WASHINGTON (AFP) - The US House of Representatives repealed a controversial tax break for US corporations in a bid to end hefty European Union trade sanctions more than a year after the World Trade Organization ruled against the practice.
The bill approved by a 280-141 vote replaces a five-billion-dollar program of tax breaks on profits earned abroad by US companies with credits designed to encourage them to keep production jobs in the United States.
"Lowering the burdens of taxation and regulation will help even the playing field and ensure American companies are more competitive in the global marketplace. As a result, we'll protect current workers while creating more jobs here at home," House Speaker Dennis Hastert said.
House lawmakers acted after a House-Senate conference committee agreed earlier this week on a compromise version of the legislation. The Senate, which approved its own bill May 11, is expected to pass the compromise and President George W. Bush has said he would sign a bill to end the long-running trade dispute.
The WTO ruled January 14, 2003, that the Foreign Sales Corporation program was an illegal subsidy that flouts global trade rules by allowing US firms, operating through subsidiaries in offshore tax havens, to benefit from reduced export taxes.
It was the latest move in a six-year dispute between the EU and the United States over the question of tax breaks for US companies with foreign operations such as Microsoft, IBM, Boeing and Caterpillar.
The EU first challenged the US tax breaks at the Geneva-based WTO in 1997 on the grounds that they provided a de facto subsidy that gives US companies an unfair advantage over European rivals.
The US Congress first overhauled the law in 2000 after the WTO ruled against Washington, but the EU complained the changes were inadequate and filed a new case before the world trade body.
In March, after efforts to solve the dispute proved unsuccessful, the EU slapped an additional five-percent tariff on several US exports, including meat, nuclear reactor parts, toys and wood products. The punitive tariffs have been ratcheted up by one percentage point a month.
If continued until the end of the year, the duties would amount to more than 300 million dollars, well short of the four billion dollars in countermeasures the WTO had allowed.
EU officials have said they would lift the punitive tariffs as soon as Washington complies with WTO rules.