Senate approves tax bill seeking to end EU trade sanctions

Senate approves tax bill seeking to end EU trade sanctions

The Senate has approved tax reform legislation that aims to bring the United States into compliance with a World Trade Organization ruling and to end hefty trade sanctions by the European Union.

The bill, approved late Tuesday in a 92-5 vote, eliminates $5 billion in tax breaks given to companies including Microsoft, IBM, Boeing and Caterpillar, which the WTO considered a direct subsidy to exporters.

But the measure, which still needs approval in the House of Representatives, offers $170 billion in different tax breaks for businesses, including lower tax rates for manufacturers such as Boeing and $14 billion in tax incentives for the energy sector.

The Senate bill also allows U.S. companies to defer more tax payments on profits made abroad, and grants them a one-year grace period to transfer back home their overseas profits, 85 percent of which are tax-exempt.

To soften the measure's negative impact on the burgeoning budget deficit, the Senate bill eliminates some tax havens and tightens tax evasion prevention.

The WTO ruling said that existing American law flouts global trade rules by allowing U.S. firms, operating through subsidiaries in offshore tax havens, to benefit from reduced export taxes.

WTO arbitrators agreed with Europe that just over $4 billion would constitute "appropriate countermeasures" against the U.S. policy.

EU sanctions began March 1 added an additional 5 percent tariff on U.S. exports, including toys and wood products. The punitive tariffs have been ratcheted up by one percentage point a month.