Case P44

Judges:
MB Hogan Ch
P Gerber M
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 15 June 1982.

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M.B. Hogan (Chairman); Dr. P. Gerber and Dr. G.W. Beck (Members)

The short issue in this case is whether a ``consultant'' engaged by UNESCO and whose rights and privileges are governed by the International Organizations (Privileges and Immunities) Act 1963-1966 (Cth.) is an ``official'' within the meaning of sec. 23(y) of the Income Tax Assessment Act and reg. 4AB(2) of the regulations. If the answer is in the affirmative, his UNESCO income is exempt from Australian taxation.

2. The taxpayer, a scientist of high repute engaged by an Australian Statutory Corporation, was invited by UNESCO to a Third World country to assist it with his expertise. The written contract stated that it would come into effect ``approximately 1 August 1978'' and expire ``end of September 1978''. Terms and remuneration are spelt out in detail. In the result we do not consider that anything turns on the terms. Suffice it for present purposes that the taxpayer claimed his salary in the amount of $3,969 as being tax exempt pursuant to sec. 23(y) whilst the Commissioner included said amount in accordance with sec. 25(1). Hence this reference.

3. Section 23(y) provides that the salary and emoluments of an official of a prescribed organization of which Australia is a member shall be exempt from income tax. There is no dispute that UNESCO is ``prescribed'' (cf. reg. 4AB(1)(k)), the question is: Who or what is an ``official''?

4. Regulation 4AB(2) provides (so far as relevant):

``For the purposes of paragraph (y) of section 23 of the Act, the organizations specified in the last preceding subregulation and the International Finance Corporation are prescribed, and the official salary and emoluments of an official of such an organization or the International Finance Corporation are, in accordance with that paragraph, exempt from income tax -

• (a) in the case of an official of the United Nations or of an official in respect of whom Australia is bound to accord the privileges and immunities accorded to diplomatic envoys in accordance with international law, to the extent that Australia is bound by an international convention or agreement to exempt from taxation his official salary and emoluments;
• (b)...
• (c) in the case of an official (other than one referred to in paragraph (a) of this sub-regulation) who is a resident of Australia, to the extent that his official salary and emoluments are for services rendered out of Australia...''

5. The problem raised in this reference involves issues of International Law. We propose, therefore, to deal briefly with the background of the United Nations and to the extent the International Organizations (Privileges and Immunities) Act 1963-1966 (Cth.) and the Statutory Rules thereunder affect the privileges and immunities of the Specialized Agencies as organs of the United Nations.

6. Notwithstanding that UNESCO is a prescribed organization for purposes of sec. 23, it is worth pointing out that the United Nations Charter draws a distinction between the privileges and immunities of the Organization, representatives of member-States and officials of the Organization (Article 105, U.N. Charter). A second category of beneficiaries is spelled out fully in the Convention of February 13, 1946 on Privileges and Immunities of the United Nations concerning representatives of member-States to the principal and subsidiary organs of the United Nations and to conferences convened by the United Nations (Article IV, sec. 11). Under sec. 16 of Article IV the meaning of the term ``representative'' has been widened to include all delegates, advisers, technical experts. Article V, sec. 17-20 and Article VI, sec. 22-23 create a third category - Officials of the United Nations and experts on missions for the United Nations. In the Convention of November 21, 1947, on the

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Privileges and Immunities of the Specialized Agencies, two classes of privileged persons are mentioned: representatives of member-States and officials (United Nations Year Book 1947-48, p. 190 et seq.; and see generally Schwarzenberger on International Law vol. III). The parties to the Convention of November 21, 1947 are the Specialized Agencies of the United Nations and members of the United Nations and other States members of one or more Specialized Agencies which have acceded to the Convention. For the sake of completeness, it merely remains to point out that the introductory words used to make the Statutory Rules, made under the International Organizations (Privileges and Immunities) Act (Cth.) state that:

``Australia has acceded to the Convention on the Privileges and Immunities of the Specialized Agencies, being the Convention approved by a resolution of the General Assembly of the United Nations adopted on the twenty-first November, 1947, as modified in accordance with the terms of the Convention and has, subject to certain specified considerations, undertaken to apply to the Specialized Agencies specified in the following Regulations the provisions of the Convention.''

