U.S. under fire for D.I.S.C.

Press, 20 October 1981, Page 5

U.S. under fire for D.I.S.C.

NZPA correspondent Washington

The United States, which recently pressured New Zealand and Australia into pledges to dismantle their export tax • incentive schemes, is under international fire for a tax break scheme of its own, known as D.1.5.C.. an acronym for a Domestic International Sales Corporation.

European • countries say the United States scheme contravenes the subsidies code of the General Agreement on Tariffs and Trade. They are expected to demand a formal declaration to that effect when the G.A.T.T. council meets in Geneva on November 3.

But United States Administration officials said they would fight, the. assertion, although they confessed the American scheme might be “technically inconsistent" with the subsidies code.

“We will make our own trading policy, and we will not be stampeded into anything by our trading partners.”- said an official of the United States Trade Repre-sentative’s-office.

If the G.A.T.T. meeting ruled that the American scheme did contravene the subsidies code. American officials would demand that other countries prove that their trade had been injured as a result. “We do not believe this is an export subsidy." the official said. “The scheme in fact taxes exports, it does

not subsidise them. But it may be a technical violation of G.A.T.T. and we are now contemplating revisions."

The United States recently accorded New Zealand and Australia “provisional" recognition as subscribers to the G.A.T.T. subsidies code, allowing them time to 'dismantle their export tax incentives scheme. The matter came to a head after American sheepfarmers had petitioned for higher import duties against

New Zealand and Australian lamb, asserting that the export incentives amounted to a production subsidy.

With New Zealand and Australia signing the subsidies code, the sheepfarmers now have to prove that their industry is being “materially injured" by the imports. The American scheme. D.1.5.C.. set up in 1972. allows a company to register as a D.I.S.C. and qualify for certain tax rebates on its export assets.

About 7000 American companies are active participants in the scheme. American officials estimate that it saves them about $l6OO million a year in taxes, while generating additional exports of about $3500 million.

It is believed that the European Common Market. The Netherlands. Belgium, and France are leading the drive against the American scheme in G.A.T.T. American officials say this is in retaliation for American complaints against certain tax procedures used by the European countries. The subsidies code prohibits countries from using their tax laws to subsidise exports. The Europeans say that D.I.S.C. does just that.

One American official said that if G.A.T.T. demanded that the United States dismantle the D.I.S.C. scheme, it would expect “reasonable time” to phase it out and make other provisions — just as it accorded New Zealand and Australia when accepting them as provisional signatories to the code.