WTO Rules U.S. Foreign Sales Corp Rules Are Illegal Export Subsidy; EU to Retaliate

The WTO Appellate Body today issued its report on the European Communities’ complaint against United States: Tax Treatment for "Foreign Sales Corporations" (DS108):

• Findings and Conclusions
• Full Appellate Body Report
• Summary of Case DS108

Bloomberg News reports on the WTO's action in WTO Rules U.S. Tax Breaks Illegal; EU to Retaliate, by Warren Giles:

The European Union plans to impose new sanctions on as much as $4 billion a year in American goods after the World Trade Organization said the U.S. failed to end illegal tax breaks to exporters such as Boeing Co.

A three-judge panel rejected a U.S. appeal because Congress ignored a WTO order to scrap the tax breaks. The EU challenged the U.S. law because it phases out the 10-year export benefits over 12 months rather than halting them immediately.

The U.S. has three months to act to avoid the re- imposition of retaliatory measures," EU Trade Commissioner Peter Mandelson said in a statement from Brussels. "The EU will not accept a system of tax benefits which give U.S. exporters including Boeing an unfair advantage. We are seeking nothing more than the re-establishment of a level playing field."

For prior TaxProf Blog coverage, see here.