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Tax Equalization

Old 07-25-2007, 09:19 AM
  #21  
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Originally Posted by company website
The bottom line is that each pilot will simply be liable for the taxes he would normally pay if he lived in the U.S., which is the goal of tax equalization.
The real bottom line is that numerous pilots would not owe as much in total tax obligation by being domiciled in Hong Kong as they would if they lived in the US. And the company is going to pocket the difference. The company is not denying this in their propaganda, but they aren't openly acknowledging it either. They CERTAINLY aren't spelling out just how many would be better off based in HKG without the equalization.

Anyone else find this interesting?

So how do those of you who plan to bid HKG feel about subsidizing the tax burden of those folks in CDG?
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Old 07-25-2007, 10:37 AM
  #22  
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Originally Posted by BrownGirls YUM View Post
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?

You are quite right YUM. I have been "foaming" about this tax non-equalization thing for awhile. It is amazing how a name is given to something, ie, tax equalization, present option (of the CBA concerning FDA's, etc), when in reality, THE NAME DOES NOT HONESTLY DESCRIBE THE TRUTH!! All smoke and mirrors. And a large portion of this LOA is smoke and mirrors.....nothing definative, a lot of ambiguity.
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Old 07-25-2007, 10:57 AM
  #23  
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Originally Posted by iarapilot View Post
. I have been "foaming" about this tax non-equalization thing for awhile. It is amazing how a name is given to something, ie, tax equalization, present option (of the CBA concerning FDA's, etc), when in reality, THE NAME DOES NOT HONESTLY DESCRIBE THE TRUTH!!
The reality is, we don't know the truth about the tax situation for US citizens in HKG. The union either hasn't looked into or won't say what Ex pat Americans who work in HKG pay in taxes. We need to know the reality of the tax rate in HKG and how we would be affected by the IRS tax code for ex pat's in HKG. Maybe some would be ahead, (guessing the lower earners) and maybe the higher earners would benefit from the company "tax equalization". We need more than guesses, rumors, and hunches as to whether this (the tax part) is a benefit and how much so.
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Old 07-25-2007, 11:20 AM
  #24  
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Some have stated how an FDA pilot gets to keep his margin on the foreign earned income exclusion. As fas as I know, this only applies without an equalization package.

For example, assume you bid, and accept an FDA to Paris. Assume also you move over there using existing CBA language. Assume, LOA or not, that you're in it for the long haul with your French wife.

For this person, he is subject to the ENTIRE hit on taxes paid to the French gov't. They have a graduated tax scale, which is slightly higher than ours in the US. So you pay off the French, in year x. Then you file your US taxes in year x. As you fill out the 1040 all those taxes paid to France go against your US tax burden. Voila. You filed your perfunctory 1040 showing you owe Uncle Sugar nothing more.

You might have an $82k exclusion. But it does you no good unless you live in a foreign country that has LESS tax liability than the US. So, FedEx "keeping" your margin from $82k just isn't how that works.

Under the equalization program (generic guy) the DIFFERENCE between total tax liability in the US versus your liability in the FDA is paid by Fred. This aparently includes a gross-up provision (the tax on the benifit) added in to preclude any further out of pocket "post equalization" expense. Price Waterhouse, Coopers might not even have to fill out the foreign earned income form, since they can already show you paid enough French tax already, again a zero US tax burden since you paid MORE than that in France.

Hope that helps.

STILL NO!
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Old 07-25-2007, 11:27 AM
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Originally Posted by a300fr8dog View Post
Some have stated how an FDA pilot gets to keep his margin on the foreign earned income exclusion. As fas as I know, this only applies without an equalization package.

For example, assume you bid, and accept an FDA to Paris. Assume also you move over there using existing CBA language. Assume, LOA or not, that you're in it for the long haul with your French wife.

For this person, he is subject to the ENTIRE hit on taxes paid to the French gov't. They have a graduated tax scale, which is slightly higher than ours in the US. So you pay off the French, in year x. Then you file your US taxes in year x. As you fill out the 1040 all those taxes paid to France go against your US tax burden. Voila. You filed your perfunctory 1040 showing you owe Uncle Sugar nothing more.




