Christine Lagarde, scourge of tax evaders, pays no tax

AVN_1

Hypocritic Lagarde:

Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged.

As an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes.

Lagarde, 56, receives a pay and benefits package worth more than American president Barack Obama earns from the United States government, and he pays taxes on it.

According to Lagarde's contract she is also entitled to a pay rise on 1 July every year during her five-year contract.

Other benefits include rent subsidies, dependency allowances for spouses and children, education grants for school-age children and travel and shipping expenses, as well as subsidised medical insurance.
For many years critics have complained that IMF, World Bank, and United Nations employees are able to live large at international taxpayers' expense.

http://www.guardian.co.uk/business/2012/may/29/christine-lagarde-pays-no-tax

beeftotheheels

Yup, because as I explained in relation to the ESM, if the IMF was taxable that would result in the rest of the Members subsidizing the US, and most specifically the State of NY, one of the richest small areas in the world (not unlike Luxembourg), not something I, for one, would be happy with.

http://www.boards.ie/vbulletin/showpost.php?p=78906432&postcount=6

She used to chair Baker McKenzie by the way, a role which would have earned her millions per annum. Just because she's earning more than you (or Obama) does not mean she's earning anything near what she could (or indeed did) earn.

AVN_1

beeftotheheels wrote: »

Yup, because as I explained in relation to the ESM, if the IMF was taxable that would result in the rest of the Members subsidizing the US, and most specifically the State of NY, one of the richest small areas in the world (not unlike Luxembourg), not something I, for one, would be happy with.

http://www.boards.ie/vbulletin/showpost.php?p=78906432&postcount=6

She used to chair Baker McKenzie by the way, a role which would have earned her millions per annum. Just because she's earning more than you (or Obama) does not mean she's earning anything near what she could (or indeed did) earn.

It doesn't matter what she (or I) could earn, what matters is that she doesn't pay any tax, however preaches the Greeks to pay it.

oscarBravo

AVN_1 wrote: »

It doesn't matter what she (or I) could earn, what matters is that she doesn't pay any tax, however preaches the Greeks to pay it.

...and you're damned if you're going to let the logical reasoning behind that fact trouble you in the slightest.

beeftotheheels

AVN_1 wrote: »

It doesn't matter what she (or I) could earn, what matters is that she doesn't pay any tax, however preaches the Greeks to pay it.

By law. She does not pay any tax because, by law, no tax is levied on her IMF salary. I presume that she pays tax on any investment income that she has, most probably in France.

She raised issue with Greek people not paying the taxes levied on them by law.

Can you grasp this distinction? If someone decides to drive on the Autobahn at 200kph you do understand that doesn't constitute speeding even though the speed limit on the M6 is 120kph because the applicable law (German in that instance) is not breached?

AVN_1

oscarBravo wrote: »

...and you're damned if you're going to let the logical reasoning behind that fact trouble you in the slightest.

What do you mean exactly?

AVN_1

beeftotheheels wrote: »

By law. She does not pay any tax because, by law, no tax is levied on her IMF salary. I presume that she pays tax on any investment income that she has, most probably in France.

She raised issue with Greek people not paying the taxes levied on them by law.

Can you grasp this distinction? If someone decides to drive on the Autobahn at 200kph you do understand that doesn't constitute speeding even though the speed limit on the M6 is 120kph because the applicable law (German in that instance) is not breached?

I'm talking about the moral side

JJJJNR

If you don't like it, I suggest you either STFU or move to china.

beeftotheheels

AVN_1 wrote: »

I'm talking about the moral side

How the hell is there a moral side to an International Agreement stating that the IMF Managing Director's salary should not be taxed?

What can she do? If she offered to pay tax on it in France, France could not accept that tax, because an International Treaty says that the salary cannot be taxed. Ditto if she offered to pay tax in the US.

Sheesh!

oscarBravo

AVN_1 wrote: »

What do you mean exactly?

I mean, you have an axe to grind. You don't care that it makes more sense for her not to pay tax in her role than it would for her to do so; the axe will be ground, and logic and reason can just get the hell out of your way.

AVN_1

beeftotheheels wrote: »

How the hell is there a moral side to an International Agreement stating that the IMF Managing Director's salary should not be taxed?

What can she do? If she offered to pay tax on it in France, France could not accept that tax, because an International Treaty says that the salary cannot be taxed. Ditto if she offered to pay tax in the US.

Sheesh!

If she doesn’t pay tax, she shouldn't preach the Greeks. Especially if she exactly knows what is the main problem for Greece (the Euro Zone membership).

beeftotheheels

AVN_1 wrote: »

If she doesn’t pay tax, she should preach the Greeks. Especially if she exactly knows what is the main problem for Greece (the Euro Zone membership).

So because she legally cannot pay tax on her salary, in your view she cannot do her job a part of which is addressing problems in countries that the fund lends to, including tax evasion in Greece????

There's no answer that's going to satisfy you on this.

later12

Out of curiosity I've sometimes idly wondered where diplomats pay their taxes, if any. I guess that section of the Vienna Convention answers my question.

