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Diplomacy lesson: is a congestion charge a service fee or a tax?

The new U.S. ambassador to Britain, Louis Susman, has indicated he will not pay the 3.5 million pounds ($5.7 million!) in congestion charges the embassy owes the City of London.  Drivers pay 8 pounds a day for the privilege of driving in a central zone at peak hours — but the U.S. embassy has refused ...

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The new U.S. ambassador to Britain, Louis Susman, has indicated he will not pay the 3.5 million pounds ($5.7 million!) in congestion charges the embassy owes the City of London. 

Drivers pay 8 pounds a day for the privilege of driving in a central zone at peak hours -- but the U.S. embassy has refused to pay. The argument? The congestion charge is a tax, not a service fee. And embassies don't pay taxes. 

The mayor's office and Transport for London, which administers the program, argue that around three-quarters of embassies pay the charge -- a service, not a tax -- and that the United States should do better than to rely on semantics to wiggle out of it. 

The new U.S. ambassador to Britain, Louis Susman, has indicated he will not pay the 3.5 million pounds ($5.7 million!) in congestion charges the embassy owes the City of London. 

Drivers pay 8 pounds a day for the privilege of driving in a central zone at peak hours — but the U.S. embassy has refused to pay. The argument? The congestion charge is a tax, not a service fee. And embassies don’t pay taxes. 

The mayor’s office and Transport for London, which administers the program, argue that around three-quarters of embassies pay the charge — a service, not a tax — and that the United States should do better than to rely on semantics to wiggle out of it. 

I tend to think of congestion charges as taxes. They’re designed to encourage certain behaviors and to make money for local governments. London spends the program’s surplus (around a third of revenue, or nearly 90 million pounds, in 2007) on transport investment, for instance. But this still seems a little unseemly. What do you think?

Annie Lowrey is assistant editor at FP.

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