India may pay $37m in taxes to New York

NEW YORK: India may have to cough up $37 million in unpaid taxes to New York with interest after losing a US Supreme Court decision on Thursday that ruled the country’s courts can decide the City’s property tax disputes with foreign governments.  

Federal law “does not immunise a foreign sovereign” in such cases, Justice Clarence Thomas wrote in a 7-2 decision on Thursday in New York’s legal battle against India’s permanent mission to the United Nations.

The City sued the Indian government in 2003 as part of an exercise to collect property taxes from countries that house their UN mission diplomats in the same buildings where they operate offices.

Foreign governments enjoy tax exemptions for the diplomatic mission section of their New York properties. Mayor Michael Bloomberg exulted that the decision will help ensure that foreign governments pay “their fair share in city taxes.”

According to a back of the envelope calculation, India which allegedly owed $16.4 million in 2003, will now have to pay $37 million including interest on the disputed amount at 18 per cent per annum.

Mayor Bloomberg’s office is trying to collect unpaid taxes to the tune of $100 from several governments including India and Mongolia. The Bush administration is worried the decision will set off reciprocal action against the US.