Nixon and the tax havens

The dispute dates back to 1971, when then US president Richard Nixon introduced domestic international sales corporations (DISCs) to assist exports and reduce the growing trade gap. The scheme allows US exporters to exempt 15% of their export sales revenue from income tax by setting up foreign sales corporations (FSCs) in various Caribbean tax havens, normally Barbados or the US Virgin Islands. A few large US companies have reaped most of the benefits.

Europe has been challenging DISCs and FSCs virtually since their inception, claiming that they give US exporters an unfair advantage - effectively a subsidy - and interfere with international trade. The USA claims that differences between US and EU taxation of foreign income give European firms an unfair advantage, and FSCs redress the balance - an argument which has failed to sway the WTO.

Source: Flight International