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London Mayor Boris Johnson Reportedly Settles US Tax Bill

Benjamin Franklin famously said that only two things in life were certain: death and taxes. The saying appears to be as valid today as it was in Mr Franklin's time, and the recent dispute between London Mayor Boris Johnson and the US government is a perfect example.

New York-born Boris Johnson holds US citizenship by virtue of being born in the USA, although he has not lived in the United States since age 5. Mr Johnson also holds UK citizenship, being a dual US/UK passport holder.

All US citizens must comply with US tax law including, if applicable, filing a US tax return and paying any tax owed under US regulations. The US is one of the few countries in the world that imposes tax obligations on its citizens even if they do not derive any income from a US source.

Mr Johnson earns a yearly salary of £144,000 as Mayor of London and additionally receives £250,000 for his regular column contributions to the Daily Telegraph. The squabble with the US authorities, however, arose from the capital gains realised by Mr Johnson's sale of his Islington property. In the UK, Mr Johnson need not pay a capital gains tax as the sale involved his primary residence. However, as far as US regulations are concerned, Mr Johnson faced a potential six figure tax bill.

During his recent US visit to promote his Winston Churchill biography, Mr Johnson was interviewed by the National Public Radio, expressing his outrage at the situation: "You may not believe this but if you're an American citizen, America exercises this incredible doctrine of global taxation, so that even though tax rates in the UK are far higher and I'm Mayor of London, I pay all my tax in the UK and so I pay a much higher proportion of my income in tax than I would if I lived in America. The United States comes after me, would you believe it, for capital gains tax on the sale of your first residence which is not taxable in Britain. They're trying to hit me with some bill, can you believe it?"

When questioned whether he would settle the US tax bill, Mr Johnson retorted, "Well, no, is the answer. I think it's absolutely outrageous. Why should I?... You know, I haven't lived in the United States since I was five years old."

However, it seems that the mayor has changed his mind, with his spokesman indicating that "the matter has been dealt with". The sum settled by Mayor Johnson is unknown.

Mr Johnson has previously been asked why he does not relinquish his US citizenship, to which he responded that it was "difficult to give up". Indeed, in addition to US immigration and US taxation consequences, the cost of expatriation has gone up as of 12 September 2014 when the US Department of State raised the non-refundable expatriation fee to $2,350.

The row over taxes is far from being one-sided, however. In his capacity as Mayor of London, Boris Johnson has been vocal about the US Embassy in London's allegedly outstanding £8 million congestion charge fees that have been incurred by diplomats travelling in and out of central London. The position of the United States Embassy in London is that, since diplomats are exempt from paying tax, the Embassy need not pay the congestion charge. Although the United States is not alone in taking this position (with Japan, Russia, Nigeria and Germany being some of the other Embassies refusing to pay congestion fees), the US has the highestunpaid congestion charges bill.

Doubtlessly, international tax rows will continue to occur. If you are feeling the pain of needing to file tax returns, bear in mind that even Albert Einstein found this a challenging process, stating "This is too difficult for a mathematician. It takes a philosopher."

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