United Nations: Status of Alternative Revenue Raising Proposals (Letter
Report, 11/08/96, GAO/NSIAD-97-31).

Pursuant to a congressional request, GAO reviewed the United Nations'
ability to raise revenues outside of member assessments, focusing on:
(1) whether U.N. organizations receive substantial contributions from
private sources; (2) whether the United Nations has authority to
implement revenue-raising options, including the imposition of taxes or
fees within the jurisdictions of member states, and how the proposals
would be processed in the U.N. system; (3) the U.S. position on U.N.
authority to impose taxes within the jurisdictions of member states; and
(4) U.N. proposals for raising revenues and the status of these
proposals.

GAO found that: (1) the United Nations receives very little financial
support from private sources; (2) because the United Nations is an
organization of sovereign states with no independent power of its own,
it has no authority to impose taxes within the jurisdictions of its
member states; (3) granting such authority would, at a minimum, require
an amendment to the U.N. Charter which would require approval and
ratification in accordance with the respective constitutional processes
by two-thirds of the members of the General Assembly, including all
permanent members of the Security Council; (4) the official position of
the U.S. government is that it would veto any proposal to amend the U.N.
Charter for this purpose; and (5) alternative revenue-raising ideas have
been solicited within the U.N. system, and some U.N. member states,
under the auspices of the Economic and Social Council, have studied
various financing mechanisms, some of which involve the imposition of
taxes within the jurisdictions of U.N. member states, but no formal
proposals have been made.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-31
     TITLE:  United Nations: Status of Alternative Revenue Raising 
             Proposals
      DATE:  11/08/96
   SUBJECT:  International organizations
             Gifts or gratuities
             Taxes
             Cost sharing (finance)
             Borrowing authority
             Foreign governments
             International relations

             
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Cover
================================================================ COVER


Report to Congressional Requesters

November 1996

UNITED NATIONS - STATUS OF
ALTERNATIVE REVENUE RAISING
PROPOSALS

GAO/NSIAD-97-31

United Nations

(711208)


Abbreviations
=============================================================== ABBREV

  UNCTAD - United Nations Conference of Trade and Development
  UNICEF - United Nations Children's Fund
  UNDP - United Nations Development Program

Letter
=============================================================== LETTER


B-274545

November 8, 1996

The Honorable Jesse A.  Helms
Chairman, Committee on Foreign Relations
United States Senate

The Honorable Judd Gregg
Chairman, Subcommittee on Commerce, Justice,
 State, the Judiciary, and Related Agencies
Committee on Appropriations
United States Senate

In response to your request, we are providing information on the
United Nations' ability to raise revenues outside of member
assessments.  Specifically, this report deals with

  -- whether U.N.  organizations receive substantial contributions
     from private sources;

  -- whether the United Nations has authority to implement
     revenue-raising options, including the imposition of taxes or
     fees within the jurisdictions of member states, and how the
     proposals would be processed in the U.N.  system;

  -- the U.S.  position on U.N.  authority to impose taxes within the
     jurisdictions of member states; and

  -- U.N.  proposals for raising revenues and the status of these
     proposals. 


   BACKGROUND
------------------------------------------------------------ Letter :1

The six principal components of the United Nations are the General
Assembly, the Security Council, the Economic and Social Council, the
Trusteeship Council,\1 the International Court of Justice, and the
Secretariat.  Numerous committees, commissions, programs, and other
subsidiary bodies fall under the main components of the United
Nations.  For the 1994-95 biennium, the U.N.  regular budget was $2.6
billion.  In 1995, the U.  S.  assessment was $315 million.\2 In
addition, the U.N.  family of organizations includes numerous
specialized agencies and other autonomous bodies, some of which have
their own separate membership, system of governance, and financing
structures.  (See app.  I.) We limited our review to the main
components of the United Nations and the subsidiary bodies that
receive funding through, or are directly controlled by, the main U.N. 
components. 


--------------------
\1 The Trusteeship Council has suspended operations. 

\2 This figure excludes assessments for peacekeeping. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The United Nations receives only a small part of its financial
support from private sources.  U.N.  operations are funded primarily
from three sources:  regular budget assessments, special assessments
for peacekeeping missions, and voluntary contributions funded by
member governments.\3 In addition, the United Nations receives some
funding through contributions from nongovernmental entities, such as
foundations or other private international organizations.  Of the
$5.9 billion voluntary contributions received in 1995, only $584
million came from nongovernmental sources.  The United Nations also
generates income from commercial sales of products such as U.N. 
publications or from gift shop operations and fees for services.  In
addition, the United Nations has on two occasions borrowed funds from
member states. 

