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Published online by Cambridge University Press: 21 July 2009
Taking the United Nations, its specialized agencies and the EC as a focal point, this article looks at the fiscal position of international organizations and their officials vis-à-vis their host state. Firstly, the fiscal privileges are examined from a theoretical point of view, after which a number of cases are analyzed in which international organizations and their host state differed in their views on the application of the aforementioned privileges.
From a broader perspective, this study explores the watercourse of standards which have sprung on the international level down to their application in daily life. A particular type of provision -concerning the fiscal immunities of an international organization and its officialscontained in a particular type of multilateral convention, dealing with the status, privileges and immunities of international organizations and their officials, is followed down to its application on the national level.
1 1 U.N.T.S. 15.
2 33 U.N.T.S. 261.
3 Published in B. Rudden and D. Wyatt (eds.), Basic Community Laws 125 (1986).
4 U.N. Doc. A/CONF.20/13.
5 On this subject, see Art. 27 of the OECD Model Convention on Double Taxation and the commentaries to this provision in 9 Nederlandse Regelingen van Inlernalionaal Belastingrecht 106–108 and K. Vogel, On Double Taxation Conventions 1256–1272 (1991), in particular at 1264.
6 See W. Jenks, International Immunities 59–60 (1961) and K. Ahluwalia, The Legal Status, Privileges and Immunities of the Specialized Agencies of the United Nations and certain other International Organizations 89–97 (1964). See also 1964 U.NJ.Y. 220 and 1968 U.NJ.Y. 214. See also XIII Documents on the UN Conference on International Organization 780 (1945); case 6/60, Humblet v. Belgian State, ECR1960, 577 at (c); and Privileges and Immunities of International Organizations, Res. 69(29) adopted by the Committee of Ministers of the Council of Europe on September 26, 1969 and Explanatory Report [hereafter referred to as Council of Europe study on privileges and immunities] 44.
7 See K. Ahluwalia, supra note 6, at 115–122. See also Humblet v. Belgian State, supra note 6, at (b); Case 7/74, Van Nidek v. Inspecteur der Registratie en Successie, ECR 1974, (Part II) at 764. See also Council of Europe study on privileges and immunities, supra note 6, 44 at 99.
8 Art. 78 ESCE Treaty, Arts. 15 and 16 of the Protocol on the Statute of the Court of Justice of the ECSC. In Van Nidek v. InspecteurderRegistrant en Successsie, supra note 7, at 757, Art. 24 of the Single European Act is also mentioned.
9 In legal terms, a German law of 1919, the Reichsabgabeordnung, defined taxes as follows: “Steuern siiid einmalige oder laufende Geldleistongen die nicht eine Gegenleistung fur eine besondere Leistung darslellen wid von einem bffentlichrechtlichen Gemeinwesen zur Enielung von Einkunften alien auferlegt werden. bei denen der Talbestand zutriffi an den das Gesetz die Leistungspflicht kniipft”. In more economic terms, Seligman (1910) gave the following definition: “A tax is a compulsory contribution from the person to the government to defray the expenses incurred in the common interest of all, without reference to special benefits conferred”. (As published in L.G.M. Stevens, Elemental Belastingrecht 358 (1989). See also Rapport van de Commissie ter Bestudering van het Begrip Belastingen, 1 Geschriften van de Vereniging voor Belastingwetenschap 184 and 1 Nederlandse Regeling van Internationaal Belastingrecht 318–321.
10 See OECD Report on Revenue Statistics of OECD Member-Countries 1967/1987, at 37 and 264. In this report, taxes are divided into six categories: (a) taxes on income, (b) taxes on profits and capital gains, (c) social security contributions, (d) taxes on pay-roll and workforce, (e) taxes on property, (f) taxes on goods and services and (g) other taxes. The term ‘general government’ is widely interpreted, and includes, inter alia local government, social security organs and supranational organs. State companies are excluded.
