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Congress Tackles IMF Tax Subsidy Issue

© Bryan Johnson

How would you like it if an international organization, using money from foreign tax payers, came to you and said that it would pay all of your local, state, and federal taxes? Most American's would gladly accept. Where do you sign up? Sound a little absurd? This is exactly what happens if you are an employee of the International Monetary Fund (IMF), the international organization the Clinton Administration currently is seeking to give $18 billion in U.S. taxpayer money for increased IMF activities.

The IMF's by-laws stipulate that employees are eligible for what is known as an "income tax allowance." Thus, whatever the tax rates are in their home country, 25 percent, 50 percent, or 90 percent, IMF employees receive an allowance or supplement to their regular income equal to the taxes they own in their home country. If the U.S. Congress has its way, this practice will end before the U.S. gives any more money to the IMF.

In a new bill (still in discussion draft form and thus does not have an H.R. number) sponsored by Congressman Ed Royce (R-CA), the IMF tax subsidy issue receives substantial attention. Specifically, the Royce bill requires that the Bretton Woods Agreement Act (the legislation establishing the creation of the IMF, World Bank, and other organizations) be amended by adding the following section:

Sec. 61. ELIMINATION OF INCOME TAX ALLOWANCE

The Secretary of the treasury shall instruct the United States Executive Director of the Fund to present to the Fund's Executive Board, and work for the adoption of, a proposal to amend the Fund's bylaws to disallow the Fund from issuing a tax allowance to the Governors, the Executive Directors, their alternates, the Managing Director, or any other officer, employee, or staff member of the Fund .

One might think that an organization that has existed for over 50 years without significantly altering its bylaws or organizational policies and structures would scoff at the idea of eliminating its tax allowance program. But, in a private meeting held in the U.S. Capitol and hosted by the Heritage Foundation, Congressional staff sources indicated that the bill would easily pass and that it seemed likely that the IMF would move to eliminate the tax allowance on its own.

With the current Congressional debate at a stalemate over whether to approve President Clinton's request for $18 billion in new IMF funding, the Royce bill is but one example of the growing frustration members of Congress are experiencing in their quest to find out more about how the IMF operates and what actually occurs in the secretive organization.

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