Nikhil Kumar: Christine Lagarde isn't a tax dodger or a hypocrite

She has dodged nothing, but the Greek economy has long suffered tax evasion


It's late one evening and Christine Lagarde, the head of the International Monetary Fund, is sitting across the table from Benjamin Franklin, the founding father of the United States. By some trick of the cosmos, they're at the same dinner party in DC, eyeing one another over a large bowl of tzatziki. The evening is drawing to a close and old Ben decides to impress Mme Lagarde with one of his stock pick-up lines: you know, Christine, there are only two certainties in life – death and taxes.

Cue an awkward silence. Ben's line dates from the 18th century, long before the conception of the 1961 Vienna Convention under which the Frenchwoman is legally a diplomatic agent. Her $467,940 IMF salary – like the salaries of her predecessors, her underlings and her colleagues at other international organisations – is therefore tax-free. This fact "emerged" this week after Lagarde was quoted as berating the Greeks for dodging their taxes. Headlines proclaimed "outrage" and "hypocrisy". It didn't matter that Lagarde was dodging precisely nothing (the Greek economy, on the other hand, has for many years suffered from well-documented tax evasion). No. The finer points – and the meaning of hypocrisy – were swallowed up by the bold headlines. She didn't pay tax. So she had no right to lecture the poor, benighted Greeks.

This isn't a defence of the rules. The critics could have taken issue with the regime that governs the salaries of international officials like Lagarde (who, by the way, pays other taxes, including local and property taxes in the US, where she is based, and in France, where she is from). Why shouldn't diplomats pay tax on their incomes? But logic and reason, and the legitimacy or otherwise of Lagarde's argument, were abruptly cast adrift and marooned somewhere in the distant waters of the Mediterranean. Besides, probing the Vienna Convention half a century late would have looked sloppy.

Lagarde should have been questioned further – not heckled. She should have been pressed harder about the elephant in the room: the lack of growth in Europe and the lack of a strategy for growth. She should have been interrogated about the intolerable pressures now bearing down on ordinary Greeks, the savage cuts mandated by the IMF and its partners.

When she spoke of "payback" time for Greece, she should have been challenged on the failures of regulators and of the policymakers who did nothing and said nothing when the debt crisis was brewing. With Spain's Bankia on its last legs, she should have been asked about her call for a recapitalisation of Europe's banks.

But her tax dodge – or lack thereof – made a better headline.

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