I think the difference between European subsidies to Airbus and American subsidies to Boeing, is that the Govt Loans to airbus have to paid out of profit.
This distorts the market place because it makes it far less risky for Airbus to develop a new product than it is for Boeing. Boeing have to repay the loan, profit or not. This increases their risk.
While we are on the subject, I know Airbus have repaid money on the 320 project, but what about 310,330, and 340. Has any money been repaid on those programs?
Ruscoe
U.K. refuses launch aid for A350
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Here is a copy of the Washington State tax incentive measure, it applies to Boeing, Airbus, or anyone else involved in the aerospace industry, you'll notice that suppliers to Airbus also receive the same tax incentives as Boeing.
Pay particular attention to the last paragraph, there lies the the glaring difference between Launch Aid and Tax incentives.
BOEING 7E7 SITE AGREEMENT
Tax Adjustment Package
Background
The State of Washington’s proposal to The Boeing Company on the 7E7 included actions taken by the state legislature during the 2003 and 2004 sessions.
A major provision of the proposal included House Bill 2294, a tax adjustment package designed for the entire aerospace industry that will take full effect when final assembly of the 7E7 begins.
The package includes –
· a reduction in the Business & Occupation (B&O) tax rate for the manufacturing or selling of commercial airplanes or their component parts;
· a sales and use tax exemption for computer hardware and software;
· a B&O tax credit for certain preproduction development expenditures;
· a B&O tax credit for property taxes on new buildings, renovations, and machinery and equipment;
· a sales and use tax exemption for construction of new buildings used in the manufacturing of super-efficient airplanes;
· a property tax exemption on qualifying property of a port district lessee that is used in manufacturing super-efficient airplanes; and
· a leasehold excise tax exemption for leasehold interests in port district facilities used in manufacturing super-efficient airplanes.
The Legislature also made substantial changes in unemployment insurance and workers’ compensation.
Does the site agreement comply with state statutes and constitutional requirements?
The Master Site Agreement between Washington state and The Boeing Company complies with state statutes and constitutional requirements. The state Attorney General’s Office was consulted on every aspect of the state’s proposal for the 7E7 final assembly facility throughout the process. The Attorney General's Office also approved all documents submitted. In addition, a Deputy Attorney General was involved in the actual negotiations of the agreement with Boeing to ensure all legal requirements were met.
Won’t Boeing receive $3.2 billion in “incentives” from Washington state for the 7E7?
No. The revised tax rate is widely available to most of the commercial aerospace industry, which may save $3.2 billion in taxes over the 20 years under the reduced B&O tax rate. Even though the tax rate is reduced by 40 percent, the commercial aerospace industry will still be paying an estimated $4.8 billion in B&O taxes over 20 years to the state.
The B&O tax rate adjustment is intended to strengthen the local economy and make Washington more competitive with other states. Most states and much of Europe have similar programs. Airbus and its parent companies have received millions in local tax breaks and other incentives for placing facilities in Florida, Mississippi and Louisiana, as well as launch aid in Europe.
The B&O tax rate adjustment that makes up most of Washington's package is available to any company doing aerospace work in the state. Suppliers to both Boeing and Airbus can take advantage of this lower rate. Airbus, itself, can take advantage of the lower B&O tax rate if it chooses to place work in Washington.
Aren’t the state and Boeing in violation of international agreements?
Washington state's program was designed to be consistent with international agreements. However, we recognize that our trading partners have the right to challenge the consistency of the 7E7 package under various trade agreements just as the United States has the right to invoke trade dispute mechanisms that will judge the laws and programs of other countries. In the event that the 7E7 package is challenged the United States Government will lead the defense, assisted by Washington state officials.
Did Boeing receive special treatment by having its B&O rate reduced?
No. The B&O tax rate reduction applies to all manufacturers of commercial airplanes or their component parts. With few exceptions, the other tax benefits in the tax adjustment package also apply to any company manufacturing commercial airplanes or their component parts. The cost reductions under the tax adjustment package for these Washington aerospace suppliers and manufacturers are meant to increase their ability to compete.
Isn't a rate reduction like this itself an unusual benefit?
