BRUSSELS (AFP) - The European Union sought consultations with the United States to determine if new US legislation abolishing contested corporate tax breaks is consistent with World Trade Organization regulations, an EU commission spokeswoman revealed.
Arancha Gonzalez, speaking for EU Trade Commissioner Pascal Lamy, said that while the new law resolved the essential elements in a dispute with the EU, there remained one portion of the legislation that EU says may not conform to WTO rules.
President George W. Bush on October 22 signed legislation that ended export tax breaks for US corporations operating in off-shore tax havens, a concession that the EU said amounted to an illegal subsidy.
The WTO agreed with the argument and the US Congress, in the face of four billion dollars in EU-imposed sanctions on US exports, altered the legislation to bring it into line with WTO regulations.
Gonzalez said the EU was now seeking clarification of a section of the new US legislation that allows some US exporters to benefit from the tax breaks in 2005 and 2006 and for an indefinite period for certain binding contracts.
The reference in the law to binding contracts concerns long-term sales options signed by such US heavyweights as Boeing, General Electric, Motorola and Microsoft.
But for the European Union, such an extension in the tax breaks constitutes an evasion of the WTO's insistence that the subsidies be scrapped.
11/05/2004 - 14:33 GMT - AFP