Paul L. Caron

Tuesday, May 29, 2012

Christine Lagarde, Scourge of Greek Tax Evaders, Pays No Tax Herself

LagardeThe Guardian, Christine Lagarde, Scourge of Tax Evaders, Pays No Tax:

Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged. As an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes....

The same applies to nearly all United Nations employees – article 34 of the Vienna convention on diplomatic relations of 1961, which has been signed by 187 states, declares: "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal." ...

For many years critics have complained that IMF, World Bank, and United Nations employees are able to live large at international taxpayers' expense. During the 1944 economic conference at Bretton Woods, where the IMF was created, American and British politicians disagreed over salaries for the bureaucrats. British delegates, including the economist John Maynard Keynes, considered the American proposals for salaries to be "monstrous", but lost the argument.

Officials from the various organisations have long maintained that the high salaries are a way of attracting talent from the private sector. In fact, most senior employees are recruited from government posts.

(Hat Tip: Bob Kamman.)

Update:  From Bruce Bartlett:   "IMF officials pay taxes just like everyone else. But the IMF grosses up their salaries to compensate them for the taxes they pay. Ask Tim Geithner, who got in trouble for not paying taxes on his IMF income. My understanding is that the IMF assumes that all its staff pay taxes to their home countries and are compensated based on some estimate of what those taxes are. Thus someone from a high tax country will be paid more than someone from a low tax country. The idea is to equalize after-tax incomes regardless of the tax levels in your home country."

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IMF "grosses up" taxes for US citizens and residents. It does not do so for others, unless they are taxed by their country of citizenship. France, like most other countries, does not tax citizens who are employed abroad.

The IMF issued a statement intended to befuddle journalists, referring to "grossing up," which is irrelevant to the Lagarde situation.

Posted by: Bob | May 30, 2012 2:49:47 PM

Some questions:

1. Does the IMF gross-up an actual taxes paid or based upon a nominal tax rate?

2. It seems that she's based in Washington D.C., is she subject to U.S. income taxation on that salary? Ordinarily yes, but does an exception exists for IMF officials?

3. Does her native France tax her salary on services abroad? I don't think so.


Posted by: Yo Gabba Gabba | May 29, 2012 3:27:10 PM