The WTO ruled in favour of Brussels in a dispute over the amended Foreign Sales Corporations Act.
The trade body said the scheme, which gives tax breaks to subsiduaries of US companies that operate out of tax havens, contravened global trade regulations and discriminated unfairly in favour of US companies.
This decision paves the way for the European Union to impose sanctions against the US. Although the exact amount is to be decided by a WTO-appointed arbitrator, the EU has already said that exporters were accumulating losses of between £2.76bn and £3.46bn annually.
Washington has 60 days to appeal the ruling and trade analysts believe authorites across the Atlantic will do just that, according to the Guardian‘s website.
At present, the US has made no official announcement to this effect, but if the US does go ahead with an appeal, it will be the second time it takes an EU dispute over tax breaks to the WTO’s Appellate court.
In February last year, the US lost its appeal against the EU after the original FSC ruling was found to violate international regulations.
Companies that have benefited under the FSC Act in the past include such global giants as Boeing, General Motors and Microsoft
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