Boeing Jetliner Denied Tax Break
By Fatima Qamar, Senior, Tax & Business
Boeing’s 777X jetliner will not receive a tax break from the State of Washington, per a ruling from the World Trade Organization (WTO). WTO made this decision after investigating a complaint from the European Union.
Boeing was originally offered a subsidy in the form of a tax cut from Washington State’s Business and Occupancy Tax (B&O Tax), on the condition that the production of wings and final assembly for the 777X jetliner would take place in the state. The tax incentive would have become effective once production started in the year 2020 and, according to an estimate provided by the European Union, would have resulted in about $5.7 billion in subsidies for Boeing. Boeing argued that the subsidies would not have amounted to more than $50 million a year, or $1 billion between 2020 and 2040.
WTO rules do not allow subsidies that put restraint on imports or are tied to the use of local content, as this can result in the exclusion of foreign competition. In September, a similar ruling was made by WTO against Airbus, Boeing’s European rival, relating to $22 billion in subsidies by European governments to Airbus.
The European Union has pressed the United States to respect the ruling and withdraw the prohibited subsidies within 90 days. Boeing officials and lawyers are seeking an appeal of the ruling and seem confident that it will be overturned.