You might have an $82k exclusion. But it does you no good unless you live in a foreign country that has LESS tax liability than the US. So, FedEx "keeping" your margin from $82k just isn't how that works.

Under the equalization program (generic guy) the DIFFERENCE between total tax liability in the US versus your liability in the FDA is paid by Fred. This aparently includes a gross-up provision (the tax on the benifit) added in to preclude any further out of pocket "post equalization" expense. Price Waterhouse, Coopers might not even have to fill out the foreign earned income form, since they can already show you paid enough French tax already, again a zero US tax burden since you paid MORE than that in France.

Hope that helps.

STILL NO!
You are correct on all points. But, HKG taxes are less than US taxes. Therefore, you will lose in HKG, but gain in CDG. A guy on first year pay in HKG will really lose. Seems like we need an LOA for each FDA the company wants to open.
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Old 07-25-2007, 11:32 AM
  #26  
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Originally Posted by BrownGirls YUM View Post
The real bottom line is that numerous pilots would not owe as much in total tax obligation by being domiciled in Hong Kong as they would if they lived in the US. And the company is going to pocket the difference. The company is not denying this in their propaganda, but they aren't openly acknowledging it either. They CERTAINLY aren't spelling out just how many would be better off based in HKG without the equalization.

Anyone else find this interesting?

So how do those of you who plan to bid HKG feel about subsidizing the tax burden of those folks in CDG?
The company isn't pocketing any differnce in HKG with regard to tax equalization. As you said, the tax hit in HKG should be LESS than the US obligation. So, as I see it, the HKG FDA guy who moves there (with his 500lbs) is trading in his individual foreign earned income exclusion for "up to" $2700 a month in rent subsidy. ie. The HKG tax equalization cost Fred nothing (except what they paid PWC to file your taxes for you)

Who's fooling who? More acurately, they won't fool me, again. (read ex-49'er)

Still NOOOO!

Last edited by a300fr8dog; 07-25-2007 at 11:35 AM. Reason: added line
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Old 07-25-2007, 01:39 PM
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Originally Posted by 130JDrvr View Post
Then who pays the taxes on the extra $6000?

Past....
Uhh, you owed $12000. To cover that while covering the "tax on the tax payment" is why they gave you $18000 based on a 33% tax rate (although you will never actually see it in your check or pocket, only on the tax return.) It's called a gross-up. Increase a benefit to cover the tax on the benefit.
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Old 07-25-2007, 02:22 PM
  #28  
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Originally Posted by fdx727pilot View Post
Uhh, you owed $12000. To cover that while covering the "tax on the tax payment" is why they gave you $18000 based on a 33% tax rate (although you will never actually see it in your check or pocket, only on the tax return.) It's called a gross-up. Increase a benefit to cover the tax on the benefit.
I realize how it works. Was just just saying that if they give you an extra 6k to cover the taxes on the 12k you got already who pays the taxes on the 6k gross up?

Kinda like if you drop an egg and it continues to fall half way to the ground does it ever hit the ground? or something like that!

Some humor..

Past...
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Old 07-25-2007, 02:24 PM
  #29  
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Originally Posted by kronan View Post
now, take it easy guys,
remember, no windfalls in the LOA----just ask Mgt or the MEC.
well, except for the ACP in Paris or Hong Kong, after-all, they possess special skills and need the ex-pat package to head over there.

hmm, wonder why the existing CBA isn't sufficient......for them, maybe they should go for the "enhanced" option if it becomes available next month.
The reason our ACP's get all that extra, is that it ensures their loyalty...

Some call it a management package, I call it being bought off...

IMHO.
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Old 07-25-2007, 02:33 PM
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Everyone here seems to be using the HKG tax rate, however the people at the hub turn meeting said that we would be paying Chinese taxes not HKG. Something on the order of 51% vs. 17% in HKG. Not sure what that does to the numbers, just trying to point out any potential inaccuracies.
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