Department of Defense Still Paying Some Foreign Taxes

C-ID-81-2: Published: Dec 15, 1980. Publicly Released: Dec 15, 1980.

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Since the early 1900's, Congress has expressed concern that the United States not pay taxes to foreign governments on defense activities overseas. In 1979, the House Committee on Appropriations noted that some tax payments were continuing and reiterated its longstanding objection to such payments. In its fiscal year 1980 report, the Committee deleted funds in Department of Defense appropriations earmarked for this purpose. In 1981 appropriations for military construction, Congress expressly banned the use of funds for the payment of property taxes to any foreign government.

The Departments of State and Defense have made some progress in reducing the tax burden on U.S. forces overseas. In the United Kingdom, the percentage of the tax assessment that is billed to U.S. forces has been negotiated downward and offsetting credits have been applied toward the U.S. obligation. The United States has also been afforded some tax relief in Germany, but German officials have been adamant in insisting on payments of taxes on family housing, calling them public charges, not taxes. In these two countries, where over half of all U.S. forces deployed overseas are stationed, the United States still pays millions of dollars in taxes.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should reemphasize the importance of the Foreign Tax Relief Program and assure that local commands maintain current country tax law studies and prepare comprehensive annual reports.

    Agency Affected: Department of Defense

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of State should strengthen the Interagency Committee on Foreign Tax Relief.

    Agency Affected: Department of State

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should conduct a special property tax study to develop data on services provided to U.S. forces by local taxing bodies in return for payment of the land tax on family housing, and the extent to which U.S. personnel and dependents use those services.

    Agency Affected: Department of Defense

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should study the German trade tax law liability to determine whether the changed status of the Mainz Army depot justifies tax exemption.

    Agency Affected: Department of Defense

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of State should examine the agreement with the United Kingdom to pay contributions in lieu of rates on U.S. diplomatic property to assure that the agreement affords the U.S. Government benefits commensurate with those provided to British Government property in the United States.

    Agency Affected: Department of State

 

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