EU Welcomes US Moves On Tax Breaks For Exporters

by Mike Godfrey, Tax-News.com, Washington

16 July 2002

Speaking to reporters on Friday, Wilfried Schneider, spokesman for the European Commission's Washington delegation gave measured support to the provision contained within a recently introduced bill to repeal billions of dollars worth of tax breaks for US exporters, but said that the 15 nation bloc would need to study the legislation in more detail.

'We are pleased that there's a real effort to comply with the WTO obligations of the United States,' he announced last week.

Introduced by House Ways and Means Committe Chairman, Bill Thomas on Thursday, as well as removing the $4 billion worth of tax breaks for US exporters, the bill hits out at all of the current corporate bogeymen - US companies which relocate offshore or transfer assets overseas, corporate insiders such as officers and directors with attractive stock option packages, and individuals and companies which fail to disclose their use of tax shelters.

Although the legislation has been dismissed by many as a neat piece of electioneering, unlikely to pass through Congress in anything resembling its current form, it may just be enough to get the United States off the hook with the European Union, which may accept the move to repeal tax breaks for US giants such as Boeing, Microsoft, and Kodak, as enough of a good will gesture.

However, unsurprisingly, the companies in question are less than happy about the plans.

Speaking to the Reuters news service on Friday, Chris Padilla, Director of International Trade Relations for the Eastman Kodak Co. announced that: 'For us, this is the make-film-in-China bill,' referring to the fact that if the Thomas bill is implemented, the company will need to relocate a significant amount of its production overseas in order to avoid an increase in its effective tax rate.

Also speaking to Reuters before the weekend, Bill Reinsch, President of the National Foreign Trade Council argued that although the draft legislation contains a number of changes long sought by exporters, it does not contain an adequate replacement for the Extraterritorial Income Tax Act (ETI), or its predecessor - also ruled against by the World Trade Organisation - the Foreign Sales Corporation legislation (FSC).

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