US and Europe clash over tax breaks
Calls from the Bush administration for a clamp down on tax breaks for foreign companies operating in the US will strain relations with its trading partners, particularly in Europe.
Washington is pushing for the rules to be tightened which currently allow foreign companies to reduce their US tax payments by billions of dollars a year, according to reports in the press.
‘This will be viewed as a major disincentive to foreign investment in the US,’ claimed Todd Malan of the Organisation for International Investment, a Washington lobbying group for foreign owned companies.
The move will raise fears in Europe that the US is responding to the European Union’s victory in the World Trade Organisation against a $4bn (£2.7bn) US tax break for exporters known as the Foreign Sales Corporation scheme.