National Post (National Edition)
Kabul embassy staff decry Canadian tax grab
`Risked our lives ... and this is the reward we get'
Former Afghan employees of Canada's shuttered embassy in Kabul say their warm welcome in this country has been tainted by a decision to tax money they earned overseas at rates of close to 50 per cent.
Global Affairs Canada gave them lump sums to cover severance pay and pension months after they were evacuated to safety last August, with an immediate deduction of 30 per cent and more tax assessed when they filed returns recently.
The ex-employees say they're extremely grateful the government got them out of Afghanistan before the Taliban took over the country, given its history of targeting employees of international organizations.
One of the embassy staff members called Canada “a very giving society,” saying that from the time they arrived, “all we received was love, support and kindness.”
But they argue the money was earned in Afghanistan when they were paying taxes to the government there and receiving no tax-funded services from Canada.
“In a way we are being punished for our services because, frankly speaking, we were the eyes and ears of the Canadian government on the ground,” he said. “We risked our lives and our families' lives and this is the reward we get .... It could not be any more un-Canadian.”
In fact, one prominent tax lawyer said he can see no reason to justify the government taxing those payments. Had they been Canadian residents when they went to work at the embassy or if the money was earned after they became residents here, it would be taxable, said David Rotfleisch, managing partner of Toronto firm Rotfleisch and Samulovitch
But if it was accrued overseas before they became Canadian residents, the government has no right to any of it, he said.
“I find this quite bewildering ... I'm amazed at this result,” said Rotfleisch. “I can't see on what basis this is taxable in Canada. This is kindergarten stuff, quite frankly.”
Another tax expert, though, disagreed.
Foreign income like lump-sum severance and pension payments is taxable even if linked to work performed while a non-resident, so long as the person received it after becoming a resident, said Jamie Golombek, a tax expert with CIBC and Financial Post columnist.
Regardless, the tax bills were a jolt for many of the embassy's “locally engaged staff” (LES), who are not eligible for social assistance or child-tax credits because of the size of the lump-sum payments and had hoped to use them to gain a foothold in their new home, said another of the employees. Half are still unemployed, he said.
The concerns have been outlined in letters to the CRA and the special parliamentary committee on Afghanistan, signed by all 45 of the former embassy workers. But they asked that the National Post not name them to protect family members still in Afghanistan, where the Taliban has a history of targeting people who work for western countries and their relatives.
The CRA was unable to comment by deadline. But Global Affairs told the employees in an email last December that they were being taxed based on their residency status at the time of the payment “and not where the money was earned.”
“In the case of Kabul LES, they have the permanent residence, a Canadian bank account and social security numbers and this being said, they have established significant residential ties in Canada.”
Whatever the letter of the tax law says, the government should resolve the issue somehow in favour of the former employees, said MP Michael Chong, Conservative co-chair of the Afghanistan committee.
“We can't forget that these Afghans put their lives on the line to assist Canadian diplomats and armed forces during the war and in its aftermath,” he said Monday. “We owe them a debt of gratitude.”
The dispute adds another layer of controversy to the troubled ending of Canada's presence in Afghanistan, where attempts to evacuate locals who worked for the Canadian military, government and aid agencies left many behind and at the mercy of vengeful Taliban.
The federal government hastily closed its Kabul Embassy last August as the Taliban were about to overwhelm the capital. It managed to bring to Canada all direct employees of the mission and their close relatives, considered to be in grave danger because of their work.
But the Afghans had to be laid off, meaning they were owed severance and pension under the terms of their employment, indicates a GAC email the workers provided to the Post. The government initially offered to pay the money into Afghan bank accounts without being taxed or to the ex-employees in Canada, where it would be subject to this country's tax laws, said the second employee.
That offer was rescinded when the Taliban froze international bank transfers. The payments were eventually made here last December.
Some had worked for the embassy since it was opened in 2003, while others were hired more recently. The job, though well-paying by local standards, put the employees in the crosshairs of the Taliban, which viewed anyone working for foreign entities as enemies.
“In the last few years, when there were a large number of targeted assassinations ... we felt a lot of danger going and coming from the office,” said the second employee. “Many of us did receive (threats).”
The work they did was essential to the functioning of the embassy. Representing Canadian diplomats who mostly did not speak either of the two main Afghan languages, the local employees monitored the political and security situation and assessed Canadian aid projects to ensure the money was spent as intended, said the first employee.
He said he received a lump sum of about $300,000 covering his pension and severance. Global Affairs Canada deducted 30 per cent off the top, then CRA demanded a further percentage after he filed his tax return this spring, for a total tax payment of about $130,000.
The second employee says he had to pay a total of $98,000 in taxes on a payment of $200,000.
WE CAN'T FORGET THAT THESE AFGHANS PUT THEIR LIVES ON THE LINE.