In January 2022, the French Embassy joined the vast majority of Tunisian employers in implementing tax deductions at source for its employees who are subject to the Tunisian tax system. Those concerned were mainly Local Law Agents (LLA), recruited based on the national labour law. However, the measure also concerned the employees of structures dependent on the French Embassy, such as the French Institute of Tunisia (IFT) and the Institute for Research on the Contemporary Maghreb (IRMC). Previously, employees had been responsible for paying income tax on a declaratory basis.
The previous system, which left the responsibility of paying income tax to employees, had the disadvantage of being irregular under Tunisian law. The tax deducted at source is indeed a legal obligation, stipulated by Article 52 of the Code of Personal Income Tax and Corporate Tax, as explained by Beligh Monser, a certified tax consultant. "It is a shared responsibility: the employer must make a deduction at source, while the employees must declare their income annually and verify with the General Tax Office that it covers their taxation", he explains.
The illegal tax operations of the French embassy have been ongoing since at least 2008, according to the Directorate General of Taxes, which claims to have sent "a correspondence from the tax authorities [...] to the Ministry of Foreign Affairs to encourage all embassies located in Tunisia to comply with the tax legislation [...], including the obligation to make deductions at source" on that date.
The institution, which is responsible, among other things, for the application of legislation on taxation and tax audits, also claims that reminders were sent out in 2009 and 2010.
The embassy*, however, denies having received these documents. According to them, the first document on the matter dates back to 2010, and was to be applied from 2014. Regarding the illegality of their situation, the embassy evasively refers to an "inertia between legality and practice over a certain period of time", starting from this period. This situation was supposed to end this January 2022, thanks to the implementation of deduction at source in all of their dependent structures.
An unpleasant surprise at the counter
Previously, this unusual tax arrangement regularly caused unpleasant surprises for Local Law Agents. Unlike the expatriate employees, who can opt to pay their taxes to either the French or Tunisian tax authorities, LLA’s must pay their taxes to the latter. Thus, they sometimes discovered several years after the beginning of their contract that they had significant debts to pay to the tax office.
This is the situation that S**, a former employee of an embassy dependent structure, was confronted with. A few months after joining the team, the young woman began to wonder about the tax situation.
"One day, I wondered about my social security coverage and I realised that I wasn't contributing to anything", she says, "and then one thing led to another and I realised that I had never paid taxes".
When she expressed her confusion to a human resources executive, the response she received surprised her. "He told me two things: that most people didn't pay their taxes, and that no one would help me do it, as the situation was being regulated across the structure". After a series of difficult back and forths with the tax office, and despite individual help from the human resources manager, the discouraged S eventually gave up.
The same misfortune happened to U, who had been working under a local contract in a different structure for several decades. A few years after signing her contract, during a banking procedure, she tried to regulate her situation with the Tunisian tax authorities, only to find herself in a financial bind. "I couldn’t do it, it was exorbitant", she says, before confessing that she had "not been encouraged" by her superiors. In fact, according to her, the subject would have caused tensions with certain superiors.
"I was told that if I paid, other people would have to pay too."
Fuelled by this experience, U became involved in the LLA strike movement last October. According to her, the lack of tax information within her structure is undeniable. "I'm not an exception, my contract didn't mention this when I signed it”, she assures. "As I came from a Tunisian administration, where this is automated, I thought that my organisation handled it."
However, not all agents agree with this narrative. "I blame it on my own ignorance", former employee of the IRMC “J” explains, "initially, I was a public servant, so it was new to me". Like her colleagues, she experienced a difficult attempt to regulate her status at the end of her contract. Despite four years of income taxes that needed to be paid following lengthy administrative procedures, J considers herself fully responsible for her situation. According to her, the unusual tax system of the organisations dependent on the embassy was announced at the signing of the contract. Thanks to payment facilitations granted by the tax authorities and to the help of her superiors, the researcher managed to settle her outstanding debts to the Tunisian administration. "The HRD is used to it, it has been like this for years", says J. "Many researchers like me have been through this before."
These different experiences all raise the same question: why did the embassy structures allow such an illegal procedure to persist for several years, one that was likely to cause difficulties for their employees used to the system of tax deducted at source?
“Shared responsibilities” with
As the situation is, according to embassy representatives, an "internal matter", they insist on remaining discreet regarding the matter. The delay in implementing the deduction at source is excused with having had a difficult dialogue with the unions. "At each meeting, employee representatives submitted documents that questioned the validity of the embassy's application of the deduction at source", they explain. "Imposing this, against their opinion, scalded our predecessors."
According to the diplomatic representation, some employees were reluctant to introduce this method of deduction, which automates the collection of income tax and limits the possibilities of circumventing it.
S, who was able to attend some exchanges between managers and staff, corroborates this statement. “One official said, informally, that the tax issue had to be addressed”, she says. At the time, the response from the local employees was, according to her, categorical: "no way". “Despite their responsibility, the employer may also have been stalling since they knew that things would not go well with the employees”, she speculates. When contacted by inkyfada to obtain their version of the facts, the CFDT-Foreign Affairs (the main union of the organisations linked to the embassy), did not respond to any interview requests.
