Economic and financial section > Double taxation and tax evasion

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The discussion leads to the conclusion that the most important elements of the question
are points i and 4, that is to say, the origin of the wealth and the domicile of the owner who
consumes the wealth.
The authors then consider in succession the various sources of wealth (immovable pro¬
perty, business enterprises, movable property with a fixed location, movable property without
a fixed location, mortgages, shares, bonds, public securities, general commercial credits and
professional earnings). They give a table 15 in which they ideally apportion economic allegiance
as between origin and domicile. In their view, origin is more important in the case of land,
commercial, industrial and agricultural establishments, etc., and, as far as a tax on capital
is concerned, mortgages. The element of domicile is, on the contrary, more important in the
case of movable property, transferable securities of every kind, general credits and personal
earnings and, in so far as a tax. on income is concerned, mortgages.
The third part of the report is devoted to the application of these principles and develops-
four general methods by which double taxation may be avoided.
In the first, which may be called “the method of total deduction ’ — a method applied in
principle in the United States — the country of domicile deducts from the tax due from its
residents the whole of the tax paid by them abroad on their income.
The second method is the extreme converse: the country of origin exempts all non-residents
from taxes imposed on income drawn from sources within its borders.
The third method consists in dividing the tax and allocating the relief given between the
two States. This is the system which has been tried in the British Empire as between Great
Britain and the Dominions.
Lastly, the fourth method, which may be called the method of the assignment of income,
consists in apportioning particular classes of wealth specifically and wholly to the countries
concerned, so that, when this division has been made, each country, independently of the other,
taxes the part of the wealth which is, so to speak, assigned to it.
The authors finally point out the advantages and disadvantages of each of these four
systems and conclude by “looking forward to an ultimate development of national ideas on
uniform lines toward method 2”.
We cannot conclude this survey of earlier work, which has assisted us in our task, without
some reference to the various memoranda submitted by the Economic and Legal .Sections
of the League of Nations and particularly to the detailed investigation into the various methods
of relief which has been carried out by M. Leon-Dufour, Secretary of the Financial Committee.
This investigation is illustrated by a number of graphs which give a clear idea of the practical
working of the various systems, and we reproduce some of these graphs as an appendix.
2. Definite Attempts hitherto made to solve the Problem.
We were thus in possession of the views of certain committees of experts and the opinion
of the commercial and industrial world as represented by the International Chamber of Commerce,
and we had the report of the four economists as a solid foundation for our work. But we
were also able to take into consideration the definite endeavours made by means of legislation
or international agreements (especially within the last twenty years) to overcome the drawbacks
of double taxation.
Certain provisions in the internal legislation of States are intended to obviate double taxation,
either wholly or partially. We may quote four examples:
15 Document F. 19, page 39.