File 522/1922 Pt 7 'Bahrain: Persian claim to sovereignty; Persian Treaty negotations 1929-1930' [‎245v] (495/1126)

directement entre ie Gouvernement Imperial et le “ Anglo-Persian ” et non pas
avec mon Gouvernement, qui n’a jamais conclu un accord a ce sujet avec
n’importe ouel autre Gouvernement etranger. Je vous envoie ci-inclus un aide-
memoire explicatif. C’est vrai que la double imposition a ete discutee a Geneve,
mais aucune decision n’a ete prise et on est encore bien loin d’un accord general
De notre cote, nous desirous, a part la question de Bahrein et celle des visites
des bateaux de guerre dans vos ports, certaines modifications dans le projet du
protocole sur Hen jam dans le but d’ecarter toute possibilite de malentendu et de
friction locale. En outre, nous voudrions voir enlevees les restrictions onereuses
SUr ^Finalement. la question des reclamations, surtout celles du Persian Railway
Syndicate. II est essential, a Eavis de mon Gouyernement, d’envisager dans le
i/nitp nne solution Je vous prie de bien vouloir penser serieusement a cette
question et me faire savoir ce que vous proposez.
Voulez-vous avoir I’obligeance d’envoyer votre reponse par Tintermediate
de Parr, qui a ete charge de vous faire parvenir cette lettre.
Je vous prie, &c.
R. H. CLIVE.
Enclosure 2 in No. 1.
Note regarding Double Taxation {enclosed in Sir R. Clive's Letter of January H
to the Minister of Court).
1 . UNDER the Income Tax Law of the United Kingdom a person resident
in the United Kingdom is liable to income tax on the whole of his income, whether
derived from sources in the United Kingdom or from sources abroad.
Consequently, a person (whether a natural person or a corporation), resident in
the United Kingdom, who carries on business partly in the United Kingdom and
partly abroad, is liable to United Kingdom income tax on the whole of his profits.
If the part of the profits earned abroad is liable to taxation abroad, the tax so
paid abroad is allowed to be debited as a trading expense in arriving at the profits
assessable to United Kingdom income tax, but the tax so paid abroad is not
allowed to be set of! against the tax payable in the United Kingdom.
2. In these circumstances, the part of the profits earned abroad will be
liable to double taxation, and in a very large number of cases such double taxation
actually exists. Various suggestions have from time to time been made for
avoiding this double taxation, and among them is the suggestion that the country
in which the trader resides should allow from its own charge of duty a deduction
equal to the amount of the tax charged abroad on the profits earned there.
3. This solution of the double taxation problem is not likely to commend
itself to the United Kingdom Government. In fact, such arrangements as nave
been made or are under discussion between the United Kingdom Government and
foreign Governments for the avoidance of double income-taxation {e.g., in relation
to profits arising from shipping businesses and from trade carried on tnrougn
agents), proceed on the basis that the profits shall be taxed only by the country m
which the trader resides, the country in which the profits arise giving up its claim
to tax.
4. There is in existence between the United Kingdom and other parts of t e
British Empire a general scheme for the avoidance or relief of double income-
taxation, based on a different principle. But in this case special considerations
prevail, in view of the close relations between the constituent members ot uie
Empire, and it is not in contemplation to extend that scheme to foreign countries.
And, clearly, it would not be possible to apply this principle to any one foreign
country in particular {e.g., Persia) without applying it to all. It is, therefore,
impossible to treat the proposals of the Persian Government otherwise than as
part of a general problem, the solution to which is not yet in sight.
January 14, 1931.