In any event, for the embassy, the responsibilities in these fiscal misadventures are clear. "No employee was unaware of how much they owed to the tax authorities. On the one hand, everyone signed a contract that stipulated the method of tax payment, and on the other hand, a certificate serving as a basis for the tax return is sent each year", the embassy assures. These documents were not made available to inkyfada, despite our requests.
On a legal level, the situation is much less clear. By maintaining this situation, the embassy has theoretically exposed itself to financial sanctions as an employer. "In the event of a tax audit, if the tax deducted at source has not been deducted, the employee will have to pay the tax authorities the surplus amount, and the employer will have to pay a penalty equal to the amount that has not been deducted", explains Beligh Monser. In practice, however, a source close to the Directorate General of Taxes clarifies this distribution of risks. "If the embassy does not apply the deduction at source, it runs the risk of a fine", he explains.
"But it is not in our interest to go against embassies, if we have to sue, we will do it against the taxpayer instead."
While these tax issues appear to have been resolved in structures linked to France, this may not be the case everywhere. According to sources close to the French embassy, other foreign representations have had the same poor organisation of income tax, placing the burden of its payment directly on the employees. In some cases, this was true until very recently. "We have escaped it, but for others, I think that some of them have not yet fully escaped it."
In an email, the Swiss embassy confirms that it first introduced the tax deducted at source in 2016, "upon the request of the Tunisian government". "Before that date, the payment of taxes was the responsibility of each employee", it added. A situation that seems very similar to the one that existed within the French embassy before January. On the phone, a Swiss embassy official confirmed this information, adding that before, "[embassy staff] were not taxed". This contradicts the information given by the Directorate General of Taxes.
For its part, the Swedish embassy explains that "the tax deduction at source for local employees was implemented upon the inauguration of the Swedish embassy in Tunis, in 2016". Other diplomatic representations contacted by inkyfada did not agree to interview requests. "Some regulations date back to 10 years ago, others to 15 years ago… and others to last year", explains a source close to the Tunisian tax administration. "All of them have been brought into the same system of deduction at source."
Behind the scenes of a discreet escape
It is therefore a slow transition, on a diplomatic scale, that the French embassy is discreetly trying to carry out. "What happens inside the embassy is of no interest to the outside world", the embassy insists. "All of this is settled. This long process is ending in the best possible way: with a consensus." This case is therefore closed for the embassy, which, after meeting with inkyfada, made it known that they had "never wished to communicate about this subject, neither directly nor indirectly".
However, this consensus, discussed at the end of the strike during a meeting between employee representatives and the ambassador on October 15, 2021, does not come without budgetary consequences for the French diplomatic representation. The January introduction of the tax deduction will be accompanied by a number of measures, for which the embassy, as summarised by CFDT-Foreign Affairs, aims to “preserve the incomes of local employees as best as possible", in accordance with the demands of the strike last October.
As for expenses, 85% of the employees concerned will see an increase in their net salary, with the aim of "mitigating or neutralising the impact of the deduction at source", according to the union's website. To summarise, the embassy proposes to finance at least a part of the income tax of its employees, an operation costing "more than 400,000 euros", according to reliable sources. As for savings, the CFDT-MFA website mentions a reduction of seven job positions at the French Institute in Tunisia, despite the IFT’s plans to expand the branch in Sousse.
"To be able to pay everyone's taxes, they have to reduce salary budgets", according to another source close to embassy officials.
Although they claim to have "nothing to hide”, the embassy does not seem very comfortable with this amicable regulation, expressing a fear that "the potential effects" of this topic will affect "the most vulnerable", and insisting on alerting inkyfada of this before publishing this article. The reluctance of the structures that are dependent on the French diplomatic mission goes so far as to dissuade the employees concerned from speaking out on the subject. "It is not in their interest to publicise the strike by explaining that it is because of the implementation of the deduction at source", says an embassy official. "I tried to make them understand, but the strike had already taken place."
Indeed, it is not easy to talk about taxation with employees of the structures linked to the French embassy. At the IFT, the IRMC, and the embassy itself, the employees show a certain discomfort in expressing themselves on the subject. "I don't have any particular need to talk about it, it doesn't interest me anymore", says the director of the French Alliance in Tunis, and former employee at the French Institute.
When approached by inkyfada, a former employee of the IRMC also refused to comment on the subject, while asserting that in her opinion, "the tax issues turned out well". S, who still occasionally collaborates with certain structures attached to the embassy, is worried about her identity being revealed. "We are not under surveillance, but in my opinion, if it is known that someone has been talking, they could be fired immediately."
According to some employees, a similar top-down pressure from the hierarchical structure has previously been felt regarding issues on working conditions. "Once, a Facebook post was published about the working hours of a guard at the IRMC", says a source who would like to remain anonymous. "An official warned the employees at this structure that people who spoke to the press could be dismissed." According to the same source, these warnings were expressed by the embassy itself, which formally denies these accounts.