State Department, USAID crack down on overseas taxes on aid

State Department, USAID crack down on overseas taxes on aid    The State Department and U.S. Agency for International Development have made progress in cracking down on countries that tax imports of American humanitarian aid.
   In 2002, Congress was informed that the Palestinian Authority collected $6.8 million in taxes from U.S. aid destined to the people of the West Bank and Gaza. The Palestinian Authority began collecting the taxes in 1998.
   Other countries have done the same but not at the scale of the Palestinian Authority. USAID estimates at least several million dollars in taxes are collected annually on U.S. aid programs. Some of this money is reimbursed by the recipient governments.
   In the 2003 Consolidated Appropriations Resolution, Congress prohibited foreign governments from enriching their treasuries from import taxes assessed on U.S. aid. Congress also empowered the State Department to withhold 200 percent of the unreimbursed taxes assessed in fiscal year 2003 from non-compliant government’s assistance allocation for fiscal year 2004. These countries have until May 17 to reimburse the United States.
   “Half of that amount reimbursed may be reprogrammed consistent with the purposes for which such funds were originally appropriated,” said James T. Ford, director of international affairs and trade for the General Accounting Office, in a recent letter to the House and Senate appropriations committees. “The other half of the funds were to be deposited in the general fund of the Treasury by Sept. 6, on the basis of certifications provided by the Secretary of State.”
   According to the U.S. government, the Palestinian Authority has refunded about $6 million in aid taxes since March 2002.
   Worldwide, USAID provided bilateral assistance estimated at more than $5 billion for fiscal year 2003. The agency has 77 bilateral agreements that prohibit countries from taxing U.S. aid shipments. USAID expects to conclude bilateral agreements and renegotiate others with countries, such as Mozambique, Eritrea, Thailand and Laos, to include the no-tax provisions for aid.
   The agency has bilateral framework agreements with the Philippines and Indonesia that do not include the tax prohibitions. However, it has grant and other agreements covering specific projects in these countries that do include tax exemptions.
   GAO conducted its review on the progress by the State Department and USAID to enforce tax exemptions with aid recipient countries from July to December 2003.