Agence France Presse | October 29, 2003
A US congressional panel Tuesday voted to strike down tax breaks for US exporters, which have been deemed illegal by the World Trade Organization and which could draw massive European countermeasures if not repealed.
The committee in the House of Representatives voted 24-15 to scrap the Foreign Sales Corporation-Extraterritorial Income Tax regime.
The European Union could impose a record four billion dollars in countermeasures under a WTO ruling if the United States fails to dismantle the tax scheme by the end of the year.
The vote by the Ways and Means Committee follows a similar vote by a Senate committee on October 2. Both chambers still have to vote on the measures approved by the committees, and then they must iron out differences in the two versions.
The change is part of a larger tax package that would provide other tax breaks to US manufacturers and businesses.
The WTO ruled in January last year that the Foreign Sales Corporation flouted its rules by allowing thousands of US firms, operating through subsidiaries in offshore tax havens, to benefit from reduced export taxes.
WTO arbitrators have agreed with the EU that just over four billion dollars (3.4 billion euros) would constitute "appropriate countermeasures" based on the trade impact of the US policy.
The four-billion-dollar penalty, which would be levied through extra duties on US goods imported to the EU, would be an unprecedented sum and send a shockwave through strained US-EU trade relations.Agence France Presse:
