DoD teacher faces $ 150,000 tax bill as German tax talks on U.S. military personnel drag on

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STUTTGART, Germany – As US Secretary of State Antony Blinken and his German counterpart roasted improving relations between their countries over beer in Berlin last month, US military school teacher Sierra Eberhardt envisioned financial ruin in the hands of local German tax collectors.

“I’m fighting on my own,” said Eberhardt, a teacher at Vogelweh Elementary School in Kaiserslautern, who was recently forced to pay tens of thousands of dollars in German income tax and faces additional bills despite a military treaty designed to put his salary – which is also imposed by US authorities – off limits.

Almost a year after the U.S. government filed a formal complaint with Germany over efforts by its local finance offices to impose tax sanctions on dozens of civilians and military personnel in the Department of Defense, Eberhardt and hundreds more remain targets.

The situation caught the attention of Defense Secretary Lloyd Austin, who at a June 30 meeting at the Pentagon raised the issue directly with German Defense Minister Annegret Kramp-Karrenbauer.

“Secretary Austin expressed gratitude for Minister Kramp-Karrenbauer’s personal commitment to the matter and called for his continued involvement in resolving the issue,” Pentagon spokesman Lt. Col. Anton Semelroth said in a statement. release last week. “Secretary Austin has expressed the desire of the United States to see the long-standing problem resolved. “

The financial results of those trapped in the German tax system have been devastating: bills reaching six figures, threats of imprisonment, frozen bank accounts and court battles.

The United States maintains that the situation amounts to a violation of the treaty, but so far American officials have been powerless to stop it. This has been happening for years, even as U.S. taxpayer dollars inject billions every year into the German economy through spending by the military community.

But despite US objections, and even indications from Foreign Minister Heiko Maas and other senior German officials that they want the case resolved, the situation has stalled.

It is unclear what authority the German federal government has over localities or how it might force state-level tax authorities to back down.

The U.S. Embassy in Germany, which is leading negotiations with the German government, said it could not go into details of the current state of affairs.

“While we do not comment on diplomatic exchanges, the Embassy and military commands are aware of this long-standing problem and are working closely to remedy what we believe to be a misinterpretation of the Status of Persons Agreement. NATO forces, ”said Scott Robinson. , a spokesperson for the American Embassy in Berlin. “The Department of Defense and the State Department are committed to trying to come to a resolution. “

This is a dispute over how the agreement should be interpreted.

In Germany, unlike any other allied country where US forces are based around the world, troops and civilian personnel face liability if local tax offices decide that a serviceman has reason to be in the country. beyond his work.

Last year there were nearly 400 cases involving SOFA statutory staff in the greater Kaiserslautern region alone, tax authorities said at the time. They included the Air Force Master Sgt. Matthew Larsen, who was targeted for extending a tour and being married to a German woman.

Being a teacher in an American basic school for long periods of time or sending children to a German school also put people on the tax collector’s radar.

In the UK, Italy, Japan and South Korea, all countries that host large numbers of military personnel, DOD personnel regularly marry locals or go on extended tours without threat of income tax, according to the commands that oversee SOFA affairs in those countries.

The Pentagon, which is now reviewing its position of strength in the world, including in Germany, declined to say whether the tax risk facing troops would be factored into decisions on how to adjust where to soldiers are stationed.

“The department takes into account a wide range of factors when reviewing and making recommendations to the Secretary of Defense on the position of US forces abroad,” Semelroth said. “As the review of the global posture is still ongoing, we do not have further details on the specific criteria used to assess the position of US forces in a particular country or region. “

Mount of frustrations

The lack of progress with Germany on the tax issue has infuriated many U.S. servicemen who say they have been left on their own to push back increasingly aggressive collection efforts. They argue that tax officials became emboldened after suffering little backlash from the U.S. government when the first cases emerged in previous years.

“Personally, I continue to be outraged by the silence of our government,” said Mike Goff, an Air Force retiree in Germany who has become an advocate for military personnel in the country. “I’m not expecting an update on where this is or when the last communiqué was sent, but give us something to show you don’t care that our own NATO ally continues to ignore the problem because Americans are still paying ill-gotten taxes with money. “

Most cases center around Ramstein Air Base, the main hub for US personnel in Germany. But DOD personnel in other locations, including the US military headquarters in Europe and Africa in Wiesbaden, have been affected.

For Eberhardt, who lives in Kaiserslautern, the first invoice she received was 76,000 euros, or about $ 90,000, in back taxes for the years 2013-2018. As a federal employee, Eberhardt already pays US income tax on her salary.

Eberhardt said she paid the back taxes after she and her husband, a German, were threatened with criminal charges, imprisonment and frozen bank accounts. In May, she received an invoice for almost 50,000 euros in additional penalties.

“I have no idea how we’re going to pay it,” she said.

Eberhardt said it was not clear how authorities could have come up with such a large sum.

“They told me that they could charge 13,000 euros up front for the simple possession of a (military) identity card because of the tax advantages attached to it,” she said.

While sending a child to a German school has been cited as one of the factors that can lead tax collectors to decide that a serviceman is in Germany for reasons other than work, Eberhardt said that German finance officials told her that she was lucky to have her children in German school.

“They told me it was good because if they were in American school, it was considered a tax lien. Then they would have charged us more, ”Eberhardt said.

The tax penalties, totaling approximately 126,000 euros, equivalent to nearly $ 150,000. Eberhardt said she also had to pay 3,000 euros every three months on her teacher’s salary just to stay up to date on annual German taxes.

Eberhardt said she hoped to get a green card for her husband so they could leave the country.

Still, that doesn’t mean evading German tax collectors.

Tax advisers told Stars and Stripes that the German tax administration is known to prosecute military personnel long after they leave the country.

Calls for cooperation

While former President Donald Trump had strained relations with Germany, especially when it came to Berlin’s defense spending, President Joe Biden took a more diplomatic approach.

It is not yet clear whether this will pay dividends on the tax issue or how much effort the administration is prepared to put in to resolve it.

For Maas, the change in tone coming from Washington was a cause for celebration when he greeted Blinken. But neither he nor Blinken mentioned the tax issue in their public remarks at a beer garden in Berlin, where Maas expressed his desire for better cooperation.

“We have so much in common,” Maas said. “And I think there is such a degree of readiness and willingness on both sides of the Atlantic to cooperate. So I’m looking forward to it. “

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