Because the United Nations is an organization of sovereign states
with no independent power of its own, it has no authority to impose
taxes within the jurisdictions of its member states.  Granting such
authority would, at a minimum, require an amendment to the U.N. 
Charter.  An amendment requires approval and ratification in
accordance with the respective constitutional processes by two-thirds
of the members of the General Assembly, including all permanent
members of the Security Council.\4 The official position of the U.S. 
government is that it would veto any proposal to amend the U.N. 
Charter for this purpose.  In early 1996, the United States and 77
other countries said that they would consider only voluntary funding
approaches for the United Nations. 

Alternative revenue-raising ideas have been solicited within the U.N. 
system.  However, no formal proposals have been made.  Some U.N. 
member states, under the auspices of the Economic and Social
Council,\5 have studied various financing mechanisms, some of which
involve the imposition of taxes within the jurisdictions of the U.N. 
member states.  The financing mechanisms studied include levies on
international air and maritime transport, telecommunications, trade,
and international currency transactions.  The United States has
encouraged delegations to the United Nations to discuss alternative
funding sources; however, it has opposed any suggestion that the
United Nations be granted authority to impose taxes. 


--------------------
\3 For a discussion of regular and peacekeeping budget assessments,
see United Nations:  How Assessed Contributions for Peacekeeping
Operations Are Calculated (GAO\NSIAD-94-206, Aug.  1, 1994). 

\4 Permanent members of the Security Council are China, France, the
Russian Federation, the United Kingdom, and the United States. 

\5 In the July 1996 Substantive Session of the U.N.  Economic and
Social Council, position papers were solicited from member states on
new and innovative ideas for generating funds. 


   FUNDING FOR U.N.  MAIN
   COMPONENTS AND THEIR SUBSIDIARY
   BODIES
------------------------------------------------------------ Letter :3

In addition to member assessments that finance the regular budget of
the United Nations, the main U.N.  components and their subsidiary
bodies\6 receive voluntary contributions from member governments and
monies from nongovernmental entities such as businesses or
foundations.  It also obtains funds through a variety of other
sources, such as sales of publications, gifts, and greeting cards;
rental income; interest on trust funds; and gains from currency
exchanges.\7

While each U.N.  agency accounts for funds received from such
sources, the United Nations has no systemwide consolidated list of
voluntary contributions or other funds received.  Voluntary
contributions may fund an organization's normal operations and/or be
earmarked for specific programs or projects.  U.N.  financial systems
are not harmonized, making it difficult to depict how voluntary funds
are distributed.  However, contributions to the U.N.  Conference on
Trade and Development (UNCTAD), the U.N.  Development Program (UNDP),
the U.N.  Population Fund, and the U.N.  Children's Fund (UNICEF),
illustrate the diversity of U.N.  organizations' funding. 

UNCTAD provides technical assistance on trade promotion issues
primarily to developing countries.  In 1994-95, UNCTAD received its
$113.6 million regular budget from the U.N.  Secretariat, and $43.8
million in extrabudgetary support.  In contrast, UNDP, the U.N. 
Population Fund, and UNICEF do not receive funding from the U.N. 
regular budget assessment but are funded by voluntary contributions
from governments; nongovernmental organizations; and, in the case of
UNICEF, partly through entrepreneurial endeavors. 

UNDP's regular program is funded by voluntary contributions from
member countries.  In addition, member countries and private and
international organizations voluntarily contribute funds for
specifically earmarked trust funds or for specific projects through
cost-sharing agreements.\8 Both the Ford and Rockefeller Foundations,
for example, have contributed to cost-sharing projects, as have the
multilateral development banks and the European Union. 

The U.N.  Population Fund, whose 1994-95 budget was $586 million, is
also funded by voluntary contributions, largely from donor
governments.  In addition, the Fund receives income by providing
procurement services to governments.  The Fund purchases
contraceptives in bulk for recipient governments.  In 1994-95, for
example, the Fund earned about $3 million from these services.  Like
UNDP, the U.N.  Population Fund receives funds through cost-sharing
agreements with governments. 

In addition to voluntary contributions from member governments,
UNICEF generates substantial income from other sources.  For example,
in 1995 UNICEF received $655 million from governments to fund its
programs and earned $308 million by selling greeting cards and
conducting private sector fund-raising activities.  In 1994, UNICEF
sold 158 million cards.  UNICEF also conducts direct mail campaigns
and other fund-raising activities, such as collecting British
Airways' passengers' unwanted foreign currency.  Fund-raising
activities are also conducted by national committees located in 37
countries. 


