WTO Rules Against US on ETI

A World Trade Organization compliance panel on Friday confirmed a European Union complaint against Washington's alleged failure to fully implement the trade body's recommendations on the now defunct Extraterritorial Income Exclusion Act overseas tax program (WTD, 7/25/05).

Brussels challenged some provisions of the US Jobs Creation Act of 2004 * which repealed ETI * saying they 'grandfather' the outlawed tax breaks for some US exporters. The EU presented its case to the WTO late last year.

In a final report issued to the two parties, the compliance panel confirmed its preliminary report issued a month earlier that stated section 101 of the Act did not fully comply with last year's Appellate Body ruling.

Brussels had argued that Section 101 'grandfathers' tax breaks for leased exports. It pointed out that the Boeing aircraft company and Microsoft are key beneficiaries.

The ruling strengthens the EU's retaliatory arsenal against the United States by giving Brussels the right to impose trade retaliatory measures up to $4 billion after the findings are approved by the Dispute Settlement Body.

But the United States is expected to challenge the verdict, WTD was told.