Foreign Relations of the United States, 1948, General; the United Nations, Volume I, Part 1

501.AC/5–748

The Director of the Office of United Nations Affairs (Rusk) to the Secretary of State

Washington, May 5, 1948.

Subject: Exemption from Income Tax on Salaries of United States Nationals Employed by United Nations Secretariat

The Problem

In passing the joint resolution authorizing United States adherence to the Convention on Privileges and Immunities of the United Nations,¹ the Senate added a reservation to the effect that the provision for exemption from income tax on United Nations salaries should not apply to United States citizens.² The question is whether the Department should seek to prevent adoption of this reservation by the House.

Discussion

Although there are obvious objections to the creation of a group of tax exempt citizens, it will be difficult for the United Nations to recruit representative American citizens if their salaries are to be taxed when those of their foreign colleagues are exempt. Most other Members are opposed to continuing the present system whereby the United Nations reimburses its United States employees for income taxes on their salaries. At the last session of the general Assembly, a proposal to impose an additional assessment on the United States to cover these reimbursements was averted with some difficulty and embarrassment. Instead, the Assembly repeated its previous request for tax exemption, after discussions in which the United States representative pointed out that the Congress had not yet taken final action and virtually committed the Executive branch to seek reconsideration.³

When the Department originally submitted the Convention for Congressional authorization of accession, you expressed the hope by letter of May 12 to the President pro tempore of the Senate and the Speaker of the House⁴ (Tab A) that no reservation with respect to income tax would be attached, since it is the policy of the United States to carry out the recommendations of the General Assembly except where this would be inconsistent with overriding considerations affecting the vital interests of the United States.

In view of the action of the Senate in attaching the reservation and the above mentioned developments in the General Assembly, it would seem appropriate for the Secretary to urge the Chairman of the House Committee on Foreign Affairs not to impose a similar reservation. A letter to this effect is attached (Tab B).⁵ It would be appropriate to transmit a copy of the letter to Senator Vandenberg as President pro tempore of the Senate (Tab C).⁶ Senator Vandenberg has been keenly interested in this problem since it arose at the first part of the General Assembly’s first session in London.

Ultimately, the best solution would seem to be exemption from income tax accompanied by a staff contributions plan, under which employees would make to the Organization itself an annual payment comparable to an income tax with similar exemptions and allowances for dependents. The General Assembly at its last session invited the Secretary-General to report on such a plan to the next session and requested that, meanwhile, all Members which have not yet provided income tax immunity should do so.

If, as appears likely, the House Committe is unwilling to eliminate the reservation, the next most desirable course would be to substitute a provision making the provisions of the Internal Revenue Code, with respect to credits for income taxes paid to foreign governments, applicable to payments made to a United Nations staff contributions scheme. It would appear preferable not to make this alternative suggestion unless the Committee acts unfavorably on the elimination of the reservation.

Recommendations

(1) Signature of the attached letter to the Chairman of the House Committee on Foreign Affairs.

(2) Signature of the attached letter to Senator Vandenberg transmitting a copy of the letter to Mr. Eaton.

(3) That, if the Committee is unwilling to follow the suggestion of eliminating the Senate’s reservation, the Department proposes substitution of a provision which would put payments to a United Nations staff contributions plan on the same basis as income tax payments to a foreign government.

1. For text of S.J. Res. 136, passed by the Senate on July 17, 1947, see Foreign Relations, 1947, vol, i, p. 48.
2. S.J. Res. 136, authorizing the President to accept on behalf of the United States the General Convention on Privileges and Immunities of the United Nations, stated in pertinent part that “the United States reserves its position with respect to section 18 (b) [of the General Convention] regarding exemption from taxation on salaries and emoluments paid by the United Nations insofar as that section may apply to United States nationals . . . .”
3. On November 4, 1947, in the Fifth Committee of the General Assembly, Mr. Stevenson declared in part: “… can assure the Committee that the executive branch of the government will renew, and most emphatically, its recommendations that in this case American employees of the United Nations should be granted tax immunity . . . .” (memorandum, R. I. Kull of the Division of International Organization Affairs to D. V. Sandifer, Deputy Director of the Office of United Nations Affairs, March 1, 1948, File No. 501.AC/3–148); for text of Mr. Stevenson’s complete remarks on this matter, see United Nations, Official Records of the General Assembly, Second Session, Fifth Committee, pp. 329–330.
4. May 12, 1947; see Foreign Relations, 1947, vol. i, p. 32.
5. Infra.
6. Not printed.