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EU Challenges US Tax Breaks For Boeing

by Ulrika Lomas, Tax-News.com, Brussels

31 December 2014


The European Union has notified the World Trade Organization (WTO) of a request for consultations with the United States over tax incentives offered to commercial aircraft manufacturers, arguing that these incentives violate WTO rules.

The EU said that, in November 2013, Washington State vastly expanded and amended its existing aerospace tax incentives program as part of its efforts to induce Boeing to manufacture its new 777X model of large civil aircraft in Washington State. According to the EU, the expanded program effectively provides "billions of dollars" in additional subsidies (as defined by Articles 1 and 2 of the WTO's Agreement on Subsidies and Countervailing Measures) to Boeing.

The expansions and amendments also made the continuing availability of such tax incentives, in whole or in part, contingent upon siting production of the wings and final assembly for a new commercial aircraft model or variant in Washington State, and maintaining all wing assembly and final assembly of such commercial aircraft exclusively in Washington State, the EU said. The bloc argued that the program is inconsistent with Articles 3.1(b) and 3.2 of the Agreement on Subsidies and Countervailing Measures, as it "conditions billions of dollars in subsidies upon the use of aircraft components manufactured in Washington State."

The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the EU may request adjudication by a panel.

TAGS: tax | tax incentives | law | aviation | World Trade Organisation (WTO) | trade disputes | United States | trade | European Union (EU) | Europe

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