11 See 1974 U.NJ.Y. 147: “[…] the characterization given to that term [(he term ‘direct tax’ asm] by municipal law or municipal officials cannot be controlling if the nature and incidence of the tax affect the United Nations and increase the financial expenses of the Organization to the advantage of a Member State”. See also 1981 U.NJ.Y. 159, 1973 U.NJ.Y. 132, 1972 U.NJ.Y. 158 and 191, 1967 U.N.J.Y. 315 and 1964 U.N.J.Y. 220 and 221.
12 See Humblet v. Belgian State, supra note 6; Case 32/67, Van Leeuwen v. City of Rotterdam, ECR 1968, 43 and Case 23/68, Klomp v. Inspectie der Belastingen, ECR 1969, at 43.
13 See The practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretariat (May 24, 1985; A/CN.4/L.383 Add.l) 1990 U.N.J.Y. 49; and legal opinion No. 22 (not yet published): “In United Nations practice, VAT is deemed to be an indirect tax within the meaning of Article II, Section 8 of the Convention of the Privileges and Immunities of the United Nations […]”.
14 See also, 1990 U.N.J.Y., legal opinion No. 28. In this opinion, the Legal Counsel stated with regard to turnover tax, stamp duty tax and other taxes related to the securities of the activities of the United Nations Joint Staff Pension Fund: “In our view, the taxes in question […] should be considered as direct taxes, as their incidence falls directly on the Organization”.
15 In the Netherlands, the European Community has explicitly been exempted from stamp taxes, as an indirect tax.
16 1964 U.N.J.Y. 220 and 221.
17 It has already been stated that, within the meaning of Section 8 of the General Convention, value added tax (VAT) is considered an indirect tax. In a certain state, arrangements had been made for the reimbursement of the amount of VAT charged on services and goods. With regard to large purchases however, the UN felt that there was too much time between the payment of VAT by the UN and its reimbursement. Due to fluctuating exchange rates and inflation, the UN was incurring substantial losses. To prevent this drain on international funds, the UN suggested that the VAT reimbursement on large scale purchases be converted into a VAT exemption. In the eyes of the UN, this could be achieved within the legal framework of Section 8 of the General Convention: remission instead of return of indirect taxes; see 1984 U.N.J.Y. 190.
18 See The Practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretariat (June 27, 1985; A/CN.4/L.383 Add. 2), at 25.
19 The following are listed in Section 19(b) of the FAO Headquarters Agreement (II U.N.L.S. Legislative Texts and Treaty Provisions Concerning the Legal Status, Privileges and Immunities of international Organizations (ST/LEG/SER.B/10) at 193): registration tax (imposta di registro), the general receipts tax (imposla generate sull'entrala) on wholesale purchases, contractual services and on tenders for contractual supplies (prestazioni d'opera, appalti) on leases of lands and buildings; from the mortgage tax; and from the consumption taxes on electric power or lighting, on gas for lighting and heating, and on building materials. A similar list is provided in respect of direct taxes.
20 See Boekwerk Internationale Fiscale Zaken, I.F.Z. 154, No. B74/15201.
21 Van Leeuwen v. City of Rotterdam, supra note 12, at 48. Emphasis added.
22 Id., at 48.
23 1973 U.N.J.Y. 133–136.
24 When confronted with a ‘service fee’ levied by the Diplomatic Services Office, a government agency, the UN Secretariat concluded along these lines that it was a direct tax from which the UN was exempt and not a charge for services rendered as the Government contended. The argument was based on the following grounds: (1) the term ‘public utility’ is ordinarily understood to mean public corporations or agencies providing such services as water, gas or electricity for consumption by the United Nations; (2) the ‘service fee’ was not calculated on the basis of an actual service but was levied for the purpose of defraying the administrative expenses of the state concerned in maintaining the Diplomatic Services Office; (3) this was more so, since it was mandatory for the UN to conduct its transactions through the Diplomatic Services Office; see 1981 U.N.J.Y. 159.
