philippines ordered to pay taxes in NYC

From the International Herald Tribune:

Judge orders India, Mongolia and the Philippines to pay nearly $60 M in taxes to NYC

NEW YORK: The governments of India, Mongolia and the Philippines must pay New York City a total of $57.6 million (€36.5 million) in real estate taxes after a federal judge ruled that diplomatic privileges do not exempt the countries from tax obligations.

U.S. District Court Judge Jed S. Rakoff issued the order Monday in a case that reached the Supreme Court. The court ruled 7-2 last year that the city had a right to collect taxes on portions of buildings used by other countries for non-diplomatic purposes.

International treaties have defined consulates and embassies as sovereign territory, which makes them generally tax exempt. But Rakoff said it was clearly stated that only the home of the head of a mission is exempted from taxes in the Vienna Convention on Consular Relations and the Vienna Convention on Diplomatic Relations.

India was ordered to pay $42.4 million (€26.88 million) in taxes related to a 26-story tower near the United Nations with 20 floors of apartments occupied by diplomatic employees.

Rakoff said Mongolia must pay $4.3 million (€2.73 million) in taxes for a six-story building with two floors of staff residences and the Philippines must pay $10.9 million (€6.91 million) in taxes for a building on a prime stretch of Fifth Avenue that includes commercial tenants such as a restaurant, a bank and an airline office.

Robert A. Kandel, a lawyer who represented the three nations in court, did not immediately return a telephone message for comment.

The city praised Rakoff's decision. "We are very pleased that the rule of law was upheld," New York Corporation Counsel Michael A. Cardozo said in a release. "Most countries are good neighbors to New York City. They pay what they owe, like all other New Yorkers who carry their share of the tax burden. However, this ruling sends a message to those trying to avert their obligations that New York City will be vigilant."

Marjorie B. Tiven, commissioner of the NYC Commission for the United Nations, said she was hopeful the case would send a message to the rest of the world about tax obligations.

"It's time for all foreign governments using diplomatic properties for non-diplomatic purposes to pay their fair share like other New Yorkers," she said.

At one point in the litigation, the U.S. Department of State had sided with the foreign countries against the city, saying that a victory by the city could force the U.S. to pay millions of dollars in taxes on various properties it controls abroad.

Originally posted here.