Lamy Welcomes House Approval Of ETI Replacement Bill

by Ulrika Lomas, for LawAndTax-News.com, Brussels

22 June 2004

EU Trade Commissioner, Pascal Lamy has welcomed the adoption by the US House of Representatives of a corporate tax bill repealing subsidies for US exporters which have been ruled illegal by the World Trade Organisation, and have attracted EU sanctions.

Following Thursday's 251-178 vote, Mr Lamy announced that:

“I have repeatedly stated that our objective remains the withdrawal of the US illegal subsidy, and compliance with the WTO’s findings. Today, thanks to the efforts of Chairman Thomas and his colleagues in the House, we are a step closer to this objective. I very much hope that both the House and Senate can now agree on a final text so that an FSC/ETI repeal bill is rapidly adopted and signed into law by President Bush."

He went on to add that:

"It goes without saying that the moment WTO compliant legislation becomes law, the EU will immediately repeal the countermeasures. That will be good news for all involved in transatlantic trade. Let’s hope the time will shortly come to put this long standing dispute behind us once and for all.”

Central to the bill is a 3% corporate tax cut to be given to manufacturing firms in compensation for loss of the FSC-ETI subsidies. However, in common with the Senate version, the bill also contains a number of other tax and non-tax-related measures, including a contentious $10 billion buy-out program for tobacco farmers.

Other measures include: a one year reduction in tax on repatriated income to 5.25%; $4 billion in Alternative Minimum Tax relief; enhanced section 179 expensing for 2 years, to encourage small businesses to invest; 11 tax relief and simplification provisions for S Corporations; an easing of qualification rules under Subchapter S; provisions to prevent broad-based stock options becoming subject to payroll taxes; and rules allowing taxpayers to deduct either state income tax or sales tax (whichever is greater) for 2004 and 2005.

However, to the surprise of observers, a provision that would have forced accounting firms to reveal identities of clients who purchased tax shelters was removed from the bill at the last minute.

The legislation's author, House Ways and Means Committee chairman, Bill Thomas argued that the item was unnecessary since the Internal Revenue Service has won several court cases in this area.

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