Airline Pilot Central Forums - Tax Equalization

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If they replace the Invol STVs with SIBA it will cost the company ZERO because:

A. All of the FDA slots are going to be filled with volunteers just like Subic.

B. All of the 90 day STVs will be filled with vacation starved empty nesters.

Fact A and B will be sworn to by any of the talking heads (union or company) so why not just remove the invol STV language?

Quote:

Originally Posted by Busboy (Post 199768)

I'm not sure how you came up with those numbers...

The company is still going to have to pay for layover hotels. Yes, there will be layovers. Maybe, 30% less hotel nights? 30% of 13 days/mo = 4 hotel days.

4 hotel days at $150/day = $600 month

They will still have to pay per diem for those layover trips. I'll give em that.

You are way off the mark on the cost of SIBA D/Hs. I added every EUR SIBA lines D/H money(Eur only) and came up with this:

Total Aug Eur SIBA D/H costs(incl carryover D/H) is $176,061. Divided by 24 lines equals:

$7336 avg Eur SIBA monthly line D/H cost.

Of course, they will still need to D/H crews around Europe. So, I'll give them $1000/month for that.

Also, if you examine the SIBA trips...You'll find that a pure Eur SIBA line has about 6 actual duty periods per month, on average. Nearly every 72+/- Aug SIBA pairing, works 6 duty periods. That's 6 actual, revenue generating, work days per month!!! I'm not sure what our domestic average is...But, I would guess somewhere around 12 to 13 days of actual work. I would think the optimizer will be able to get nearly the same out of the FDAs. So, that would be 6 days+/-, per month, of productivity gain for the company.

6 days @ 6hrs X $220 = $7920 per Capt

I figure the total company cost savings to be:

Hotel savings ----- $ 600
D/H savings ------- $6336
Productivity gains - $7920

Total ------------- $14,856/month

That's about $180,000 per year per captain. Cost neutral? Are you kidding? I have no idea what the tax equalization plan will cost the company...But, I'm pretty confident is isn't going to be $180,000/year per captain, minus the $40,000 "benefit".

And, that's based on a 28 day month. The actual number would be higher when the four 5 week months are figured in.

Still a big NO here.

Excellent analysis....I would like to see the MEC go over something like this at a meeting before they tell us there is nothing else the company can afford.

If there's cost savings like these --- there's leverage!

Exactly why we voted ALPA in so they could tell us the cost, to the nickle, of any company proposal. How much should ALPA pay busboy for the work.

I feel that I need to clarify this tax equalization....the way I read it. It seems that a lot of folks DONT understand it. First, there is no reason to pay the same taxes as if you were in the US, because you ARE NOT in the US, and you are entitled to an $82000+ exclusion, after meeting certain criteria. Now, I agree that with CDG it will be to ones benefit. But in countries that will tax you at a lower %, you could be better off without the equalization.

Take SFS. An FO, married with two kids, no property in the US, no gains on any investments, will pay around $3000 federal per year. That is because he first takes his income, say $150K, subtracts his $82.4K for foreign earned income exclusion, that leaves $67.6K. Then he takes out his housing deductions and others. The number you come up with is what you would pay taxes on. If SFS had the equalization BS, we would be paying a lot more than we do!!!!

I am posting this email I received.....FYI.

My fellow pilots,

The negotiating committee and the MEC have stated that the “tax equalization” formula is a mandatory requirement to opening new foreign domiciles. Please have them explain which governments or jurisdictions have such a prerequisite. I don’t believe they can answer that with any semblance of honesty. But if I’m wrong, please let me know, I will be glad to admit when I’m wrong. This tax equalization is a normal and “customary” practice amongst many corporations. However, the biggest difference being, those companies pay their ex-pats full benefits. In other words, their entire housing costs, tuition, roundtrip tickets for families, leased vehicles, all… paid in full. Yes, there are usually limits to the aforementioned. In other words, they don’t have eight children attending the most expensive schools, they don’t live in mansions with helipads, and they don’t drive Ferrari’s. They do however live commensurate to what they are accustomed to in the U.S.

A recent communication to the pilots from Jack Lewis states,”companies do ex/Pat packages to send people with unique skills to places they do not want to go. Unfortunately, we are not particularly unique (at least skill-wise) and we do a voluntary bid.” I respectfully disagree. They give them to people who want to go as well. And, those that don’t want to go don’t have to. They usually accept or even apply for the position because of the promotion, and subsequent pay increase associated with that promotion. In addition, they get full expatriate packages, just like Cathay and Dragonair. Also, since when is piloting not a unique skill?

