Section of Taxation Publications
  VOL. 54
NO. 3
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 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
 Income Taxation, International Competitiveness and the World Trade Organization’s Rules on Subsidies: Lessons to the U.S. and to the World from the FSC Dispute
Rosendo Lopez-Mata*

* S.J.D. Candidate, University of Virginia School of Law; LL.M. (with distinction) 1994, Tulane University School of Law; Licenciado en Derecho (summa cum laude) 1989, Universidad Iberoamericana (Mexico City). Visiting Mexican attorney at Dorsey & Whitney LLP (D.C. office).

Countries commonly resort to special income tax regimes as a means to attract international capitals or foster the international competitiveness of national industries. In order to achieve these objectives countries enact international tax law provisions which are specifically designed to benefit international investors or exporters. In certain cases, export tax incentives may be characterized as indirect subsidies with distortive effects on international trade. This article describes how the United States has recurrently failed to craft an export tax incentive regime that conforms to its obligations under successive multilateral trade agreements. While the United States appears to have a structural obstacle to securing export incentives compatible with the WTO’s Agreement on Subsidies and Countervailing Measures, this article suggests that the United States is not the only country which is struggling to reconcile income tax law with international economic regulations. This article also examines whether the WTO’s discipline on subsidies is comprehensive enough to cope with income tax-related subsidies.

Along with a brief discussion about the intrinsic tax benefits arising from territorial systems of taxation as opposed to worldwide systems of taxation, the article underscores how complex tax issues such as transfer pricing might become a rich source of trade disputes in the future.

From a policy standpoint the article urges countries to cease considering taxation as a purely domestic issue with minor international repercussions except for double taxation issues, and highlights the absence of an international tax architecture.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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