--------------------
\6 The subsidiary bodies include the Office of the U.N.  High
Commissioner for Refugees, the Office of the U.N.  High Commissioner
for Human Rights, the U.N.  Children's Fund, the U.N.  Conference on
Trade and Development, the U.N.  Development Program, the U.N. 
Capital Development Fund, the U.N.  Development Fund for Women, the
World Food Program, the World Food Council, the U.N.  Environment
Program, the U.N.  Population Fund, the U.N.  International Drug
Control Program, and the U.N.  Research Institute for Social
Development. 

\7 The United Nations sells postage stamps, operates a gift center
and newsstand, sells publications, and provides visitor services. 
Between 1994 and 1995, the United Nations earned about $9 million
from these activities. 

\8 Cost-sharing agreements are designed to allow donors to contribute
to specific projects within a country at their discretion.  Recipient
governments also make contributions to specific projects through
cost-sharing agreements. 


   THE UNITED NATIONS LACKS
   AUTHORITY TO TAX MEMBERS
------------------------------------------------------------ Letter :4

Although its members are sovereign nations, the United Nations itself
does not possess the attributes of sovereignty.  The United Nations
was created as a forum to mediate international disputes, maintain
international peace, develop friendly relations among nations,
promote social and economic progress, and foster respect for human
rights.  It is endowed by its members with certain powers necessary
to discharge its functions.  Those powers are limited to carrying out
only those activities that are within the scope of its Charter. 

Regarding financial matters, article 17 of the Charter vests the
General Assembly with responsibility for the U.N.  budget.  Article
17 authorizes the General Assembly to "consider and approve the
budget of the Organization." It provides that the "expenses of the
Organization shall be borne by the Members as apportioned by the
General Assembly." As noted by the International Court of Justice,
"article 17 is the only article in the Charter which refers to
budgetary authority or to the power to apportion expenses, or
otherwise raise revenue."\9

Article 17 authorizes the General Assembly to approve a budget and to
apportion expenses among members; it does not authorize the United
Nations to independently raise revenue by imposing fees or taxes on
international transactions.  More important, a basic underlying
principle of the U.N.  Charter acknowledges the sovereignty of all
nations and generally prohibits the United Nations from intervening
in matters that are essentially within the domestic jurisdiction of
any state.\10 Consistent with this underlying principle, at least one
U.S.  court has ruled that the United Nations has no power to
legislate within the realm of the municipal law of the United
States.\11 The power to tax, an attribute of sovereignty, is clearly
within the U.S.  domestic jurisdiction and the United Nations cannot
independently impose taxes on U.S.  citizens. 

Implementation of any of the suggested taxes or fees on international
transactions would, at a minimum, require an amendment to the U.N. 
Charter.  A U.N.  Charter amendment requires approval and
ratification by two-thirds of the members of the General Assembly in
accordance with their respective constitutional processes, including
all the permanent members of the Security Council.\12 To be effected,
an amendment requires ratification by the United States, a permanent
member of the Security Council.  In the United States, ratification
requires the advice and consent of the Senate, provided two-thirds of
the Senators present concur.\13


--------------------
\9 1962 I.C.J.  151. 

\10 U.N.  Charter, article 2(7). 

\11 United States v.  Keeney, 111 F.  Supp.  233 (1953), reversed on
other grounds, 218 F.  2d 843 (1954). 

\12 U.N.  Charter, article 108. 

\13 U.S.  Constitution, article II, ï¿½ 2. 


      U.N.  BORROWING
---------------------------------------------------------- Letter :4.1

As discussed above, the U.N.  ability to raise revenue is limited to
measures authorized under article 17.\14 In addition to assessments
and contributions, the General Assembly has authorized, in connection
with its authority to consider and approve a budget, the United
Nations to borrow funds to finance operations on at least two
occasions.  In both cases, the United States was the major lender and
did not question the capacity or the authority of the United Nations
to issue bonds or borrow money.\15