I'm not sure how logical the argument that we don't want to be subsidising states which host IMF/ World Bank/ UN employees could be.

I wouldn't have thought that it matters to IMF subscribers whether Lagarde and her organisation hand over a few million in taxes to New York City or Washington DC or anywhere else.

NYC/ DC already enjoy the reputational benefit of hosting the three organisations named, as well as the revenue arising out of the organisations' activities in those states (e.g. legal and financial services), other services consumed there, and their staff salaries and expenses which are spent in the city and would dwarf any potential tax bill. We're also talking about a fairly petty amount of money relative to IMF capital subscriptions.

However, in the same way as I don't think subscribers to the IMF genuinely care where Christine Lagarde pays her taxes, neither do I think do most people. But, maybe, yes there is a certain irony to her comments earlier this week.

Might I also say there seems to be a certain status quo vs novus ordo mundi creeping into every.single.discussion. I don't know if it's just the polarising effect of the referendum or what. It gets a little boring when everyone knows what everyone is going to write.

beeftotheheels

later12 wrote: »

However, in the same way as I don't think subscribers to the IMF genuinely care where Christine Lagarde pays her taxes, neither do I think do most people. But, maybe, yes there is a certain irony to her comments earlier this week.

As you noted salaries aren't the big issue. The big issues would be any capital taxes on the funds e.g. a vanilla Lux fund is subject to an annual wealth tax of 0.5% of the value of the fund (obviously without any tax planning), taxation on interest generated by the fund (imagine a borrower could introduce a withholding tax of say 50% on interest payments by the Gov to foreign funds thus halving their actual interest bill) and income taxes on profits of the fund, and to a much lesser extent indirect taxes on fees and income taxes on employees.

Subscribers would care a hell of a lot about the first three, hence the general rule that such a fund be exempt from tax, and once you're going down that road with respect to income and capital, you might as well go the whole hog and include indirect and payroll taxes in conformity with the principle established.

Scofflaw

I wonder how much of this kind of concern will still be around next week? This is kitchen sink campaigning.

amused,
Scofflaw

later12

beeftotheheels wrote: »

Subscribers would care a hell of a lot about the first three, hence the general rule that such a fund be exempt from tax, and once you're going down that road with respect to income and capital, you might as well go the whole hog and include indirect and payroll taxes in conformity with the principle established.

I don't really see the logic behind that. The IMF, through its crisis operations, provides a valuable public-spirited contribution to the world. But employees of that organisation have an extra responsibility as citizens and residents of their environment, and that is a responsibility which we all have - as Lagarde said of the Greeks - to pay our taxes.

In the grand scheme of things, we are talking about a pretty insignificant amount of money here. It's really not about that. I think there is an important principle that needs to be respected which is that leaders behave like stakeholders in society, that they observe everyday statutory duties that makes them 'of the people'.

Scofflaw wrote: »

I wonder how much of this kind of concern will still be around next week? This is kitchen sink campaigning.

Not sure what the reference to campaigning is here. There is an immediate interest in the story because it is topical in light of Lagarde's comments towards the Greeks. And it's hardly a new point of contention.

http://www.bloomberg.com/news/2011-07-22/are-tax-free-imf-salaries-inflated-echoes.html

beeftotheheels

later12 wrote: »

In the grand scheme of things, we are talking about a pretty insignificant amount of money here. It's really not about that. I think there is an important principle that needs to be respected which is that leaders behave like stakeholders in society, that they observe everyday statutory duties that makes them 'of the people'.

You can't draw a line based on Quantum. Narnia draws down €10m from the IMF and only wants to levy a withholding tax of 30% of its interest payment which is chicken food so that's okay?

It is a principle. No one gets to tax the IMF, a fund which itself exists for the benefit of its members such that that tax exemption is recycled for the benefit of those members.

If you can levy employment taxes, why not indirect taxes? If indirect taxes, why not capital duties? If capital duties...

That's a much more important principle for the IMF to be able to work that Christine being seen to head down the pub for a pint of lager and a bag of pork scratchings.

later12

beeftotheheels wrote: »

No one gets to tax the IMF

The US get to tax IMF employees. If Lagarde were an American for example, her income would be taxed and the shortfall made up by an IMF-top up on her salary. This doesn't actually apply because she's French.

Plenty of people in the IMF pay taxes, if they are American. Nobody would suggest this sets off some calamitous chain reaction whereby Eritrea can start taxing IMF funding at 90%

All in all, I think it's quite reasonable that we make a distinction between taxing employees and taxing a fund's activities - after all, we see it all the time in the rest of the world.

beeftotheheels

later12 wrote: »

The US get to tax IMF employees. If Lagarde were an American for example, her income would be taxed and the shortfall made up by an IMF-top up on her salary. This doesn't actually apply because she's French.

Plenty of people in the IMF pay taxes, if they are American.

