Monday, July 6, 2009

The OECD – does it know what it is doing?

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On the subject of the Unfair Treatment of Public Service Pensioners in France.
My correspondence on this with the Tax Treaty Team in Whitehall is one sided. Generally I write: they do not reply. To my first letter they replied after some months and informed me that they ‘were following the rules”. Fairness and morality played no part. They and some others refer to the Rules as laid down by the OECD. So this is an area to explore.
OECD --The Organisation for Economic Co-operation and Development. As it itself proclaims, "it is an international organisation helping governments tackle the economic, social and governance challenges of a globalised economy". This body was founded in 1961 with its headquarters in Paris. Thirty countries have signed up to its deliberations. It has a budget of 303 million Euros a year.
You can read more by going to http://www.oecd.org/
Amongst its other activities it advises on Double Taxation Conventions. To achieve this it produces a Model Construction for such Conventions which the thirty countries follow. To explain how the Model should operate there is a commentary on it. This extends to 417 pages and is viewable via this following link.
http://www.oecd.org/dataoecd/14/32/41147804.pdf

It is apparent that the intentions of the OECD are admirable. It is to prevent tax payers being overtaxed whether they be individuals or organisations. Unfortunately the end result is, for this particular individual and those like me, quite the contrary. The OECD has made the whole rigmarole extremely complicated and yet it misses out on important details.
Inherent in the Conventions is the idea that monies paid out by Governments to people for their pensions should be taxed by those Governments.
As far as the British citizen in concerned, the notion fails, and fails miserably and ludicrously. It fails because the ruling states that pensions ‘paid for services to the Government’ are those so affected. By some ludicrous quirk, it seems that NHS workers are not considered as working for the Government. So it is that such pensions do not have to be taxed by the British Government if they live abroad.
Another anomaly arises with pensions paid via the Teachers Superannuation Scheme. This is a Government sponsored body and works smoothly. But there are many teachers working in the private sector who pay into this scheme, and the pensions of those persons who live abroad are also not taxable by the British Government.
So what about those, like me, who have worked in both sectors. Oh well, the British Government want to tax me on the lot! And I fear the OECD seem to think in their 417 page commentary that such a situation is acceptable. Not to me!
So the British Government want to rake in the tax on my income.
And the French Government go along with this. But I desire to live in France as the French do. For instance, a Frenchman on a modest income, as mine is, would be able to obtain reductions on his tax payments.
Here we touch on the ignorance of the taxation systems amongst the British expatriates who have such British Government pensions. The vast majority are probably quite unaware that they are potentially losing out because of these stupid rules laid down by the OECD in collusion with the thirty Governments who have signed up to the OECD.
How many are aware that reductions of tax are available for employment of
1. A home help. and 2. A gardener. ?
These reductions are CONSIDERABLE, They amount to 50% of the outlay. The reduction can reach thousands of euros a year, and could eliminate all income tax anywhere!
Reductions are also available for funds paid to charities (75% no less, of the outlay).
These reductions are denied to those who pay tax to Britain (unless they enjoy a considerable income taxable in France as well.)
The loss to me last year approached 1,000 euros. And now I cannot afford to employ a home help, which I could if this ruling did not apply! I still support a charity to help the education of a boy in Cambodia, since such a promise is a long term commitment, a commitment made before the collapse of the pound.
As we get older, and I am close to my 77th birthday, one needs home-helps and gardeners. Why should these confounded Governments, aided blindly by the OECD deny me the advantages available to the ordinary Frenchman? And more! This situation is contrary to Article 25 of the said Double Taxation Convention and YET the bureaucrats do not answer my letters!
This is a matter which should raise the hackles of every teacher, military personnel, local Government pensioner, fireman and more who have retired to France. Yet I fear few seem to realise the situation.
I suspect that the French Government doesn’t realise the situation either. But I have informed them. And they do not reply either. I have written three times!

What does one do now?
I wait a while and then I write to the European Union Parliament who operate a petition service open to all European Citizens.

To those who read this – please can you draw the attention of any affected by this circumstance to read this article and ask them to get in touch with me, to join with me in raising it with the French and British Governments, and if it should be necessary, the EU parliament.
Brian Cave