware in what way the existing system entails either of these effects in any marked degree, and, in the absence of such information, it does not feel able to make any definite recommendation. It requests the Secretariat to obtain from the International Chamber of Commerce all requisite information in this connection and to collect such further [?] as may be necessary for its enquiry.

V. STUDY OF THE POSSIBILITY OF CONCLUDING MUITILATERAL CONVENTIONS FOR THE AVOIDANCE OF DOUBLE TAXATION ON POINTS ON WHICH A SUFFICIENT NUMBER OF COUNTRIES SEEM TO BE IN AGREEMENT.

The Committee noted the following resolution adopted by the International Chamber of commerce at its Amsterdam Congress in July 1929:

“The International Chamber of Commerce considers that it would be highly desirable for an international conference to be convened as soon as possible, consisting of: (a) Treasury officials, and (b) representative business men, appointed by the International Chamber of Commerce, for the purpose of unifying as far as possible the systems applied for the abolition of double taxation and preparing a multilateral convention for this purpose.”

The Committee unanimously agreed that bilateral conventions only constitute a partial ution [?] of the problem of double taxation. Though recognising that this solution appears at the present time in most cases to be the only possible one, the Committee felt that it should always [?] borne in mind that multilateral conventions would be better calculated to secure the desired unity of method and principle. It therefore thinks that an endeavour should be made to conclude such conventions as soon as agreement, even on a limited scale, seems to be possible.

For instance, the Committee held that a multilateral convention for the avoidance of double xation [?] in the case of commercial and industrial enterprises having permanent establishments [?] several countries cannot be concluded until a precise definition of the terms “permanent establishment” and “autonomous agent” has been secured.

The Committee hopes that the study it has undertaken in this connection will lead to a inition [?] capable of general acceptance, and that, when this result has been achieved, steps may be taken to prepare a multilateral convention regulating the taxation of industrial and commercial enterprises which conduct business in more than one country.

The Committee is also glad to note that the International Chamber of Commerce has instructed its national Committees to work to the same end. At its next session, the Committee proposes to examine such conclusions as these national Committees have reached.




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VI. TAXATION OF FOREIGN MOTOR VEHICLES.

On September 19th, 1929, the Council of the League of Nations authorised the Fiscal Committee to co-operate with the Permanent Committee on Road Traffic in studying the questions involved by the taxation of foreign motor vehicles.

This joint action had already been requested by the Advisory and Technical Committee on Communications and Transit, which, at its March 1929 session, adopted the following resolution:

“The Advisory and Technical Committee for Communications and Transit has noted the resolution of the Permanent Committee on Road Traffic concerning taxes on foreign motor vehicles, and requests its Chairman to take all the necessary steps for the joint examination of this question by the Permanent Committee on Road Traffic and the Fiscal Committee recently appointed by the Council of the League of Nations.”

The resolution of the Permanent Committee on Road Traffic referred to in the above resolution is as follows:

“The Committee, having taken note of the material submitted to it by the Secretariat, and having heard the information supplied by the representatives of the International Chamber of Commerce, the International Association of Recognised Automobile Clubs and the Alliance internationale du Tourisme, requests the Chairman of the Advisory and Technical Committee to take steps, by whatever procedure may be the most appropriate and with the assistance of fiscal experts, to enquire into the possibility of a general agreement between States with a view to the introduction of a system of taxes on foreign motor vehicles entering their respective territories which, by its nature and its method of enforcement, would not constitute a hindrance to international motor touring;

“Recommends that this question should be studied in conjunction with the following resolutions adopted by the Committee, which are based on certain desiderata drawn up by the International Association of Recognised Automobile Clubs and the Alliance internationale de Tourisme:

  • “ ‘(1) That no taxes on foreign motor vehicles should be levied during the [?] two months, at least, of their stay in the country;
  • “ ‘(2) That the method of collecting such taxes should be simplified to the utmost possible extent, in particular by making it the general rule to levy the daily licence fees at the time of leaving the country;
  • “ ‘(3) That the tax on foreign motor vehicles should not be leviable when the motorist merely comes to the Customs frontier office, for instance, to have his triptych endorsed, without proceeding further into the country.’ ”

The Committee has conducted a preliminary enquiry and indicates below the general lines which it thinks should be followed in reaching the solution it contemplates.

The Committee is of opinion that the ideal method of apportioning the various taxes on motor-cars (road taxes, luxury taxes) would be for each State merely to tax the motor cars registered in its territory, and entirely to exempt foreign cars. Certainly, this method, if adopted, would greatly encourage international traffic both tourist and goods traffic and would, moreover, provide a full and complete remedy for the evil of double taxation. Although the latter point is not without importance, the former seems still more essential. It seems that Governments would be well advised to exempt motor-cars registered in countries which do not levy any tax on foreign cars, not in order to avoid double taxation an impossibility in this case—but in order to apply the principle of reciprocity.