7. I now turn to the term ``official''. It is not defined in the Charter nor in the Income Tax Assessment Act. International institutions are, of course, merely creatures of treaty and do not qualify for any privileges or immunities under international customary law. Thus any privileges and immunities which international institutions are to enjoy must be granted to them by the States concerned. Turning to Commonwealth legislation, we find sec. 18 of Article VI of the International Organizations (Privileges and Immunities) Regulations enacting Article VI of the 1947 Convention on the Privileges and Immunities of the Specialized Agencies, which states:

``Officials

Each specialized agency will specify the categories of officials to which the provisions of this article and of article VIII shall apply. It shall communicate them to the Governments of all States parties to this Convention in respect of that agency and to the Secretary-General of the United Nations. The names of the officials included in these categories shall from time to time be made known to the abovementioned Governments.

Section 19

Officials of the specialized agencies shall:

• (a)...
• (b) Enjoy the same exemptions from taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations;''

Annexure IV of the said Regulations is headed ``United Nations Educational, Scientific and Cultural Organization'' and states that the standard clauses shall operate in respect to the said organization and are to be complementary to the privileges and immunities as far as possible to those enjoyed by the United Nations. Clause 3 of Annexure IV of the Regulations provides:

``3. (i) Experts (other than officials coming within the scope of article VI) serving to committees of, or performing missions for, the Organization shall be accorded the following privileges and immunities so far as is necessary for the effective exercise of their functions, including the time spent on journeys in connexion with service on such committees or missions:

• (a) Immunity from personal arrest or seizure of their personal baggage;
• (b) In respect of words spoken or written or acts done by them in the performance of their official functions immunity of legal process of every kind, such immunity to continue notwithstanding that the persons concerned are no longer serving on committees of, or employed on missions for, the Organization;
• (c) The same facilities in respect of currency and exchange restrictions and in respect of their personal baggage as are accorded to officials of foreign Governments on temporary official missions.

(ii) Privileges and immunities are granted to the experts of the Organization in the

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interests of the Organization and not for the personal benefit of the individuals themselves. The Organization shall have the right and duty to waive the immunity of any expert in any case where in its opinion the immunity would impede the course of justice, and it can be waived without prejudice to the interests of the Organization.''

8. This, then, is the statutory background. Applied to this reference, it would appear to us that the status to be accorded to this taxpayer whilst engaged on his UNESCO-sponsored trip is that of an expert performing a mission for a Specialized Agency. Such privileges and immunities which he enjoys as an ``expert'' are to be found in cl. 3 of Annexure IV contained in the Statutory Rules 1962, No. 105 made under the International Organizations (Privileges and Immunities) Act 1948-1960 as stated above. To the extent that the taxpayer claimed to be an ``official'' pursuant to Article VI of the said rules, it is for him to show that he has been nominated as such, and his name communicated inter alia, to the Commonwealth Government (cf. sec. 18 of Article VI above). No such evidence was tendered. To rebut a case which had not been made out, the Commissioner called a legal expert from the Department of Foreign Affairs, whose principal purpose, it appears to us, was to give expert evidence on Australian law. However, en passant, this witness deposed that as a result of telex enquiries made to UNESCO, that organization considered the taxpayer a ``consultant'' during the relevant period. The Tax Office sought further and better particulars with respect to this hybrid, and whether a consultant fits into the genus ``specialist'' and sent off yet another telex. The reply stated:

``Please be informed (Taxpayer) engaged by UNESCO as `Consultant' not `Official' of the Organization under Article VI of Convention on Privileges and Immunities. Stop. Status of UNESCO `Consultant' is assimilated to `Expert' within meaning of Annex IV paragraph 3 of Convention.''

9. We have included the above since it appears that what constitutes an ``official'' for purposes of Australian tax law has indeed been delegated to the various Specialized Agencies. The Crown's evidence having shown conclusively that with respect to this taxpayer, there has been no compliance by UNESCO with respect to either manner or form to elevate him to the status of ``official'', we are compelled to conclude that his UNESCO income is not tax exempt under sec. 23(y) or any other provision dealing with exempt income. We can understand this taxpayer's irritation with the denial of his status since he was certainly an official in every sense that word is used in common parlance. However, for purposes of tax exempt status, an ``official'' under sec. 23(y), which takes its colour from the International Organizations (Privileges and Immunities) Act and the rules and regulations made thereunder, the word has a narrow, technical meaning, involving - like marriage or divorce - the official intervention of another party; one cannot become an ``official'' aided only by one's own bootstraps.

10. In the result, we have no alternative but to uphold the Commissioner's decision on the objection.

Claim disallowed