In a simplistic explanation, tax equalization is a formula, whereby Fedex, and other companies, can offset the burden of paying foreign taxes, by withholding the employee’s foreign earned income exclusion benefit and the employee’s tax write-off for foreign taxes paid. Hong Kong taxes are about 17%. France is upwards of 40%. On a side note, mainland China taxes are roughly 51%, so if the negotiating committee in fact negotiated Hong Kong versus Guangzhou, they certainly didn’t have to use any strong-arm tactics. In addition to the extraordinary taxes, medical care problems, and legal ramifications, the company would have been compelled to provide car and bilingual driver.

So what does this mean? The foreign earned income exclusion allows U.S. taxpayers, who have met certain criteria in establishing a foreign residence, to be exempt from paying federal taxes on the first $82,400 they earn. Depending on the individual’s tax bracket, the amount you get to keep of your money is substantial. Do the math based on your income. It is the biggest reason I bid Subic. And this is not a Subic issue. The amount is well over $20,000 for me. The amount is the same regardless of whether the ex-pat lives in CDG, HKG, or SFS.

If I were to pay my own Hong Kong taxes, I would pay roughly $37,800 USD. With the foreign earned income exclusion and the write-off for the above foreign taxes paid, my U.S. federal tax liability would be zero. So please don’t readily buy into the idea that tax equalization is such a great deal! Obviously CDG would be different.

This LOA is concessionary in that we lose more than is readily apparent. Besides losing the foreign earned income exclusion, which equates to well over $20,000 USD per year, we also lose the relocation allowance of $10,000 or 79 CH (whichever is greater).This is both to and from the new domicile. For a 15 year captain in HKG, that equates to over $38,000(albeit for the current 3 year commitment). The difference in household goods moved is comical. The STV is akin to STD. The language is nebulous, at best. Ground transportation can be increased between HKG and CAN. Since the MD-11 flies to both those cities, will their crews be elgible for the transportation marathon as well? All these inadequacies in addition to what was previously explained in the Minority Opinion.

Finally, a negotiating committee member recently wrote, "The company sees China and Europe with dollar signs. Both are potential gold mines for the company and they will exploit that potential with us or without us." Sounds similar to the infamous red letter a few years back. I agree that both China and Europe are potential gold mines for the company. Likewise, I understand that the company needs this. What I don't understand is our need to accept a substandard LOA in order to facilitate their needs.

If the cost of the insurance the company provides for us is taxed and the bank money you use to commute to MEM is taxed as income. Why wouldn't the IRS rule that the money FEDEX payed towards equalizing our taxes be a benefit that was taxed as income. Man is that a scary scenario? Wonder if the tax lawyers scoped that one out:confused:

Quote:

Originally Posted by Eaglebeak (Post 201850)

Well, if you had been to the roadshow, you would know that it is, so any money Fedex adds to pay your taxes has to be grossed up so the taxes on the tax payment are covered. If your tax rate is say 33% (for easy math, since I'm a pilot and not an accountant,) if Fedex needs to add $12000 to cover your tax bill (US and HKG or CDG,) then they actually will add $18000, as 33% or $6000 is an additional tax on the payment.

Quote:

Originally Posted by fdx727pilot (Post 201924)

Then who pays the taxes on the extra $6000? :confused:

Past.... :)

Quote:

Originally Posted by fdx727pilot (Post 201924)

Which is why the difference between HK taxes and Mainland taxes could be as much as 100K.

More Tax info on PFC. At least they admit it dosen't benefit everyone. Be nice to see a table so we can see who it benefits least.

Quote:

Originally Posted by From the company website

tax equalization was chosen because it benefits almost all the pilots bidding the FDA.

Wow, the dishonesty displayed by the company and the union is really becoming sad. Trying to deflect the tax equalization thievery toward the SFS tax situation is not even a clever tactic. NEWSFLASH: SFS is closing! Nothing about SFS is germane to the discussion, especially taxes.

Let's talk about HKG and tax equalization as it pertains to the $82.4k tax exclusion. You live and work in Hong Kong. You are entitled to it. You get it(well, under "equalization", the company gets it). Take the new hire who makes, ohhhh, 70k/year for grins. His tax obligation to the US is ZERO. He owes the Hong Kong government a figure on the order of 16% of his income. So Joe Nugget pays about 16% of his 70K to Hong Kong. Under equalization, FedEx pays that obligation to the Hong Kong government and keeps the difference between what he would pay the US and what they actually paid the Chinese.

Joe Nugget has never even seen Subic, but he for darned sure is not benefitting from tax "equalization". His "special situation" is nothing more than not making enough to owe the US anything in the first place and hong kong taxes are much less than US taxes. If it's such a benefit, make it optional.

Does anyone else find it curious that neither the company, nor the union has shown us any hard examples of what an average F/O or captain would pay in taxes both with and without equalization in both domiciles?