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

501.AC/5–748

The Under Secretary of State (Lovett) to the Chairman of the Committee on Foreign Affairs, House of Representatives (Eaton)

Washington, May 7, 1948.

Dear Mr. Eaton: In connection with the consideration by your Committee of S. J. Res. 136, authorizing the President to accept on behalf of the Government of the United States the Convention on Privileges and Immunities of the United Nations, I would like to express once again the hope that the Committee will give the most careful consideration to the desirability of approving the pending resolution¹ without the reservation now attached thereto by the Senate with respect to income tax immunity. You will recall that Section 18(b) of the Convention provides that officials of the United Nations shall be exempt from taxation on the salaries and emoluments paid to them by the United Nations, and that the Senate, in approving the joint resolution, amended it to withhold the application of this Section from United States nationals.

I fully appreciate the reluctance of the Senate to relieve any group enjoying the benefits of United States citizenship from the obligation to contribute to the financial support of their Government. At the same time, there are in my opinion certain compelling reasons for not including in the Senate Joint Resolution a reservation of the type in question.

1. At two consecutive regular sessions, the General Assembly of the United Nations (the United States abstaining) has unanimously requested all Members to provide such tax exemption in order to ensure equality of tax treatment among the staff in a manner which is equitable among Members. Since it is the policy of the United States to give its full support to the United Nations, it is believed that this Government should comply with such requests of the General Assembly whenever it can do so without prejudice to the vital interests of the United States.

2. Only two other states—New Zealand and Canada—have made such a reservation. Eighteen Members, including the United Kingdom and France, have acceded to the Convention without reservation. Nationals of only two Members, United States and Canada, are presently subject to taxes on their income from the United Nations.

3. In order to afford equality of treatment to all members of the Secretariat staff, the General Assembly has in the past authorized the Secretary-General to reimburse employees for taxes which they have paid to their national governments on income received from the United Nations. The cost of such tax reimbursements to the United Nations is approximately $500,000 annually, of which about $450,000 represents payments to United States nationals. This charge, of course, is drawn from the general budget and is apportioned among all Member States. Despite the dissatisfaction of many Members at having to contribute to taxes paid by United States nationals to the United States Government, the Assembly has agreed to continue the tax reimbursement system for one more year with a clear warning that it may be terminated after 1948.

4. When the situation is reviewed by the General Assembly next fall, there is likely to be a demand that Members who do not grant exemption to their nationals make supplemental contributions to the United Nations budget in order to meet the tax reimbursement payments. If this were done, the result would be to increase our share of the total United Nations budget and to set the stage for the doctrine that Members might be permitted to vary their contributions on the basis of the particular activities they might choose to support.

5. If, alternatively, the tax reimbursement plan is abandoned, United States nationals employed by the Secretariat would be earning a net salary substantially lower than their foreign colleagues. As a result, it would be difficult to recruit well-qualified American citizens.

6. The Department is convinced that the best ultimate solution to this difficult problem lies in the adoption of a staff contributions plan under which United Nations employees would make contributions from their salaries to the United Nations, based roughly on the income tax structure in the Member nation where the employee is situated (in most cases the United States). The effectiveness of such a scheme would depend on the willingness of Member nations which may not wish to grant tax exemption at least to amend provisions of their tax laws designed to avoid double taxation so as to allow a credit for contributions made under the scheme.

Approval by the Congress of the pending resolution without a reservation with respect to income taxes would create the best possible atmosphere in which to work out a satisfactory staff contributions plan avoiding the creation of a tax-privileged group. It would also reaffirm the willingness of the United States to co-operate fully in carrying out the declared policy of the General Assembly.

It is therefore the hope of the Department of State that the Congress will approve the pending resolution without reservation with respect to income tax. Officials of this Department will be glad to furnish further information on the subject at the convenience of the Committee.²

Faithfully yours,

Robert A. Lovett

1. This refers to the draft resolution accompanying the Secretary of State’s letters of May 12, 1947, to the Speaker of the House and the President pro tempore of the Senate.
2. The Committee on Foreign Affairs of the House of Representatives took up the General Convention in the course of public and executive sessions held between May 4 and June 3 at the same time that it had pending on the legislative calendar a quantity of other proposals pertaining to United States-United Nations relations. Out of the deliberations came a “one-package” omnibus bill (H.R. 6802) which reduced the numerous proposals to five general headings and which included initially as “Part III” the substance of Senate-enacted (July 17, 1947) S.J. Res. 136 with its ‘reservation with respect to income tax immunity. In reporting out the bill, the House Committee swept away the Senate reservation and adopted the position recommended by the Department of State, thereby pointing the way for a possible acceptance by this Government of the proposed United Nations staff contributions plan. However, except for that part of the omnibus bill relating to a United States loan to the United Nations for the building of the United Nations headquarters facilities in New York (see editorial note, p. 28), H.R. 6802 was not acted upon by the House of Representatives before the expiry of the 80th Congress.

   For relevant commentary and documentary references concerning the legislative history of H.R. 6802, see footnote 2, p. 21 and editorial note, p. 28.