Monday, July 13, 2009

New York Loses Some Tax Base

The State Department recently changed its policy regarding the tax status of foreign diplomatic missions in the U.S., and the Mayor of New York City is predictably unhappy about it. From today's New York Post:

Thanks a lot, Hillary!

In a surprise turnaround that will cost the city $260 million in back taxes and untold millions in future lost revenue, Hillary Rodham Clinton's State Department has quietly reversed a longstanding policy requiring foreign governments to pay taxes on some diplomatic residences.

It's a shocking about-face by Secretary of State Clinton -- who repeatedly spoke in favor of the city's right to collect the taxes when she was New York's junior senator.

The Big Apple, which recently won a federal court ruling requiring India and Mongolia to fork over some $46 million in back taxes, is expected to lose about $7 million a year in current tax revenues.

-- snip --

Foreign governments receive tax exemptions for some diplomatic buildings here -- typically their main headquarters and the residence of their chief diplomat.

Other buildings, like those housing lesser mission employees, were subject to city tax rules.

-- snip --

Patrick Kennedy, undersecretary of state for management, said the rules change comes because other countries do not apply similar taxes on US properties overseas, which include Army bases, FBI offices and State Department housing.

"Those countries have come to us and said, 'Wait a minute. Why is New York taxing us when we don't tax you?' " he said.

"This has become a diplomatic irritant. They've held up activity at those locations, not given us building permits." [TSB note: like in Mumbai, where India has held up the completion of a new U.S. consulate for a couple years in order to arm-twist the State Department over the tax troubles of the Indian mission in New York.]

Kennedy acknowledged that New York has more diplomatic housing than any other city in the nation.

But he insisted, "New York gets a lot of benefits from having these here."

Well, New York will get a lot less benefit than it used to, while suffering as much as ever from VIP-caused traffic jams and thousands of scoff-laws with diplomatic immunity.

Sorry about that, New York.

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