CAB129-53 — Page 99

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introduced in Parliament to enable the United Kingdom to ratify the Status of Forces Agreement. If the Visiting Forces Bill is duly enacted, the additional legislation required to enable the United Kingdom to ratify the Protocol would be in connection with the following articles: --

Article 4 (a) on criminal jurisdiction;

Article 10, giving each Supreme Headquarters juridical personality;

Article 11 (2), which makes the property and funds of a headquarters in certain cases immune from execution or legal seizure by a court;

Article 13, on the inviolability of documents belonging to a headquarters.

Financial Provisions

4. The three other provisions of the Protocol which merit particular attention are Articles 7 and 8 dealing with taxation and Article 12 (2) on the transfer and conversion of currency.

5. Article 7 provides for income tax exemption for headquarters staff, who fall into three categories:

(i) military staff who belong to the armed services of the North Atlantic Treaty countries and who are attached to the headquarters for duty; (ii) civilian staff employed by such armed services who are attached to the

headquarters for duty; and

(iii) civilian staff directly employed by the headquarters.

The first two categories will be paid by the armed forces of which they are member. or by which they are employed and therefore can be assimilated for income tax purposes to the members of the national forces and their civilian components to whom the Status of Forces Agreement itself applies. The third category can be assimilated to the international staff of N.A.T.O. and are therefore brought under the income tax arrangements laid down in Article 19 of the Agreement on the Status of N.A.T.O., National Representatives and International Staff, signed in Ottawa on 20th September, 1951. The effect is that British nationals in cate gories (i) and (ii) will be liable to United Kingdom income tax on the salaries and emoluments received by them as members of the military headquarters staff, but those in category (iii) will not. This scheme, with which the departments con- cerned are satisfied, represents a carefully weighed compromise between national requirements. Legislation covering the Status of Forces Agreement and the Civilian Status Agreement will probably be included in next year's Finance Bill and the necessary small addition to cover the categories in the Protocol could be måde at the same time. The principle that United Kingdom nationals on the staff of international organisations should be exempt from United Kingdom incom: tax on the salaries and emoluments paid to them as such has already been accepted and applied by the United Kingdom to the international staff of other international organisations (Diplomatic Privileges (General Amendment) Order in Council. 1950).

6. Article 8, paragraph 1, provides that each N.A.T.O. member should negotiate an agreement with any allied headquarters operating in its territory l relieve it so far as practicable from all duties and taxes which would add to the cost of common defence. This paragraph was proposed by the United States to meet the requirements of the Mutual Security Act and the intention is that N.A.T.O. countries should extend to the international military headquarters to which the Protocol applies the same taxation privileges as they have already under- taken to extend to the United States Government in connexion with its expenditure on mutual defence. The United States will, on its part, grant equivalent privileges This provision of the Protocol should produce no special difficulty for us. The United Kingdom has already entered into a bilateral agreement with the United States of the kind.contemplated (exchange of notes of 17th and 18th March, 1952. At present in the United Kingdom there are no N.A.T.O. military headquarten to which the Protocol will apply.

7. Article

Article 12, paragraph 2, provides that countries should facilitate the transfer to another country and the conversion into another currency of fund held by a headquarters. This will not formally oblige the United Kingdom to Paver Sterling funds, for example, into dollars where gig9 would serious! prejudice our interests; the undertaking is in fact similar to that already given b the United Kingdom in respect of other international bodies.

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