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GB.274/16/6
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SIXTEENTH ITEM ON THE AGENDA
Report of the Director-General
Sixth Supplementary Report:
Taxation of salaries paid to local staff in Zambia
1. The exemption from taxation on salaries and emoluments paid by the International Labour Organization to its officials, whatever their nationality, recognized by almost all(1) member States of the Organization in accordance with article 40 of the Constitution, has recently been called into question by the tax authorities of the Republic of Zambia. Since this immunity is fundamental to the status and proper functioning of the Organization, the Director-General considers it his duty to inform the Governing Body of the situation.
2. The Convention on the Privileges and Immunities of the Specialized Agencies, adopted by the United Nations General Assembly on 21 November 1947, provides (section 19) that all officials are exempt from taxation in respect of the salaries and emoluments paid to them by the employer organization. Zambia adhered to that Convention with respect to the International Labour Organization on 19 June 1975. In addition, it confirmed its obligations to the International Labour Organization under the Convention at the time when the Organization established an office in Lusaka.(2)
3. Since 1994, the locally recruited staff of the United Nations organizations in Zambia have been receiving tax payment requests from the Zambian Revenue Authority. Several measures have been taken by the Office in close collaboration with the United Nations. The matter was raised with the Ministry of Foreign Affairs of Zambia by the United Nations Resident Coordinator in Zambia, on behalf of all the United Nations organizations. On 30 January 1995, the Office addressed a note verbale to the Permanent Mission of Zambia to the United Nations Office in Geneva for transmission to the competent authorities of Zambia. The Office recalled the applicable legal texts and the rationale for the tax exemption of international civil servants and requested the assistance of the Permanent Mission in the matter. A note verbale of a similar content was also sent on 15 May 1998 from the Office of the Resident Coordinator of the United Nations system's Operational Activities for Development in the Republic of Zambia to the Ministry of Labour and Social Security of the Republic of Zambia. Another letter was sent by the Director-General on 18 November 1998 to the competent authorities in Zambia referring to the various interventions made, to the continued requests of the Revenue Authority requiring payment by local staff of income tax, and to their receipt of demand letters with threats for the institution of debt-recovery proceedings. The most recent development has been a local press release informing all local staff of the organizations to pay tax on their emoluments with effect from 1 March 1999, giving the deadline of 14 April 1999 for the payment of the March returns and imposing penalties for late payment.
4. As has been explained to the Government of Zambia, the exemption embodied in section 19 of the Convention on Privileges and Immunities of the Specialized Agencies is essentially based on the fact that the taxation of salaries is detrimental to the Organization and the other member States, rather than to the officials concerned, as they have a right to claim reimbursement from the Organization itself having regard to the principle of equal treatment of staff. Such reimbursement can only come from the regular budget, to which all member States contribute. In the absence of a government scheme to reimburse such taxes, the violation of obligations in this respect thus runs counter to the principle of equality as between member States. In addition, officials (including those recruited locally) already pay a form of internal taxation, called "staff assessment", provided for under the Staff Regulations.
5. The Director-General is concerned that despite the numerous interventions made both through the United Nations Resident Coordinator and directly by the Office, no progress has been achieved nor has any response been officially received by the organizations from the Government of Zambia.
6. The Governing Body may wish to take note of the present report and request the Director-General to convey to the Government of the Republic of Zambia the importance that it attaches to equality between member States and between officials of the Organization, as well as the hope that, taking into account the concerns expressed by the Director-General in his letter of 18 November 1998, the Government will be able to take all necessary action to ensure that its fiscal authority complies with the Government's international obligations.
Geneva, 21 March 1999.
Point for decision: Paragraph 6.
1. One or two States impose taxes on the international salary but have agreed with the Organization on a system of reimbursement.
2. See article 2 of the Agreement between the International Labour Organization and the Government of Zambia concerning the establishment of the office, signed on 20 December 1967.