25 See 1973 U.N.J.Y. 135. Reference is made to a statement made by the Legal Counsel before the ILC – published in II Yearbook of the ILC 247 (1967) – in which the same line of reasoning is upheld. Here, the Legal Counsel argued that charges exacted by a Government upon aircraft for landing and parking an aircraft constitute a direct tax because the charges were only levied for the mere fact of calling or stopping at an airport. Along the same line of reasoning, he stated that ‘handling charges’ were considered a public utility charge for which the UN does not claim exemption. The same would apply to charges for the rental of hangar storage, or for electricity charges for the lighting of the runway at night. See also Art. 5 of the Agreement between the United Nations and the Fire Department of New York City concerning Joint Inspection of United Nations Fire Protection Equipment and Facilities of June 6, 1989, which explictly states: “It is agreed that the United Nations shall be exempt from all inspectional and permit fees in respect of the Fire Department inspections of United Nations fire protection systems and facilities”. Text obtained from the UN Secretariat, New York.
26 Following this line of reasoning, street lighting can be a public utility service if you are billed by the amount of light furnished to your frontage.
27 Klomp v. Inspectie der Belastingen, supra note 12, at 43. The Dutch translation of the law in question is ‘Algemene Ouderdoms Wet’.
28 The text of this article later became Article 13 of the EC Protocol.
29 Due to the way in which the prejudicial question posed by the Hague Gerechtshof was formulated, the Court did not see enough room for itself to express an opinion on the question whether Mr. Klomp can be exempted from the Old Age contribution on the ground that EC civil servants are already automatically subject to a similar EC social security scheme (this in order to avoid double levying of contributions).
30 See, e.g., Art. 33 Vienna Convention on Diplomatic Relations and the following provisions of headquarters agreements: Art. 17 EBRD Headquarters Agreement, Art 3 Arrangement for the Execution of the 1LO Headquarters Agreement (15 U.N.T.S. 397), Art. 3 Arrangement for the Execution of the WHO Headquarters Agreement (26 U.N.T.S. 349), Art 2 Plan for the Execution of the WMO headquarters Agreement (211 U.N.T.S. 293), Art. 20 Headquarters Agreement of the Iran – United States Claims Tribunal (1990 Tractatenblad No. 150) and Sections 25 and 26 IAEA Headquarters Agreement (II U.N.L.S. Legislative Texts and Treaty Provisions Concerning the Legal Status, Privileges and Immunities of International Organizations (ST/LEG/SER.B/10), at 327. Swiss jurisprudence seems to deviate somewhat from the abovementioned practice, but only in respect of UN officials who are of the Swiss nationality: exemption is only granted to such persons if participation in both the UN Pension Fund and the Swiss scheme constitutes an excessive burden (charges trop lourdes) on his or her income (1980 U.N.J.Y. 220 and The practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretarial (Add.2), supra note 18, at 39). Its doubtful whether this practice is fully in accordance with the current state of international law.
31 In this study, all laws enacted by the central government will be referred to as first level legislation. Laws which have been issued on a state, cantonal or provincial level will be named second level legislation. Finally, the municipal level will be called the third level.
32 U.N. Doc. A/Conf.39/27, Fourth Annex. This Convention is in principle only applicable to treaties which have been concluded between states. See, however, Art. 3 of this Convention and Arts. 27 and 46 of the Vienna Convention on the Law of Treaties concluded between States and International Organizations or between International Organizations (1986), U.N. Doc A/CONF.129/15.
33 1976 U.N J.Y. 11.
