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WTO rules against tax break for Boeing 777X jet

The WTO said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace

Reuters 

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The World Trade Organization (WTO) ruled on Monday a tax break from Washington state to help develop its new 777X jetliner was a prohibited subsidy, in a setback for the US planemaker as it eyes victory in a parallel case against Airbus.

The said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace agreed in 2013, when was considering where to base assembly of the latest member of its long-haul jet family.

It is the third swathe of taxpayer support for or its European rival faulted by the in a record transatlantic trade spat dating back 12 years, and involving mutual accusations of tens of billions of dollars of aid.

The ruling, which can be appealed by either side, comes as the United States ponders the first sanctions against the European Union in more than a decade over earlier subsidy rulings against Airbus.

The did not give a value for the banned aid in its latest ruling, but the EU estimated it at $5.7 billion out of an $8.7 billion tax package in Washington, where most factories are based.

said the measures had cost it $50 billion in sales.

said the aid in question would only kick in from 2020 and would be worth $50 million a year, a fraction of the total amount at stake in the world's largest trade dispute.

The backed EU claims that another six measures provided subsidies to Boeing, but rejected European arguments that these fell into the most toxic category being reviewed by its panel.

It urged the United States to withdraw the prohibited subsidy in 90 days, but did not say how this should be done, prompting immediate discord between US and European representatives about how much the planemaker would have to give up and when.

Seizing on previous U.S. statements that subsidies originally deemed prohibited – but later watered down on appeal – should be repaid to taxpayers, European sources said would now have to forego billions of dollars in aid.

They also zeroed in on "programme accounting" methods used by Boeing, which they said had already allowed it to factor in the future support for the 777X even before money had been received.

Under the same system, would have to adjust its accounts sooner rather than later to reflect new risks resulting from the finding, they argued, in what would be the first direct impact of the marathon case on investors.

Confident on appeal

The European Commission urged the United States to remove the prohibited aid "without delay".

officials and lawyers, however, played down the prospect of having to pay back any support, noting there was no money to discuss until deliveries of the new jet start in 2020.

They said they were confident the ruling would be overturned on appeal and insisted the tax breaks were dwarfed by $22 billion in subsidised loans by European governments to Airbus, adding these could spark US retaliation within a year.

Investors, too, seemed sceptical about the prospect of any near-term financial hit, sending shares down just 0.3 per cent, in line with the market.

"We expect little material impact on either or from rulings," Bernstein analysts said in a note.

On paper, the ruling is however seen as a step backwards for the United States because the had earlier ruled that a previous version of the same tax breaks had fallen into a weaker category of subsidies, which the Geneva watchdog treats less harshly.

Under rules, subsidies that are explicitly tied to exports or, in this case, the use of local content are banned.

European officials argue fell into a prohibited subsidy trap of its own making when state lawmakers insisted on locking into Washington more clearly than before, after accepted earlier tax breaks only to move work elsewhere.

In 2013, Washington lawmakers extended the tax breaks from 2024 to 2040 but said they would end support for any new version of jet if its body or wings were assembled outside the state.

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WTO rules against tax break for Boeing 777X jet

The WTO said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace

The WTO said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace
The World Trade Organization (WTO) ruled on Monday a tax break from Washington state to help develop its new 777X jetliner was a prohibited subsidy, in a setback for the US planemaker as it eyes victory in a parallel case against Airbus.

The said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace agreed in 2013, when was considering where to base assembly of the latest member of its long-haul jet family.

It is the third swathe of taxpayer support for or its European rival faulted by the in a record transatlantic trade spat dating back 12 years, and involving mutual accusations of tens of billions of dollars of aid.

The ruling, which can be appealed by either side, comes as the United States ponders the first sanctions against the European Union in more than a decade over earlier subsidy rulings against Airbus.

The did not give a value for the banned aid in its latest ruling, but the EU estimated it at $5.7 billion out of an $8.7 billion tax package in Washington, where most factories are based.

said the measures had cost it $50 billion in sales.

said the aid in question would only kick in from 2020 and would be worth $50 million a year, a fraction of the total amount at stake in the world's largest trade dispute.

The backed EU claims that another six measures provided subsidies to Boeing, but rejected European arguments that these fell into the most toxic category being reviewed by its panel.

It urged the United States to withdraw the prohibited subsidy in 90 days, but did not say how this should be done, prompting immediate discord between US and European representatives about how much the planemaker would have to give up and when.

Seizing on previous U.S. statements that subsidies originally deemed prohibited – but later watered down on appeal – should be repaid to taxpayers, European sources said would now have to forego billions of dollars in aid.

