Canada and the United States Agree on Tax Relief for Shipping

Canada opened its Washington legation in February 1927, with an accredited minister to negotiate directly with the American government. [5] [1]

Vincent Massey approached the State Department in May 1928 after Canada's Parliament changed its income tax law. The Canadian minister proposed reciprocal relief for shipping earnings and offered to apply Canada's exemption to earlier years. American law already allowed certain foreign shipping income to escape taxation when the vessel's country granted equivalent treatment, but the two governments still needed to establish whether their provisions matched. [1] [2]

The Treasury Department identified a limit: Canadian citizens residing in the United States remained subject to American income tax, and an executive agreement could not waive that statutory obligation. Washington therefore asked for a more precise statement of the Canadian exemption and its starting date. The negotiation had to distinguish nationality, residence, corporate organization, and the country in which a ship was registered. [2]

The resulting undertaking covered qualifying shipping earnings, including ferries, and applied from 1921 onward, subject to statutory limits on refunds. Washington accepted it on 17 September. On 29 September, Canadian chargé H. H. Wrong confirmed that revenue officials were receiving instructions to implement it and that Canada regarded the exchange of notes as a sufficient record of the agreement. [3] [4]

Related Diplomats

1. Vincent Massey [1]
2. H. H. Wrong [4]

Related Reading

• Canada and the United States
• Negotiating through Washington’s Institutions
• Canada