The Committee, however, wonders whether, in order to attain a first result at least, it would not be desirable for the present to limit exemption to private touring-cars; as, generally speaking, these cars only undertake journeys of short duration and are not heavy like lorries and char-à-banes, exemption is justified in their case and might be included within the framework of a general Convention.

Such a Convention would not prevent the conclusion of bilateral agreements between various countries concerning the taxation of heavy motor-cars used for the transport of goods or the public conveyance of persons.

Complete exemption, i.e., exemption not limited in duration, would eliminate the formalities which the levying of a tax makes necessary and would render Recommendations 2 and 3 of the Permanent Committee on Road Traffic superfluous. On the other hand, exemption covering only a few months would necessitate the maintenance of supervisory formalities.

Naturally, if complete exemption were accorded to lorries and char-à-banes, the Government in question would have to reserve the right to take special steps in cases where the owners of these cars misused the facilities granted them. Thus, for instance, a foreign motor-car used solely in one country and never leaving that country would still be subject to taxation.

Another question discussed was whether the right to exemption (total or partial) should be accorded to cars the owner of which resides in the territory of one of the contracting parties, or to cars registered in the territory of the contracting party. As, in reality, these two methods are practically the same, the Committee suggested that the second might be selected, if only on


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account of the greater facility afforded of furnishing proof. A motorist crossing a frontier might not always be in a position to prove that his domicile entitled him to exemption (the passport system not being eternal), whereas proofs of registration are to be found on the car itself.

If, in order to make sure that the greatest possible number of countries shall be parties to the Convention, it be thought undesirable to accord complete exemption, exemption might be granted for a period of three months (as already laid down in the laws of several countries).

The foregoing proposal satisfies Recommendation 1 of the Permanent Committee on Road Traffic.

The second recommendation of this Committee is concerned with the method of levying taxes, and calls, in so far as day-to-day taxes are concerned, for the acceptance of the system of levying these taxes at the time cars leave the country. The Committee is of opinion that this recommendation is a reasonable one and that its acceptance would facilitate international traffic. True, the system which would result from its acceptance would involve a certain amount of risk for the creditor country, since there always remains the possibility of evading a tax which has not been paid. But in the particular case of motor-cars, this danger may perhaps be greatly reduced by the Customs formalities to which foreign cars are subject. The necessity of keeping Customs documents up to date obliges motorists to go to a Customs office from time to time, and the authorities may then ascertain whether the road tax has been paid.

The third recommendation of the Permanent Committee on Road Transport is not such as to give rise to much comment. It seems to be rather an exaggeration to tax a person merely for having made a short journey in order to have his triptych visaed, and countries which do this might well accede to the recommendation of the Committee, without any alteration of their internal legislation. The mere issuing of instructions to their administrative agents would be sufficient.

As to formalities, it might be possible to use Customs booklets as control documents. Otherwise, it would be well to introduce a special booklet.

The last question examined by the Committee was whether all the exemptions, general and otherwise, should be included in one multilateral Convention, or whether two Conventions should be drawn up—one for those countries which accord complete exemption, and the other for those which favour exemption limited to a definite period only.

The Committee holds that the best solution would be the conclusion of a single Convention whereby all the signatory States would accord restricted exemption, but an additional optional Protocol might be signed by such States as agreed to full and complete exemption. As exemption is accorded on a basis of reciprocity, it is thought that the most-favoured-nation clause inserted in the commercial treaties should not be invoked in this connection. It would be as well to elucidate this point.

The Convention would obviously be no obstacle to the conclusion of bilateral agreements by countries not bound to one another by the stipulations of the proposed Convention, but desirous of restricting exemption to certain countries or of restricting its duration.

On the basis of these principles, the Committee has drawn up a draft Convention, which it has discussed with a delegation of the Permanent Committee on Road Traffic. It has commissioned three of its members to continue to collaborate with the Transit Organisation in drawing up the final text of the draft.

VII. REPRESENTATION OF THE FISCAL COMMITTEE ON THE INTERNATIONAL CONFERENCE ON THE TREATMENT OF FOREIGNERS.

In a resolution adopted on August 31st, 1929, the Council called upon the Fiscal Committee to send to the International Conference for the Conclusion of a Convention on the Treatment of Foreigners two of its members, to be present at the meetings of the Conference in a consultative capacity.

The Committee discussed the fiscal clauses to be incorporated in the draft Convention. It endeavoured to determine the scope of these clauses, and considered the various questions which might be raised by the Government delegates to the Conference. It appointed M. BORDUGE, Chairman of the Committee, and M. BLAU as its representatives.

VIII. APPOINTMENT OF CORRESPONDING MEMBERS.

The Fiscal Committee found that, as at present constituted, it had only nineteen corresponding members.

It considers that, in view of the character of its work, it is extremely important that there should be corresponding members of the Fiscal Committee in the largest possible number of countries. Indeed, only on this condition can there be any hope of giving the maximum effect to the studies undertaken by the Committee, particularly in connection with the question of unifying the methods employed for the avoidance of double taxation.

The Fiscal Committee hopes that the Council will extend the list of its corresponding members as much as possible.

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