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The Elephant Always Forgets: US Tax Reform and the WTO

11 Pages Posted: 7 Feb 2018  

Reuven S. Avi-Yonah

University of Michigan Law School

Martin Vallespinos

University of Michigan at Ann Arbor - Law School

Date Written: January 28, 2018

Abstract

The “Tax Cuts and Jobs Act” (TCJA) enacted on December 22, 2017 includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the Trump administration and its Congressional allies will react to such a loss in a similar fashion as the Bush administration did in 2004, or whether it will defy the WTO, with potential far-reaching consequences for the world trade order.

Keywords: TCJA, Tax Cuts and Jobs Act, tax reform, WTO, FDII, BEAT, international tax

JEL Classification: H26

Suggested Citation

Avi-Yonah, Reuven S. and Vallespinos, Martin, The Elephant Always Forgets: US Tax Reform and the WTO (January 28, 2018). Available at SSRN: https://ssrn.com/abstract=3113059

Reuven S. Avi-Yonah

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

Martin Vallespinos (Contact Author)

University of Michigan at Ann Arbor - Law School ( email )

Ann Arbor, MI
United States

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