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Charlotte Amalie
Monday, July 4, 2022
HomeNewsArchivesLOBBYING CONTINUES FOR HELP ON FSC PROGRAM

LOBBYING CONTINUES FOR HELP ON FSC PROGRAM

The Turnbull-James administration is lobbying hard to maintain the existence of Foreign Sales Corporations in the territory to preserve millions in revenue each year.
Last month, an appeals panel of the World Trade Organization ruled that FSCs, a United States tax-break scheme on industrial and agricultural exports, were an export subsidy and therefore violated global free trade rules.
There are approximately 3,500 FSCs registered in the territory, said Lt. Gov. Gerard Luz James II, who as lieutenant governor oversees the program. Over the last 15 years, he said, FSCs have generated more than $69 million for the V.I. treasury through franchise taxes.
James has been lobbying the White House, the U.S. trade representative and members of the Congressional Black Caucus to help save the FSC program.
"Along with thousands of U.S. exporters, the Virgin Islands has unquestionably been a major stakeholder in the FSC program," James said in a release. "The territory can ill afford to lose the economic benefits of the FSC program, particularly when the local government is experiencing a substantial budgetary shortfall."
The WTO had ordered the U.S. to dismantle the FSC program by Oct. 1 of this year. Because the ruling is against the U.S., the territory has no direct status to appeal, James said.
Besides the taxes collected on FSC companies in the territory, James noted that the FSC program has a trickle-down effect. It uses local lawyers and accountants, who then train and employ clerical and managerial staff who pay their taxes locally. There is also a derivative income earned by banks that hold FSC funds.
Congress established the Foreign Sales Corporation system as an alternative to a previous program to which U.S. trade partners had objected. Exporters began using FSCs, offshore subsidiaries, in 1985. A portion of the export sales run through the FSC are exempt from federal taxes.
The European Union first signaled its intention to make a formal challenge to the program in November 1997. There followed a series of formal and informal discussions between the EU and the US, and the two sides reportedly were negotiating with each other throughout much of the WTO process.
Many observers believe such negotiations will intensify now.
Several U.S. accounting firms have been working for months to develop alternatives to the FSC which will continue to give U.S. exporters some sort of tax relief.

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The Turnbull-James administration is lobbying hard to maintain the existence of Foreign Sales Corporations in the territory to preserve millions in revenue each year.
Last month, an appeals panel of the World Trade Organization ruled that FSCs, a United States tax-break scheme on industrial and agricultural exports, were an export subsidy and therefore violated global free trade rules.
There are approximately 3,500 FSCs registered in the territory, said Lt. Gov. Gerard Luz James II, who as lieutenant governor oversees the program. Over the last 15 years, he said, FSCs have generated more than $69 million for the V.I. treasury through franchise taxes.
James has been lobbying the White House, the U.S. trade representative and members of the Congressional Black Caucus to help save the FSC program.
"Along with thousands of U.S. exporters, the Virgin Islands has unquestionably been a major stakeholder in the FSC program," James said in a release. "The territory can ill afford to lose the economic benefits of the FSC program, particularly when the local government is experiencing a substantial budgetary shortfall."
The WTO had ordered the U.S. to dismantle the FSC program by Oct. 1 of this year. Because the ruling is against the U.S., the territory has no direct status to appeal, James said.
Besides the taxes collected on FSC companies in the territory, James noted that the FSC program has a trickle-down effect. It uses local lawyers and accountants, who then train and employ clerical and managerial staff who pay their taxes locally. There is also a derivative income earned by banks that hold FSC funds.
Congress established the Foreign Sales Corporation system as an alternative to a previous program to which U.S. trade partners had objected. Exporters began using FSCs, offshore subsidiaries, in 1985. A portion of the export sales run through the FSC are exempt from federal taxes.
The European Union first signaled its intention to make a formal challenge to the program in November 1997. There followed a series of formal and informal discussions between the EU and the US, and the two sides reportedly were negotiating with each other throughout much of the WTO process.
Many observers believe such negotiations will intensify now.
Several U.S. accounting firms have been working for months to develop alternatives to the FSC which will continue to give U.S. exporters some sort of tax relief.