CEOs Urge Bush Over Taxes With EU
By CURT ANDERSON, AP Tax Writer
WASHINGTON (AP) - Fearing a debilitating trade war with Europe, top executives at 74 of America's biggest companies want the Bush administration to settle a dispute over a U.S. corporate tax break.
In a letter to President Bush (news - web sites) and Cabinet officials, the executives said the United States must reach a ``mutually acceptable solution'' with the 15-nation EU, which won a ruling last month from the World Trade Organization (news - web sites) that the tax break amounts to an illegal trade subsidy.
The EU is seeking WTO authority to impose more than $4 billion in sanctions against U.S. exports if the tax system remains in place. The United States has not announced whether it will appeal, which could delay sanctions.
``This dispute could be enormously destabilizing,'' the executives said in the letter dated Tuesday. ``A move toward retaliation, or a continuing threat of retaliation, could undermine the U.S.-EU relationship, which is our most important strategic, diplomatic and economic alliance.''
Companies whose top executives signed the letter - most are major exporters that benefit from the tax break - include Boeing Co., Motorola Inc. (MOT - news), Lockheed Martin Corp. (LMT - news), Johnson & Johnson, General Motors Corp. (GM - news), Exxon Mobil Corp. (XOM - news), DuPont and Caterpillar Inc. (CAT - news)
The tax break was enacted last year to replace a similar U.S. system that also was ruled an illegal subsidy by the WTO. It allows U.S.-based companies to avoid paying taxes on much of their foreign income as long as they have paid taxes on it overseas.
Proponents argue that absent the break, EU-based companies would enjoy an unfair tax advantage.
The executives recommended that the Bush administration appeal the WTO ruling, which is expected to be made official later this month, to buy time for a negotiated settlement. If there is no appeal, the Europeans should be urged to suspend the case temporarily, the executives wrote.
``Absent an appeal or a suspension, the specter of massive EU retaliation would draw near and possibly take on a political life of its own,'' they wrote.
U.S. Trade Representative Robert Zoellick declined comment Thursday on the letter. A Bush administration ally in Congress, House Ways and Means Committee Chairman Bill Thomas, has said repeatedly that the United States should not appeal and instead should enact a fundamentally different tax system that would be acceptable to the WTO.
``Dragging out the process through extensive appeals or cosmetic changes to our tax system will not solve the problem,'' Thomas, R-Calif., said in a recent statement.
A Democratic member of the Ways and Means panel and critic of the tax break, Rep. Lloyd Doggett of Texas, said many who pushed for the new law in Congress last year knew it was ``fatally flawed'' and likely to draw a new EU challenge. He agreed with Thomas that an appeal would prove fruitless.
``The only purpose of an appeal is to delay the inevitable conclusion that this unjustified bit of corporate welfare is void,'' Doggett said.
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On the Net: National Foreign Trade Council: http://www.nftc.org