That's not true. If Christine was based in France then France could tax her salary. The Articles of Agreement allow anyone to tax nationals/ citizens etc, not just the US, but they exempt the IMF from any obligation in relation to those taxes.

Given her job, she's more than likely not resident anywhere for tax purposes (and in any event France operates a territorial tax regime) and so the only way she could pay tax would be through employment related taxes - which would put the IMF into the position of being subject to tax obligations (as an employer), which it cannot be.

later12

beeftotheheels wrote: »

That's not true. If Christine was based in France then France could tax her salary. The Articles of Agreement allow anyone to tax nationals/ citizens etc, not just the US, but they exempt the IMF from any obligation in relation to those taxes.

Can you clarify which bit you're suggesting isn't true?

I'm not saying the US is the only country which may tax its IMF staff. I'm just saying it's the only country that chooses to do so, just like it taxes its UN employees.

So IMF employees pay tax and the world doesn't fall apart, and nothing changes in relation to the fund. I'm not really seeing the problem.

but they exempt the IMF from any obligation in relation to those taxes

But personal income tax is not an organisation's obligation, it is an individual's obligation, or as Lagarde said - it ought to be.

All I'm saying is that I think it's important that leaders pay taxes. And not just for the sake of public confidence in those leaders, but perhaps indeed for their own sense of citizenship or duty when in office. I think that's a fairly importance principle that quite rightly applies to most leaders worldwide.

beeftotheheels

later12 wrote: »

But personal income tax is not an organisation's obligation, it is an individual's obligation, or as Lagarde said - it ought to be.

There is no basis for Lagarde to pay tax, being a French National employed by a fund based in the US, other than through an employment tax. The IMF cannot be subject to employment tax obligations.

So you want the Articles of Agreement amended so the IMF gets employment tax related obligations?

Or France to change the whole premise of their tax code to include the taxation of nationals rather than residents, and the taxation of foreign income by those nationals?

Or you want the US to change the premise of their tax code, in conjunction with an alteration to the Articles of Agreement, such that Christine could have an income tax obligation in a State of which she is neither resident nor a national, and in that case where does that leave IMF staff stationed in hostile program countries?

later12

beeftotheheels wrote: »

So you want the Articles of Agreement amended so the IMF gets employment tax related obligations?

Change?

Heavens No.

beeftotheheels

later12 wrote: »

Change?

Heavens No.

It was a three way choice - and I'm inferring you're going for the one I find most offensive i.e. making the IMF subject to someone's taxation regime which offends the principle that it is not subject to tax!

Still, easier than tearing up and rewriting the French and US tax codes just to satisfy your sense of social justice...

Ellis Dee

The difference between Ms. Lagarde and the rich Greeks who do not pay their taxes, i.e. who evade the taxes that they are required under the law to pay, is that her salary is legally tax-free. Presumably, the salary of her predecessor was likewise tax-free, as will that of her successor be. :rolleyes:

I also assume that when the salary scales that apply to her and her senior colleagues are set, the fact that they will not have to pay taxes in New York state is taken into consideration; otherwise, their (taxable gross) salaries would be higher than what they already receive.

Those who criticise her are merely throwing a red herring into the ring, but they do not in any way detract from the validity of her argument that rich Greeks, especially the billionaires swanning around the Mediterranean in the luxury yachts, should pay their taxes.



Come to think of it, it might not be a bad idea to make the rich in Ireland and a lot of other places pay their fair share of taxes as well. :cool:

later12

beeftotheheels wrote: »

It was a three way choice - and I'm inferring you're going for the one I find most offensive i.e. making the IMF subject to someone's taxation regime which offends the principle that it is not subject to tax!

Still, easier than tearing up and rewriting the French and US tax codes just to satisfy your sense of social justice...

My admittedly lazy sarcasm wasn't directed at you particularly, but perhaps this debate is attaching more relevance to Lagarde's tax status than actually exists.

But in fact, the fact that this issue is so not a big deal (combined with Lagarde's comments on responsibility) is what is mildly provocative about it.

I just don't see it as a major catastrophe to have the articles amended so that the IMF is liable for processing the personal deductions of its workforce so that they are obliged to pay taxes, just like other organisations, without affecting how the organisation's own activities are taxed.

If needs be, I'm quite sure the IMF could be exempted from paying medicare and social security contributions.

I'm sure a lot of people are yawning and thinking this is ridiculously tedious stuff. It's not something that's going to keep us awake at night, but like I said I think it is an important - and not insurmountable - concept that world leaders and actors influential in global affairs live up to what would be regarded as one of the most fundamental duties of citizenship. Is "social justice" that important. Yes, I think it is.

rumour

Ellis Dee wrote: »

Come to think of it, it might not be a bad idea to make the rich in Ireland and a lot of other places pay their fair share of taxes as well. :cool:

What do you think their fair share should be?

d'Oracle

I don't care about the issue largely, the tax status of one individual in the IMF is of no relevance to much of anything..

I am continually baffled, however, by how Obama's salary has become the metric for high-level salary rates.