Originally Posted by TonyC

Tax Gross-Up is EXACTLY what makes Tax Equalization work. It's not only "in" the LOA, it's a key component that allows the language, "a pilot bears approximately the same US Federal tax burden as he would pay if he were assigned to a domestic base rather than CDG or HKG."

Taxes paid by the employer to the host country are accrued to the employee as taxable income, and thereby increases the employee's tax obligation to the U.S. (and maybe the applicable state). This is not the choice of the employee or employer, it is IRS regulation. In effect, that "raises the pay" of that employee. A gross up is applied to ensure that the tax obligation on that increased income does not impose a tax burden that he would have not borne had he been assigned to a domestic base.

I hope this brief explanation will help everyone see it more clearly. (If not, you can find my contact info on the ALPA FEDEX website.)

Consider also the Price Waterhouse Cooper's explanation of Tax Equalization Policy. As you read their information you might notice Tax Equalization is not a scheme devised by FedEx -- it's a standard option for companies with expatriate employees.


I won't get into a discussion about whether this is good or bad -- I leave that debate in your hands. I simply believe the debate will be more relevant if the subject matter of the debate is better understood.

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