B-104845, OCTOBER 3, 1951, 31 COMP. GEN. 123

B-104845: Oct 3, 1951

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

1951: REFERENCE IS MADE TO LETTER. WHILE IT IS STATED IN THE LETTER THAT THE FAILURE OF YOUR DEPARTMENT TO WITHHOLD SUCH TAXES AT THE SOURCE IN ACCORDANCE WITH LOCAL LAW MAY JEOPARDIZE THE RELATIONS BETWEEN THIS GOVERNMENT AND THE FOREIGN GOVERNMENTS INVOLVED. IN THAT SUCH GOVERNMENTS HAVE GREAT DIFFICULTY IN OTHERWISE COLLECTING TAXES. IT IS NOT CONTENDED THEREIN THAT THE FAILURE TO WITHHOLD THE TAXES HAS JEOPARDIZED SUCH RELATIONS. IT WAS HELD IN OFFICE DECISION OF MARCH 29. PAY ROLL DEDUCTIONS COULD NOT BE MADE PURSUANT TO BRAZILIAN SOCIAL SECURITY LAWS FROM THE SALARIES OF BRAZILIAN NATIONALS WHO WERE CIVILIAN EMPLOYEES OF THE NAVY DEPARTMENT. WHAT IS STATED THEREIN WITH RESPECT TO MAKING SUCH PAY ROLL DEDUCTIONS IS EQUALLY APPLICABLE TO THE SITUATION HERE INVOLVED.

B-104845, OCTOBER 3, 1951, 31 COMP. GEN. 123

TAXES - FOREIGN - WITHHOLDING - NATIVES EMPLOYED BY UNITED STATES IN FOREIGN COUNTRIES THE UNITED STATES HAS NO OBLIGATION UNDER INTERNATIONAL LAW TO COMPLY WITH LAWS OF FOREIGN GOVERNMENTS RELATIVE TO THE WITHHOLDING OF TAXES FROM THE SALARIES OF THEIR NATIONALS IN THE ABSENCE OF A STATUTE, TREATY, OR PROPER EXECUTIVE AGREEMENT PROVIDING FOR THE WITHHOLDING OF SUCH TAXES AND THEREFORE, AN INCOME TAX LEVIED BY A FOREIGN GOVERNMENT ON ITS NATIONALS MAY NOT BE WITHHELD BY AN AGENCY OF THE UNITED STATES FROM THE SALARIES OF NATIONALS EMPLOYED IN THAT COUNTRY.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE AIR FORCE, OCTOBER 3, 1951:

REFERENCE IS MADE TO LETTER, DATED JULY 20, 1951, FROM THE ASSISTANT SECRETARY OF THE AIR FORCE, REQUESTING THAT YOUR DEPARTMENT BE PERMITTED TO DEDUCT FOREIGN GOVERNMENT INCOME TAX PAYMENTS FROM SALARIES OF NON- UNITED STATES CITIZEN CIVILIAN EMPLOYEES AT INSTALLATIONS, ACTIVITIES, AND COMMANDS SITUATED IN FOREIGN COUNTRIES.

WHILE IT IS STATED IN THE LETTER THAT THE FAILURE OF YOUR DEPARTMENT TO WITHHOLD SUCH TAXES AT THE SOURCE IN ACCORDANCE WITH LOCAL LAW MAY JEOPARDIZE THE RELATIONS BETWEEN THIS GOVERNMENT AND THE FOREIGN GOVERNMENTS INVOLVED, IN THAT SUCH GOVERNMENTS HAVE GREAT DIFFICULTY IN OTHERWISE COLLECTING TAXES, IT IS NOT CONTENDED THEREIN THAT THE FAILURE TO WITHHOLD THE TAXES HAS JEOPARDIZED SUCH RELATIONS. BUT BE THAT AS IT MAY, IT WAS HELD IN OFFICE DECISION OF MARCH 29, 1944, 23 COMP. GEN. 733, THAT IN THE ABSENCE OF A STATUTE OR TREATY TO THE CONTRARY, PAY ROLL DEDUCTIONS COULD NOT BE MADE PURSUANT TO BRAZILIAN SOCIAL SECURITY LAWS FROM THE SALARIES OF BRAZILIAN NATIONALS WHO WERE CIVILIAN EMPLOYEES OF THE NAVY DEPARTMENT. WHAT IS STATED THEREIN WITH RESPECT TO MAKING SUCH PAY ROLL DEDUCTIONS IS EQUALLY APPLICABLE TO THE SITUATION HERE INVOLVED. THE THEORY UNDERLYING THAT DECISION IS THAT SINCE THE UNITED STATES GOVERNMENT HAS NO OBLIGATION UNDER INTERNATIONAL LAW TO COMPLY WITH FOREIGN LAWS RELATIVE TO THE WITHHOLDING OF TAXES ON BEHALF OF FOREIGN GOVERNMENTS, ANY EXPENSE INCURRED IN WITHHOLDING SUCH TAXES WOULD NOT BE IN SATISFACTION OF A "NECESSARY EXPENSE" OF THE DEPARTMENT OR AGENCY INVOLVED SO AS TO BE PROPERLY CHARGEABLE TO ITS APPROPRIATION. THE QUESTION HERE FOR DECISION, THEREFORE, IS WHETHER THE ADMINISTRATIVE EXPENSE IN WITHHOLDING THE TAXES AND PAYMENT THEREOF TO THE FOREIGN GOVERNMENTS INVOLVED IS A "NECESSARY EXPENSE" OF YOUR DEPARTMENT.

