EU: Salaries

Debate between Lord Flight and Lord Wallace of Saltaire

Wednesday 6th March 2013 Lords Chamber

[Lord Wallace of Saltaire]

My Lords, the European Union institutions all together employ approximately 55,000 people. EU staff are exempt from national income tax, a similar situation to that found in other international bodies. As in other international bodies, the EU deducts a proportion of salary as a form of extranational taxation, proceeds from which are returned to the EU budget. This is applied progressively, rising from an initial 8% to a 45% marginal rate for the highest-paid. In addition, there is now a special or solidarity levy, which last month was increased from a top rate of 5.5% to 6%; most officials pay an average of 2%. I should declare an interest. My wife was for five years the director of the Robert Schuman Centre in Florence, whose staff regulations were those of the European institutions. We have examined her payslips and established that an average of 28% of her gross salary was deducted in community tax each month.

[Lord Flight]

My Lords, would it not be more sensible for civil servants working for the EU to be taxed on the same basis as civil servants working, for example, for the Foreign Office; namely, for them to pay the rates of income tax applicable to the country where they are otherwise normally resident?

[Lord Wallace of Saltaire]

My Lords, we are now into the whole question about residency, non-residency and international organisations. It has been a common rule for international organisations that you do not pay national taxes but are given a degree of exemption. If we were to reclassify the European Union as not an international organisation but as rather like going to work in Manchester or Leeds, different processes would apply. As a former international banker, the noble Lord will be well aware of the many complexities of international taxation, expatriate allowances and the like.