No Tax Joy For American Employees Of The UN

by Leroy Baker, Tax-News.com, New York

30 September 2003

Whilst many Americans can look forward to a slightly fatter pay check or dividend payout in the coming months as a result of recent tax cuts, those in the employ of the United Nations must face a veritable tax maze as a result of America's long standing objection to the UN paying tax-free salaries.

In theory, the recent tax cuts should make no differences to the wages of American UN employees, as the organisation aims to pay all its workers tax-free regardless of the country from which they originate or in which they reside. However, back in 1947 the US administration deemed it "undesirable" for Americans to shirk their normal "responsibilities of citizenship" in such a way. Therefore, along with Turkey, the United States does not allow its citizens to benefit from the UN's ideal of treating all its workers equally.

Consequently, payday for American employees of the UN is a somewhat complicated affair, where they are paid a net salary, and their tax forms are submitted to the UN rather than the IRS. The United Nations then writes the tax check, and passes it back to the employee, who in turn files it with the US Treasury.

This means that employees from a third country must pay into a fund to reimburse their citizens for the American or Turkish taxes they have paid, meanwhile receiving a credit against annual dues from the remainder. It also means that employees must allow the UN access to their personal tax records in order to prevent the organisation from being presented with an inflated tax bill, with the worker potentially pocketing the difference. Understandably, the system is unpopular with workers and administrators alike.

Whilst US workers are exempt from local and state taxes, a proposal in 1993 by the then Vice President Al Gore's government efficiency team to scrap the system and exempt American UN employees from federal taxes was quickly shelved.

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