THERE IS QUOTED THE FOLLOWING DIPLOMATIC INSTRUCTION BY THE ASSISTANT SECRETARY OF STATE ( CARR) TO THE CONSUL IN NEW ZEALAND, AS APPEARS IN VOLUME IV OF HACKWORTH'S DIGEST OF INTERNATIONAL LAW, AT PAGE 801:

IT IS BELIEVED THAT A CONSULAR OFFICE OF THIS GOVERNMENT SHOULD NOT ACT IN THE COLLECTION OF A TAX ON BEHALF OF A FOREIGN GOVERNMENT AND THE CONSULATE SHOULD THEREFORE PAY ITS EMPLOYEES THE FULL CONTRACTUAL SALARY, LEAVING TO THE EMPLOYEE THE ADJUSTMENT OF ANY TAX RELATION WITH HIS OWN GOVERNMENT.

ACCORDINGLY, YOU WILL TAKE NO ACTION TO COLLECT THE TAX AND YOU WILL NOT EXERCISE ANY PRESSURE UPON THE EMPLOYEES OF THE OFFICE WITH REGARD TO THE PAYMENT OF SUCH TAXES.

IN VIEW OF THE RULE HERETOFORE STATED AND THE POSITION MAINTAINED BY THE DEPARTMENT OF STATE, WHICH IS CHARGED WITH THE FUNCTION OF CONSIDERING MATTERS OF FOREIGN POLITICAL POLICY, THERE APPEARS TO BE NO BASIS UPON WHICH THIS OFFICE COULD REGARD THE EXPENSES OF YOUR DEPARTMENT IN WITHHOLDING INCOME TAXES ON BEHALF OF FOREIGN GOVERNMENTS AS "NECESSARY EXPENSES" CHARGEABLE TO APPROPRIATIONS OF YOUR DEPARTMENT IN THE ABSENCE OF A STATUTE, TREATY, OR PROPER EXECUTIVE AGREEMENT AUTHORIZING THE WITHHOLDING OF SUCH TAXES. THIS IS TRUE EVEN THOUGH SUCH EXPENSES WOULD BE ONLY INCIDENTAL TO THE EXPENSE OF MAINTAINING AND OPERATING A CIVILIAN PAY ROLL OFFICE AS INDICATED IN THE LETTER FROM THE ASSISTANT SECRETARY. WHILE NOT CONTROLLING HERE, IT IS POINTED OUT THAT THE FEDERAL GOVERNMENT DOES NOT WITHHOLD TAXES IMPOSED BY MUNICIPALITIES OR STATES OF THE UNITED STATES FROM THE SALARIES OF FEDERAL EMPLOYEES. SEE 28 COMP. GEN. 101 AND 27 ID. 372.

ACCORDINGLY, I AM CONSTRAINED TO HOLD THAT THE WITHHOLDING OF INCOME TAX OF FOREIGN GOVERNMENTS FROM THE SALARIES OF NATIONALS THEREOF WHO ARE CIVILIAN EMPLOYEES AT YOUR INSTALLATIONS, ACTIVITIES, AND COMMANDS LOCATED IN THE FOREIGN COUNTRIES IS NOT AUTHORIZED, UNLESS AND UNTIL THE PRESENT EXECUTIVE AGREEMENTS ARE PROPERLY MODIFIED, OR A STATUTE OR TREATY SO PROVIDES.