34 Section 8 of the General Convention and Section 10 of the Specialized Agencies Convention.
35 Art. 3 EC Protocol.
36 See 1967 U.N.J.Y. 315 and 1990 U.N.J.Y., legal opinion No. 27.
37 See The Practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretariat (Add.2), supra note 18, at 23–26.
38 Which reads: “The Organization shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfilment of its purposes”.
39 See The Practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretariat (Add.l), supra note 13, at 37.
40 See 1990 U.N J.Y., legal opinion No. 28. In this opinion, the Legal Counsel stated: “As for withholding taxes on cash dividends paid on securities, including securities forming part of the assets of the UNJSPF, intemathey in our view represent taxes on dividends and, as such, should also be considered as direct taxes levied on income and assets of the owner of the securities. The fact that the tax is withheld at the source does not convert it into a tax against the corporation as such. Therefore the United Nations is entitled to exemption from the tax in question as well”.
41 Or, in the words used by the European Court of Justice in Case 23/68, Klomp v. Inspectie der Belastingen (supranoie 12, 51 at 18–22.), a charge “intended to provide for the general expenses of public authorities”.
42 Especially the more technically orientated organizations, who would be more inclined to make use of research facilities outside the organization may find a need for such an agreement (such as the FAO, the IAEA, the WHO, the WMO, Euratom and the ESA).
43 See The Practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretariat (Add.l), supra note 13, at 38.
44 See Case 260/86, Commission of the European Communities v. Kingdom of Belgium, ECR 1988–2, at 955.
45 1974 U.N.J.Y. 147.
46 An. 100, Loi instuarant une taxde mis en circulation, Moniteur Beige, 12638 (01.06.1992).
47 An. 210 EC Treaty.
48 See, P. Coppens and A. Bailleux, L'lmpdt des Personnes Physiques, Droit Fiscal 11 (1992); M. Dassesse and P. Minne, Principes Généreaux el Impöt sur les Revenus, Droit Fiscal 19 (1992).
49 Van Nidek v. Inspecteur der Registratie en Successie, supra note 7, 764 at 5, 6 and 7.
50 It is submitted that is not a very sound argument upon which one can base the conclusion that pensions are salaries and emoluments within the meaning of Article 13 of the EC Protocol. It could however be brought forward as a good argument to prevent taxation of the pensions (the ‘prevention of double taxation’ argument).
51 See The Practice of the United Nations, the Specialized Agencies and the International Atomic Energy Agency concerning their Status, Privileges and Immunities: Supplementary Study prepared by the Secretariat (Add. 2), supra note 18, at 37.
52 Id..
53 Id..
54 Id..
55 Art. 16 Protocol on the Privileges and Immunities of the European Patent Office.
56 Emphasis added. Case 260/86, Commission of the European Communities v. Kingdom of Belgium, (supra note 44, at 9SS). Here the Court further elaborates on the ruling which it gave in Case 6/60, Humblet v. Belgian State (supra note 6, at 559) when it stated that the words “shall be exempt from any tax on salaries” indicate “clearly and ambiguously exemption from any fiscal charge based directly or indirectly on the exempted remuneration”. The argument brought forward by the Belgians that the term on salaries in Article 13 of the EC Protocol justified the converse argument that the article did not prevent the taxation of other (non exempt) income at a higher rate by reason of the remuneration of the exempted official was firmly rejected on the grounds that even in such a case the exempt salary would constitute the legal basis for the assessment.
57 The Advocate-General found it difficult to agree with argumentation of the Court, especially when taking the Humblet, Klomp and van Leeuwen cases into account. According to him, these judgements make it clear that the fiscal immunity coveres taxes “in whatever form and under whatever description they are levied”. The two factors named by the Court, -(a) that the death duty was only levied once (and not periodically) and (b) that it did not correspond to a tax of a similar nature levied by the Community (the ‘prevention of double taxation’ argument)-, did not, in the eyes of the Advocate-General, change the fact that the death duty was a charge intended to provide for general expenses of the public authorities, in other words, a tax which put international funds into a national treasury. For these reasons he concluded that the tax was one for which Community officials should be exempt (Case 7/74, Van Nidek v. Inspecteur der Registratie en Successie, supra note 7, at 768–769).
