2012-UNAT-240, Johnson
UNAT considered an appeal by the Secretary-General and a cross-appeal by Ms Johnson. UNAT agreed with UNDT’s analysis and held that the decision to deny the staff member a refund of the US income tax on her salary and emoluments was unlawful. UNAT recalled that the US grants foreign tax credits in respect of income tax paid by one of its nationals or permanent residents to another State to relieve the effects of double taxation. UNAT held that the exclusion of such credits as payment would not only contravene the principle of equality of treatment among staff members if staff members from the United States were deprived of the benefit of reimbursement for using such tax credits, but also the principle of equity among Member States irrespective of whether they choose to grant, or not to grant, an income tax exemption to their nationals, as these two principles form the basis for the staff assessment system in respect of taxation. UNAT dismissed the appeal and the cross-appeal and affirmed the UNDT judgment.
UNDT Judgment: The Applicant contested the decision not to reimburse her for the staff assessment on her salary and emoluments. UNDT considered that the utilization of foreign tax credits by United States taxpayers constitutes “a payment method” to settle tax obligations and that the staff member, having discharged her tax obligation on income she earned by means of a foreign tax credit, “must be regarded both as having been subject to US taxation on income received from the Organization, and as having discharged that tax obligation”. UNDT ordered the Secretary-General to refund the Applicant the amount of the staff assessment on her salaries and emoluments.
A staff member (who is a United States taxpayer) can discharge his/her US income tax liability on UN salary and emoluments by utilizing foreign tax credits. Accordingly, the Organization must grant a refund of the US income tax on his/her UN salary and emoluments.