MEA summons US envoy over school tax fraud

  • Shishir Gupta and Pramit Pal Chaudhuri, Hindustan Times
  • Updated: Jan 18, 2014 01:35 IST

The United States Embassy number two was called in by the ministry of external affairs to explain a New York Times article that alleged many teachers at the American Embassy School had been paid salaries in a manner designed to avoid taxes and violative of their visa status.

This is part of India’s policy of keeping the Devyani Khobragade affair alive in Washington, especially at a higher level, and pushing for a comprehensive solution to the criminal charges the Indian diplomat faces.

National Security Advisor Shiv Shankar Menon, while at the Munich security dialogue from January 31 to February 2, will meet either US counterpart Susan Rice or US Secretary of State John Kerry and seek a settlement of all outstanding issues and take relations forward.

The school was made part of the US embassy in an agreement in June 1973 and allowed to employ 16 staff members with a visa that exempted them from paying taxes.

Indian and US official sources, broadly confirming the allegations in the article, say the school had funnelled the salaries for about twice that number through the accounts of the 16 tax-exempt staffers. “This is both visa and tax fraud,” said a source.

Foreign Secretary Sujata Singh is known to have written to Finance Secretary Sumit Bose asking the finance ministry to investigate the tax compliance of US embassy staff. New Delhi has also asked for details on the legal status of the American Community Service Support Association which runs a bowling alley, hair salon and bar inside the embassy premises. The US embassy has asked for more time to give a complete response to the numerous tax and visa queries it has received from the Indian government.

Observers say these actions are all pressure tactics to ensure India can negotiate for a fuller settlement that would combine a regularization of such institutions as the American School, the status of servants employed by Indian diplomats in the US and resolve the charges against Khobragade. In effect, a number of “wink and nod” arrangements tolerated by diplomats of the two countries will now be formalised.

New Delhi is moving to make its diplomats’ servants into full-time embassy staff, thus ensuring they are exempted from US labour laws. But its own Achilles’ heel is the visa applications of the 14 maids presently employed by Indians in the US and the likelihood they have salary discrepancies in their visa forms.

Contacted by HT, the American embassy declined to respond, saying these issues were being handled “through diplomatic channels.”

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