They also zeroed in on "programme accounting" methods used by Boeing, which they said had already allowed it to factor in the future support for the 777X even before money had been received.

Under the same system, would have to adjust its accounts sooner rather than later to reflect new risks resulting from the finding, they argued, in what would be the first direct impact of the marathon case on investors.

Confident on appeal

The European Commission urged the United States to remove the prohibited aid "without delay".

officials and lawyers, however, played down the prospect of having to pay back any support, noting there was no money to discuss until deliveries of the new jet start in 2020.

They said they were confident the ruling would be overturned on appeal and insisted the tax breaks were dwarfed by $22 billion in subsidised loans by European governments to Airbus, adding these could spark US retaliation within a year.

Investors, too, seemed sceptical about the prospect of any near-term financial hit, sending shares down just 0.3 per cent, in line with the market.

"We expect little material impact on either or from rulings," Bernstein analysts said in a note.

On paper, the ruling is however seen as a step backwards for the United States because the had earlier ruled that a previous version of the same tax breaks had fallen into a weaker category of subsidies, which the Geneva watchdog treats less harshly.

Under rules, subsidies that are explicitly tied to exports or, in this case, the use of local content are banned.

European officials argue fell into a prohibited subsidy trap of its own making when state lawmakers insisted on locking into Washington more clearly than before, after accepted earlier tax breaks only to move work elsewhere.

In 2013, Washington lawmakers extended the tax breaks from 2024 to 2040 but said they would end support for any new version of jet if its body or wings were assembled outside the state.
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Business Standard
177 22

WTO rules against tax break for Boeing 777X jet

The WTO said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace

The World Trade Organization (WTO) ruled on Monday a tax break from Washington state to help develop its new 777X jetliner was a prohibited subsidy, in a setback for the US planemaker as it eyes victory in a parallel case against Airbus.

The said the subsidy came in the form of a renewed cut in Washington state's main business tax for aerospace agreed in 2013, when was considering where to base assembly of the latest member of its long-haul jet family.

It is the third swathe of taxpayer support for or its European rival faulted by the in a record transatlantic trade spat dating back 12 years, and involving mutual accusations of tens of billions of dollars of aid.

The ruling, which can be appealed by either side, comes as the United States ponders the first sanctions against the European Union in more than a decade over earlier subsidy rulings against Airbus.

The did not give a value for the banned aid in its latest ruling, but the EU estimated it at $5.7 billion out of an $8.7 billion tax package in Washington, where most factories are based.

said the measures had cost it $50 billion in sales.

said the aid in question would only kick in from 2020 and would be worth $50 million a year, a fraction of the total amount at stake in the world's largest trade dispute.

The backed EU claims that another six measures provided subsidies to Boeing, but rejected European arguments that these fell into the most toxic category being reviewed by its panel.

It urged the United States to withdraw the prohibited subsidy in 90 days, but did not say how this should be done, prompting immediate discord between US and European representatives about how much the planemaker would have to give up and when.

Seizing on previous U.S. statements that subsidies originally deemed prohibited – but later watered down on appeal – should be repaid to taxpayers, European sources said would now have to forego billions of dollars in aid.

They also zeroed in on "programme accounting" methods used by Boeing, which they said had already allowed it to factor in the future support for the 777X even before money had been received.

Under the same system, would have to adjust its accounts sooner rather than later to reflect new risks resulting from the finding, they argued, in what would be the first direct impact of the marathon case on investors.

Confident on appeal

The European Commission urged the United States to remove the prohibited aid "without delay".

officials and lawyers, however, played down the prospect of having to pay back any support, noting there was no money to discuss until deliveries of the new jet start in 2020.

They said they were confident the ruling would be overturned on appeal and insisted the tax breaks were dwarfed by $22 billion in subsidised loans by European governments to Airbus, adding these could spark US retaliation within a year.

Investors, too, seemed sceptical about the prospect of any near-term financial hit, sending shares down just 0.3 per cent, in line with the market.

"We expect little material impact on either or from rulings," Bernstein analysts said in a note.

On paper, the ruling is however seen as a step backwards for the United States because the had earlier ruled that a previous version of the same tax breaks had fallen into a weaker category of subsidies, which the Geneva watchdog treats less harshly.

Under rules, subsidies that are explicitly tied to exports or, in this case, the use of local content are banned.

European officials argue fell into a prohibited subsidy trap of its own making when state lawmakers insisted on locking into Washington more clearly than before, after accepted earlier tax breaks only to move work elsewhere.

In 2013, Washington lawmakers extended the tax breaks from 2024 to 2040 but said they would end support for any new version of jet if its body or wings were assembled outside the state.

image
Business Standard
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