The IMF Wrinkle

Michel Camdessus, who’s asking the U.S. taxpayer for a fresh $18 billion for the International Monetary Fund, personally takes home $224,650 a year as head of that august body. A fund station chief, say the guy in Djakarta telling President Suharto what hoops to jump through, makes roughly $120,000. The average professional staff member makes $94,341.

The president of the United States is paid $200,000. A congressman voting on the IMF package makes $136,673. The highest-paid–not average–congressional staff members make $123,000. The IMF staff, though, has a wrinkle. The president, the congressmen, and the Capitol Hill staffers have to pay taxes out of their salaries. The folks at the IMF don’t.

U.S. nationals working for the IMF at its Washington headquarters, for example, of course must file tax returns and pay Uncle Sam. But what happens next is a bureaucrat’s dream. The IMF compensates its employees–wherever they work–for income taxes paid. There is also a generous bundle of perquisites and allowances that ensures that IMF staff under their tax-exempt umbrella can live in tasteful quarters abroad and send their children on an IMF ticket to assorted private schools and universities.

What all this means is that IMF staffers, in prescribing policies for the world at large, do not have to live with their own medicine. They are personally shielded from many of the very policies they like to inflict on others worldwide. From their Washington headquarters they roam the globe, prescribing tax hikes for Thailand, devaluations for Indonesia, and bailouts they describe as costing nothing but for which U.S. taxpayers bear the risk of lending money to a growing list of sinking economies. When the working day’s done, however, and it’s time for take-home pay, IMF staff can count on steady salaries in U.S. dollars, net of taxes.

It’s a point that just might help clarify matters in a debate over IMF funding that has left many members of Congress bored or simply baffled by the intricacies of Mr. Camdessus’s many projects. Mr. Camdessus is looking for a 45 percent increase in funding and hopes to have at his command a capital base of some $285 billion; his $18 billion sailed through the Senate on an 84-16 vote. House majority leader Dick Armey has tried to get some debate started in that chamber, complaining about “mission creep” as the IMF goes from a lender of last resort to running all the world’s economies and even governments. Representative Spencer Bachus promises to explore what the IMF is doing in hearings in a subcommittee he heads.

The amounts involved in asking IMF employees to pay taxes like anyone else may be small relative to Mr. Camdessus’s dreams, or even the hundreds of billions the fund has been tossing around these past few years to bail out places like Mexico and East Asia. And the policies these billions leverage out of client nations, such as Indonesia, affect mainly the faraway folks who have to pay for their daily bread in devalued rupiah and render up higher taxes under IMF programs for Djakarta. But a good look at IMF staff taxes could give the average congressperson a good glimpse of the mentality of the place.

Indeed, if only IMF policy shapers had some of their own pocket change at risk, they just might prove a tad more cautious about pushing for things like higher taxes and bigger bailouts. Happily, there may be help on the way. Representative Ed Royce (R., Calif.) tells us he is prepared to add to the IMF funding bill an amendment instructing the U.S. Treasury to demand that the IMF scrap its practice of “compensating IMF employees for taxes paid in their home countries.” A modest proposal but one that would remind IMF staffers, as they tinker with tax policies around the globe, that there is such a thing as the real world.

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