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US court says India owes NY City $42 mn

US court says India owes NY City $42 mn
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First Published: Thu, Mar 20 2008. 12 19 AM IST
Updated: Thu, Mar 20 2008. 12 19 AM IST
New York: The governments of India, Mongolia and the Philippines owe New York City roughly $57 million (Rs230 crore) in property taxes, a federal judge has ruled, closing a long chapter in the city administration’s efforts to force foreign governments to shoulder some of the costs of their presence at the United Nations.
The ruling, released on Monday by judge Jed S. Rakoff of the US district court in Manhattan, awards the city $42.3 million from India, $10.9 million from the Philippines and $4.4 million from Mongolia. The bulk of the amount is interest that had accrued on outstanding taxes over decades.
Whether that money will ultimately land in New York’s coffers remains to be seen, since the city cannot enforce the liens in the usual way by foreclosing on the buildings. But Michael A. Cardozo, the city’s corporation counsel, said he hoped the ruling would persuade the three countries and other nations to pay taxes they owed. A provision of the Foreign Operations Appropriations Act penalizes countries with unpaid taxes by withholding 110% of the debt from their foreign aid.
“If the consequence of not paying your taxes simply is you’re going to get sued and you’re going to pay a lot of interest, I think a rational person would say, I just might as well pay my taxes,” Cardozo said in a telephone interview on Tuesday. “We don’t like to sue these countries; that’s not what we want to do. We want to be good neighbours and we want to be a good host, but they should be paying.”
Robert A. Kandel, a lawyer for the three countries, declined to comment. Sukhbold Sukhee, second secretary of the permanent mission of Mongolia, said the mission did not yet have an official response. Leandro Lachica of the Philippine consulate general in New York said officials were weighing their legal options. Efforts to reach representatives of India by phone were unsuccessful.
The city filed the suit in 2003 against the three countries and Turkey, claiming they should pay taxes because non-diplomatic activities such as housing low-level staff and, in the case of the Philippines, operating a bank branch and an airline office took place on their properties.
Turkey settled its case that year, but India and Mongolia appealed the city’s right to sue, arguing all the way to the US Supreme Court that the Foreign Sovereign Immunities Act of 1976 generally kept the federal courts from hearing suits against foreign governments.
But last year, in a seven-two ruling, the Supreme Court agreed with the city that the tax issue was an exception and allowed the case to proceed in US district court.
Earlier this year, Rakoff said that the portions of property owned by foreign governments that were used for commercial activities or to house staff other than the consul general and the ambassador to the United Nations were not exempt from taxes.
On Monday, he ruled in favour of the dollar amounts the city had sought.
© 2008/THE NEW YORK TIMES
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First Published: Thu, Mar 20 2008. 12 19 AM IST