WTO Panel Report In United States: Tax Treatment Of ‘Foreign Sales Corporations’

[1] The creation of the World Trade Organization (‘WTO’) by the Marrakesh Agreement Establishing the World Trade Organization in 1994 was another attempt in both international economic law and public international law to create a truly effective international organisation. While having fewer Members than the United Nations, the WTO possesses fantastic enforcement mechanisms that substantially improve its ability to encourage compliance by nation states with international law obligations, a point Australian business has increasingly stressed to the Australian government. [2] Against this background, the on-going disagreement between the European Communities (‘EC’) and the United States (‘US’) in United States – Tax Treatment of ‘Foreign Sales Corporations’ provides an interesting example of the developing law of the WTO – both its procedures and jurisprudence. It illuminates the methods and operation of this important rule-based international organisation. [3] While the dispute may not yet have reached a definitive conclusion, the recent WTO panel decision provides an opportune moment to comment on the question of the tax treatment of Foreign Sales Corporations (‘FSC’) as an example of WTO procedure.