In a decision that would immediately save India about $40 million, US secretary of State Hillary Clinton has reversed a housing policy exempting diplomatic residences in New York City from paying property tax.
The New York City, which last year had won a prolonged court battle against India and Mongolia in the US Supreme Court, was pressing these two countries to pay their property tax dues amounting to about $46 million.
However, with the June 23 order of the secretary of State, India and Mongolia now need not have to pay property tax on the residences of its diplomats in the New York City; so does those of other countries as well.
The decision has left the New York City mayor, Michael Bloomberg, fuming who termed Clinton's decision as "unfair".
"They won't be paying taxes, but if you or I have a building [in the city], we pay taxes ... It is totally unfair," he said.
A State Department official said such a decision has been taken in the best interest of the US tax payers and its foreign policy.
If such an order would not have had passed, several countries were planning to take reciprocal actions, which would have had resulted in the United States paying hundreds of millions of dollars, the official said.
Bloomberg alleged that the change is "against State Department policy for 150 years." So far only the diplomatic missions and residences of the chief of the missions were exempted from property tax; but not the residences of other diplomats.
India and Mongolia had challenged such a provision and had refused to pay the property tax imposed on the residences of its diplomats. As the house tax mounted, New York City dragged both India and Mongolia to court.
After years of battle, New York City won the court case. After the Obama Administration came to power, both India and Mongolia raised the issue with the State Department. India argued that it was on reciprocal basis.
The under secretary of State for Management, Patrick Kennedy, was asked to look into the issue, following which Clinton issued an order on June 23 to exempt residences of diplomats from house tax.
Kennedy said the rules change comes because other countries do not apply similar taxes on US properties overseas, which include Army bases, FBI offices and State Department housing.
"Those countries have come to us and said, 'Wait a minute. Why is New York taxing us when we don't tax you?'," Kennedy told
The New York Post.
"This has become a diplomatic irritant. They've held up activity at those locations, not given us building permits," Kennedy said.
