EU Seeks Advice From WTO Concerning Phasing Out Of US Tax Breaks

by Mike Godfrey, Tax-News.com, Washington

09 November 2004

The European Union on Friday asked the World Trade Organisation to examine the ‘grandfather’ clauses of the recently passed US tax bill designed to settle the long-running dispute over trade subsidies between the two superpowers.

The American Jobs Creation Act signed by President Bush last month has been welcomed by Brussels, and in theory puts an end to the transatlantic trade dispute by repealing the Foreign Sales Corporation and Extraterritorial Income Exclusion legislation. However, Europe remains concerned over the length of the phasing out period for the illegitimate subsidies.

"The EU today took the first step in this process by formally requesting consultations with the US in the WTO," EU spokesman Anthony Gooch confirmed last week.

Nonetheless, Gooch assured the American government that this action will not impede the process of repealing legislation and lifting the EU’s retaliatory tariffs, which are currently in place on about $4 billion worth of American exports.

The tariffs are due to be lifted on January 1 2005, coinciding with the commencement of the Jobs Creation Act.

Responding to the EU’s action, Richard Mills, a spokesman for the US Trade Representative’s office observed that grandfathering was a facet of tax law the world over, including in many EU countries.

“Grandfathering involves only a minimal amount of tax benefits, and a number of contracts by EU companies are expected to benefit from grandfathering," he stated.

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