58 Case 7/74, Van Nidek v. Inspecteur der Registratie en Successie, supra note 7, at 765.
59 See 1983 U.N.J.Y. 216; 1973 U.N.J.Y. 168; 1969 U.N.J.Y. 226 (with reference to Case 6/60, Humblet v. Belgian State, supra note 6) and 239.
60 The plea by the Belgian authorities, that the tax exemption of Art. 11 of the ECSC Protocol (now Art. 13 of the Protocol of the EC) was purely an individual exemptionfrom tax and not a general immunity from income tax, was rejected. The Court stated that the exemption from national taxes, although provided in the public interest of the Community, is granted directly to those officials and confers an individual right on them.
61 Case 6/60, Humblet v. Belgian State, supra note 6, at 579.
62 See HogeRaad, judgment of June 7, 1972, 1972 B.N.B. 205; judgment of April 16, 1986, 1986 B.N.B. 274; judgmentof June4, 1986, 1986 B.N.B.281; and judgmentof April 27, 1988, 1988 B.N.B. 182. In these judgements, the abovementioned reservation is interpreted narrowly. For example, because the exempt income is not taken into account to determine (he gross income, the exempt income cannot be used to calculate tax deductions which are dependent of the gross income. Officials of international organizations in connection with which the reservation has not been made, need only to state this circumstance on their tax form. They are not obliged to fill in the amount of income that they have received from the organization.
63 Art. 18 of the Protocol on Privileges and Immunities of the European Space Research Organization; see 1971 U.N.T.S. 281. In the Netherlands, the reservation is applied as follows: the following income is taken into account when determining the tax bracket for both spouses: the ESTEC salaries and emoluments before internal organizations’ tax deduction, the household allowance, the dependant allowance and the part of the health insurance that is paid by the organization.
64 See Case 6/60, Humblet v. Belgian State, supra note 6, at 576. The Luxembourg parliament, when voting on the EAEC Treaty, expressed the opinion that the provision on fiscal immunity “will not prevent the national tax authorities from taking into account the exempted income for the purpose of calculating the rate of tax applicable to the non-exempt income, that is to say income arising from sources other than the emoluments paid by the Communities”.
65 Art 16 of the Headquarters Agreement between the Government of Japan and the International Tropical Timber Organization signed in Tokyo on February 2, 1987; see 32 Japanese Annual of International Law 175 (1989).
66 Case 333/88, Tither v. Commission of Inland Revenue, ECR 1990–3, at I–1158.
67 Id., I–1157 at 10, where the Court emphasises that the case only relates to “the situation of a person whose salary is not chargeable to tax by virtue of an immunity such as the one laid down in Article 13 of the Protocol and whose other income is less that the amount of mortgage interest paid, so that the person is not subject to income tax under national legislation”.
68 See Moniteur Beige, 24464 (29.12.1990).
69 The quotient conjugal can have the effect of increasing employment by creating equality between a spouse (in practice, mostly women) who works outside the house and a spouse who chooses to work at home, raising the children. Thus the Belgian government hopes that the application of the quotient conjugal will contribute to a higher birth rate (information supplied by the Belgian Ministry of Finance). With regard to an excise tax on the sale of chemicals that deplete the ozone layer (ODC's) which was levied by a state for environmental reasons (an indirect tax from which remission or reimbursement can be claimed under Section 8 of the General Convention, the UN Legal Counsel stated that a request for exemption: “[w]ould be anomalous in that the very Organization which […] seeks the reduction of ODC's would be attempting to exempt itself from a control measure imposed to secure a reduction”.( 1990 U.N.J. Y., legal opinion No. 27). In light of the purpose that lay behind the tax, he thus did not consider it appropriate to claim exemption. In addition to the grounds already mentioned, this line of reasoning could also be applied to fence off claims for tax exemptions based on not applying the quotient conjugal to exempt officials.
70 Case 333/88, Tither v. Commission of Inland Revenue, supra note 66, at I–1158. Emphasis added.
