US proposals threaten European companies

Proposals in the US Congress could force foreign-owned companies to pay higher taxes, a move that comes in retaliation to the EU-US dispute over tax breaks for exporters Saturday, 22-Jun-02 00:00:00 GMT News 10523 Proposals in the US Congress could force foreign-owned companies to pay higher taxes, a move that comes in retaliation to the EU-US dispute over tax breaks for exporters.

Bill Thomas, chairman of Congress' tax writing committee, wants to raise taxes on foreign-owned companies, according to reports in the Financial Times. The extra money will then be redistributed to US companies that will lose the benefits from the extraterritorial income regime following the World Trade Organization ruling that the practice is an illegal export subsidy.

The WTO's agreement with the EU stance means that the controversial regime must be revised if the US is to avoid hefty sanctions. The EU has argued that the tax break is worth $4 billion per year to US exporters, though the US government has said it is worth around $1 billion per year.

But if the US Congress changes its tax regime, European companies will be hit hard because they are the biggest investors in the US.

The report suggested that Thomas was likely to introduce any tax reform before the end of July.

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