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UNTAET position on tax controversy

Introduction & comment from La'o Hamutuk

The letter below was published in the Timor Post in Bahasa Indonesia on 15 March. It outlines UNTAET's views on the issue recently raised by La'o Hamutuk about taxing UN contractors in East Timor.

The UN often negotiates agreements with countries in which they are operating regarding tax concessions for companies doing business with the UN. But tax experts tell me that the standard practice, where no such agreement has been negotiated, is that such companies are subject to tax. Although UNTAET is a UN-mandated transitional government here, I don't think the East Timorese people expect that publicly enacted laws -- UNTAET regulations -- would have exceptions made to them through orders from the UN in New York, especially when the law has been in effect for almost two years, and UNTAET will leave in two months. One would have hoped that such discussions would have taken place before or shortly after the regulation was promulgated in June 2000, and that they would have been public.

Intership's individual tax case was proprietary information, which became public after pressure from UN headquarters in New York caused the Tax Commissioner here to raise it with the Finance Minister, who brought it to East Timor's Council of Ministers (Cabinet). But the tax regulations (and whether they are enforced for UN contractors) are public policy. If these regulations are to be changed for all UN contractors, that is a matter for public discussion. If they are secretly changed for just one taxpayer, that could be a matter for criminal investigation.

-- Charles Scheiner, La'o Hamutuk

see also Can the Rule of Law Prevail? Pressure from UNHQ Exacerbates Amos W Tax Controversy

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Dili, 14 March 2002

To the Editor in Chief Timor Post Mr. Hugo Adérito

We are happy to see that your article on page four of your 14 March 2002 edition tried to explain the very complex issue of taxation in East Timor.

However, the headline you employed, “Barbara Reis: ‘Sistem PBB tak perbolehkan pengusaha asing bayar pajak’ was completely inaccurate.

I never said, nor is it true, that the “UN system does not permit foreign companies to pay taxes”. My comments to the Timor Post reporter, as I repeatedly and explicitly emphasised, were confined solely to the question of UN contractors. For the record the following are the points that I made during the interview:

- The question of taxes payable to the East Timor Revenue Service by the Intership is, under the law of East Timor, a confidential matter between the tax Commissioner and the company.

- The unique status of East Timor, where the United Nations is at the same time a peacekeeping mission and the Transitional Administration, has meant that the normal procedures for a UN presence are no longer applicable in all circumstances.

- The standard practice would be for the UN to negotiate the status of its mission and its tax liabilities with the government of the state where the mission is located. Traditionally UN contractors have been included in these arrangements. In the case of East Timor, however, this didn't happen due to the mentioned “unique status” of the UN in East Timor.

- Steps are being taken to clarify the situation in East Timor and it is expected that there will be an agreement between East Timor and the UN that can be put in place to cover the successor mission after 20 May.

- UNTAET, the Office of Legal Affairs and the Department of Peacekeeping Operations in New York together with the Minister of Finance of the East Timor Public Administration are collaborating to resolve the question of the Amos W.

I would appreciate it if you publish this response with the same prominence, and on the same page, as the article in question appeared.

Thank you very much, 

Bárbara Reis, Spokesperson, UNTAET


The East Timor Institute for Reconstruction Monitoring and Analysis
1a Rua Mozambique, Farol, Dili, Timor Lorosa’e
P.O. Box 340, Dili, East Timor (via Darwin, Australia)
Tel: +670-3325013 or +61-723-4330
email: laohamutuk@easttimor.minihub.org
Web: http://www.laohamutuk.org