Reuven S. Avi-Yonah, University of Michigan Law School, on the The First US Tax Treaty and Its Influence:
This paper discusses the first US tax treaty concluded with France in 1932 and ratified in 1935. This treaty is interesting because it follows the League of Nations model of 1928 but with significant differences. It is also a treaty between a global jurisdiction and (at the time) a purely territorial one. This meant that while reductions in French taxes benefited the US fisc because they resulted in lower foreign tax credits (but the overall tax level was the same), French investors into the US could derive some types of income (e.g., royalties) without any tax being imposed by either country. This may also explain why the treaty was more limited in scope than the League of Nations model. But the main importance of the treaty is because it is the first ever appearance of the Arms Length Principle in international tax, which had a profound influence.--Dan Ernst
