Association Demands End To Tax Withholding Probe For
Non-US-Based Crews
The Latin American Airline Transport Association,
known as AITAL from its Spanish name (Asociacion Internacional de
Transporte Aereo Latinoamericano), with the full
support of IATA, has issued a warning to the Internal Revenue
Service to cease its attempts to force non-US-based crews of
its member airlines to pay withholding taxes.
The IRS is allegedly
engaging in a tax probe of crew members who work flights within US
airspace, in an attempt to force them to pay taxes on income earned
while in the US. AITAL is strongly opposing the IRS on this issue
for several reasons, not the least of which that the probe is
allegedly targeting employees of airlnes based out of Brazil,
Chile, Costa Rica, El Salvador, Guatemala, Peru and Panama, but not
employees of other international transport carriers such as cruise
ship lines. AITAL also says the IRS has advised other carriers in
other countries that they may become targets of the tax probe.
In a strongly worded
response to news of the probe, AITAL is warning of potential
retaliation against US airlines operating routes to/from Latin
America. The Association has pointed out crew members of US
airlines normally earn quite a bit more money than their
counterparts in the targeted countries, and the tax and
administrative burden could be much higher than what the IRS could
gain if the probe continues.
According to AITAL, the probe is based on a 10-year-old IRS
regulation which "in theory would apply to all types of
vessels, yet they are not going after the cruise and maritime
industry."
Furthermore, AITAL believes the actions on the part of the IRS
are in violation of treaties between US and the target countries
which include "express provisions that exempt the air carriers
from US income tax requirements."
The member airlines are
already complaining to AITAL that the administrative burden alone
of the probe could be extremely onerous. "Airlines would be
required to research more than 100,000 individual time sheets over
the last decade, [to] try to figure out when each employee was over
US airspace and for how long, and when they reported for work,"
AITAL said.
IATA has placed its support squarely on the side of the
airlines. "This initiative is not fair and it does not pass the
common sense test," IATA DG and CEO Giovanni Bisignani said in a
statement. "It will adversely impact international trade and
wrongfully discriminates against the airline industry."