In the 1940s, the General Assembly authorized the Secretary General
to negotiate a loan agreement with the United States for construction
of the U.N.  headquarters.\16 The U.S.  Congress authorized the
President to enter into the loan agreement, which was brought into
effect on August 11, 1948.\17 On the second occasion, in the 1960s,
the General Assembly authorized the Secretary General to issue $200
million in bonds as part of a plan to alleviate a financial
crisis.\18 The bonds were offered to members of the United Nations;
specialized agencies; the International Atomic Energy Agency; and if
the Secretary General determined, after consultation with the
Advisory Committee on Administrative and Budgetary Questions,
non-profit institutions or associations.\19 The U.S.  Representative
to the United Nations voted in favor of the bond issue and the
Congress authorized appropriations in the amount of $100 million.\20
The Congress regarded the bond issue as an extraordinary remedy that
was not intended to set a precedent for future financing.\21 The
authorizing legislation specifically provided that it did not
authorize the United States to participate in any future U.N. 
borrowings.\22


--------------------
\14 The regular budget of the United Nations, U.N.  specialized
agencies, and the International Atomic Energy Agency are generally
financed with assessed contributions that members are obligated to
pay under article 17.  Special programs, such as UNICEF, are financed
with voluntary contributions.  Peacekeeping operations are typically
financed with special assessments. 

\15 Under article 104 of the U.N.  Charter, the United Nations enjoys
in the territory of each of its members such legal capacity as may be
necessary for the exercises of its functions and the fulfillment of
its purposes. 

\16 General Assembly Resolution 182(II), November 20, 1947. 

\17 U.N.  Headquarters Agreement Act, Public Law No.  80-357, 61
Statute 756 (1947). 

\18 General Assembly Resolution 1739 (XVI), December 20, 1961. 

\19 Conceivably, if the General Assembly had chosen to at the time,
it could also have authorized sale of the bonds to commercial
institutions. 

\20 22 U.S.C.  287g. 

\21 Senate Report Number 1277, 87th Congress 2d Session (1962). 

\22 22 U.S.C.  287j. 


   OPTIONS FOR RAISING REVENUES
------------------------------------------------------------ Letter :5

Various options to raise revenues have been discussed within the U.N. 
system, but none have been formally proposed by any U.N.  official or
member state.  Options discussed included (1) the issuance of bonds
and borrowing money, which the United Nations has used in the past;
(2) an international lottery; (3) obtaining fees from a U.N.-issued
credit card; (4) the imposition of levies on international
transportation-related activities and financial transactions; (5)
obtaining fees from a U.N.-established international currency
exchange; or (6) the borrowing of funds from international financial
institutions such as the World Bank.  State Department officials note
that the World Bank can lend only to sovereign governments, and since
the United Nations is not a sovereign entity, this option is not
viable. 

According to State Department officials, the United Nations has not
formally raised for discussion any of these options at economic
summits.  In May 1995, the U.N.  Secretary General sent a letter to
the Group of 7 (G-7) heads of state prior to the June 1995 meeting in
Halifax, Nova Scotia.\23 The letter discussed the financial
challenges facing the United Nations and the need to streamline
operations and improve management.  The Secretary General said in the
letter that he would be relying on the General Assembly's High-Level
Open-Ended Working Group on the Financial Situation to identify
options but without mentioning specific proposals.  According to
State Department officials, none of the proposals were on the agenda
of the 1996 G-7 meeting held in Lyon, France.  Many of the options
lack broad international support.  For example, in early 1996, the
United States and 77 other countries said that they would consider
only voluntary funding mechanisms for the United Nations. 


--------------------
\23 The G-7 comprises the following industrialized countries: 
Australia, Canada, France, Germany, Italy, the United Kingdom, and
the United States. 


   U.S.  POSITION ON INVOLUNTARY
   LEVIES
------------------------------------------------------------ Letter :6

The official U.S.  policy is that the United States opposes
involuntary methods of raising additional revenue within the U.N. 
system.  The U.S.  Representative for U.N.  Management and Reform
stated at the High-Level Open-Ended Working Group on the Financial
Situation of the United Nations in January 1996 that the United
States does not support any involuntary funding approach to support
the United Nations.  Further, State Department officials said that
the United Nations does not have the authority to impose or collect
any form of tax, and the U.  S.  government would not consent to any
proposal to grant such authority.  In March 1996, the U.S.  Permanent
Representative to the United Nations stated that the United States
supports addressing the U.N.  financial situation with management
reforms and encourages the United Nations to discuss alternative
funding sources.  She also stated that the United States would oppose
any plan to finance U.N.  activities by taxing member states.  The
U.S.  veto power would prohibit implementation of any tax.  According
to State officials, no formal proposals to impose a tax on U.S. 
citizens have been made, and State has not assessed the impact of a
tax on U.S.  bilateral or multilateral agreements. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

