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Computer peripherals industry

United Technologies Corporation Defends Foreign Sales Corporation Provisions

Strategic Insights

— 1 min read

Washington D.C. - United Technologies Corporation's international trade counsel, Jeremy Preiss, has defended the Foreign Sales Corporation (FSC) provisions of the U.S. tax code, calling the European Union's challenge "misguided." According to Preiss, the 1984 legislation is consistent with World Trade Organization (WTO) rules and necessary to level the playing field for U.S. and foreign exporters.

The EU announced in July that it would request a WTO dispute panel to consider its claim that the FSC provisions violate U.S. obligations under the WTO. Preiss countered that the FSC merely applies the same principle of territorial income taxation enjoyed by EU companies to U.S. exporters who establish qualifying Foreign Sales Corporations outside the United States.

The FSC, established in 1984, was designed to neutralize some of the tax advantages inherent in European territorial-type tax systems. Preiss warned that the EU's challenge could have unintended, adverse consequences for both the WTO and tax policy, and that the tax policies of many EU member states are vulnerable to the same trade arguments and theories.

Key Takeaways:

  • The EU's challenge to the FSC provisions of the U.S. tax code is "misguided" and could have unintended, adverse consequences for both the WTO and tax policy.
  • The FSC provisions are consistent with WTO rules and necessary to level the playing field for U.S. and foreign exporters.
  • The FSC merely applies the same principle of territorial income taxation enjoyed by EU companies to U.S. exporters who establish qualifying Foreign Sales Corporations outside the United States.
  • The EU's challenge could have implications for the tax policies of many EU member states, which are vulnerable to the same trade arguments and theories.
  • United Technologies Corporation, a top 20 U.S. exporter, provides a broad range of high technology products and support services to various industries.
  • The FSC has operated for 13 years without challenge from the European Union.

Statistics:

  • 1984: The year the FSC provisions of the U.S. tax code were established.
  • 13 years: The length of time the FSC has operated without challenge from the European Union.
  • 20: The ranking of United Technologies Corporation among the top U.S. exporters.

Sources:

  • United Technologies Corporation
  • General Agreement on Tariffs and Trade (GATT)
  • World Trade Organization (WTO)
  • European Union
  • National Foreign Trade Council
  • Foreign Sales Corporation Coalition

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