The Department of State reviewed a draft of this report and agreed
with its contents.  The Department's comments are reproduced in their
entirety in appendix II. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

For information on the funding sources available to U.N. 
organizations, we obtained financial and other documentation from the
United Nations and its subsidiary bodies.  To identify U.N. 
authority to implement revenue-raising options, we reviewed the U.N. 
Charter.  To identify U.N.  proposals for raising revenues, we
interviewed officials at and obtained documentation from the United
Nations, the Department of State, and the U.S.  Mission to the United
Nations.  To determine the U.S.  position on U.N.  authority to
impose taxes within the jurisdictions of member states, we spoke with
officials at the Department of State and the U.S.  Mission to the
United Nations.  As an agency of the United States, we have no direct
audit authority to review international organizations, including the
United Nations or its specialized agencies.  However, these
organizations cooperated with us in our data collection efforts,
although we could not independently verify the accuracy of the data
they provided.  We performed our review between June and September
1996 in accordance with generally accepted government auditing
standards. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Secretary of State, the
Director, Office of Management and Budget, and interested
congressional committees.  Copies will also be made available to
others upon request. 

Please contact me at (202) 512-4128 if you or your staff have any
questions concerning this report.  Major contributors to this report
were LeRoy W.  Richardson, Patricia L.  Martin, Joseph C.  Brown, and
Mark C.  Speight. 

Harold J.  Johnson, Associate Director
International Relations and Trade Issues


THE UNITED NATIONS SYSTEM
=========================================================== Appendix I

THE U.N.  PRINCIPAL COMPONENTS

The General Assembly
The Security Council
The Economic and Social Council
The Trusteeship Council\1
The International Court of Justice
The Secretariat

RELATED U.N.  PROGRAMS AND
SUBSIDIARY BODIES

Office of the U.N.  High Commissioner for Refugees
Office of the U.N.  High Commissioner for Human Rights
U.N.  Children's Fund
U.N.  Conference on Trade and Development
U.N.  Development Program
U.N.  Development Fund for Women
World Food Program
World Food Council
U.N.  Environment Program
U.N.  Population Fund
U.N.  International Drug Control Program
International Trade Center

SPECIALIZED AGENCIES AND OTHER
AUTONOMOUS BODIES

Food and Agricultural Organization
General Agreement on Tariffs and Trade
International Trade Center
International Atomic Energy Agency
International Consultative Group on Food Irradiation
International Civil Aviation Organization
International Fund for Agricultural Development
International Labor Organization
International Maritime Organization
International Monetary Fund
International Telecommunication Union
U.N.  Educational, Scientific, and Cultural Organization
U.N.  Industrial Development Organization
Universal Postal Union
World Health Organization


--------------------
\1 The Trusteeship Council has suspended operations. 


      WORLD BANK GROUP
------------------------------------------------------- Appendix I:0.1

International Bank for Reconstruction and Development
International Development Association
International Finance Corporation
Associated Organizations:
 Consultative Group on International Agricultural Research
 International Center for the Settlement of Investment Disputes
 Multilateral Investment Guarantee Agency


      REGIONAL DEVELOPMENT BANKS
------------------------------------------------------- Appendix I:0.2

African Development Bank
Inter-American Development Bank
Institute for Latin American Integration
Asian Development Bank
Caribbean Development Bank

PEACEKEEPING OPERATIONS

U.N.  Truce Supervision Organization in Palestine
U.N.  Military Observer Group in India and Pakistan
U.N.  Peacekeeping Force in Cyprus
U.N.  Disengagement Observer Force (between Israel and Syria in the
 Golan Heights)
U.N.  Interim Force in Lebanon
U.N.  Iraq-Kuwait Observation Mission
U.N.  Mission for the Referendum in Western Sahara
U.N.  Mission in Bosnia and Herzegovina (includes International
Police
 Task Force)
U.N.  Preventative Deployment Force (in the former Yugoslav Republic
of
 Macedonia)
U.N.  Observer Mission in Liberia
U.N.  Observer Mission in Georgia
U.N.  Support Mission in Haiti
U.N.  Angola Verification Mission III
U.N.  Mission of Observers in Tajikistan
U.N.  Transitional Administration for Eastern Slavonia, Baranja, and
 Western Sirmium
U.N.  Mission of Observers in the Prevlaka

Source:  Congressional Research Service. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
STATE
=========================================================== Appendix I



(See figure in printed edition.)


*** End of document. ***