Not at all. Over the years the Legislature has enacted numerous rate reductions and credits against the B&O tax to help level the playing field for Washington businesses. Washington has given rate reductions to certain industry sectors to help keep them competitive.
Besides the multi-billion dollar tax package the state enacted, the City of Everett is also proposing a tax package. Can you explain what Everett is offering?
Under a proposal approved by the Everett City Council, the B&O tax for all businesses in the City limits would be calculated using a flat formula – one-tenth of a percent for gross sales up to $6 billion with .25 percent for sales thereafter. These new rates become effective January 1, 2006.
What’s the difference between Washington state’s tax adjustment package and the incentives received from European governments by Airbus?
Certain parties have attempted to label the Washington state tax adjustment package as government subsidies comparable to the billions in launch aid that Airbus receives from sponsor states in Europe. Such comparisons are without merit.
Launch aid and other forms of government support to Airbus remove the commercial and financial risk of aircraft development. Launch aid frequently takes the form of a government “loan”. However, in a very real sense, launch aid as it has been provided to Airbus by the European sponsor states is risk-free money that comes up front in the development of a program and that kind of money has an enormous impact on risk mitigation (i.e., providing incentive for a manufacturer to undertake a program that a non-subsidized competitor would not).
A simple comparison can be made with the Washington state tax package, which (rather than money up front) is merely a reduction in tax. Boeing and other commercial aerospace suppliers still pay, and critically will receive full benefits in the form of reduced B&O tax only years after the program has been launched; i.e., long after the company assumed full commercial risk in deciding to build the aircraft in the first place. Thus, the reduced Washington B&O tax rate requires Boeing to take all the risks associated with developing and producing the plane before receiving any tax reductions.
For More Information
Please contact the state 7E7 Project Coordination Office:
Robin Pollard, 7E7 Project Coordinator
360-725-4063
robinp@cted.wa.gov
Russ Brubaker, 7E7 Tax Commitment Coordinator
Department of Revenue
360-570-6131
russb@dor.wa.gov
Stephanie Barnett, 7E7 Project Assistant
360-725-4050
stephanieb@cted.wa.gov
Robert Hamilton, Governor’s Advisor for Trade Policy
Governor’s Executive Policy Office
206-256-6100
roberth@cted.wa.gov
Pay particular attention to the last paragraph, there lies the the glaring difference between Launch Aid and Tax incentives.
BOEING 7E7 SITE AGREEMENT
Tax Adjustment Package
Background
The State of Washington’s proposal to The Boeing Company on the 7E7 included actions taken by the state legislature during the 2003 and 2004 sessions.
A major provision of the proposal included House Bill 2294, a tax adjustment package designed for the entire aerospace industry that will take full effect when final assembly of the 7E7 begins.
The package includes –
· a reduction in the Business & Occupation (B&O) tax rate for the manufacturing or selling of commercial airplanes or their component parts;
· a sales and use tax exemption for computer hardware and software;
· a B&O tax credit for certain preproduction development expenditures;
· a B&O tax credit for property taxes on new buildings, renovations, and machinery and equipment;
· a sales and use tax exemption for construction of new buildings used in the manufacturing of super-efficient airplanes;
· a property tax exemption on qualifying property of a port district lessee that is used in manufacturing super-efficient airplanes; and
· a leasehold excise tax exemption for leasehold interests in port district facilities used in manufacturing super-efficient airplanes.
The Legislature also made substantial changes in unemployment insurance and workers’ compensation.
Does the site agreement comply with state statutes and constitutional requirements?
The Master Site Agreement between Washington state and The Boeing Company complies with state statutes and constitutional requirements. The state Attorney General’s Office was consulted on every aspect of the state’s proposal for the 7E7 final assembly facility throughout the process. The Attorney General's Office also approved all documents submitted. In addition, a Deputy Attorney General was involved in the actual negotiations of the agreement with Boeing to ensure all legal requirements were met.
Won’t Boeing receive $3.2 billion in “incentives” from Washington state for the 7E7?
No. The revised tax rate is widely available to most of the commercial aerospace industry, which may save $3.2 billion in taxes over the 20 years under the reduced B&O tax rate. Even though the tax rate is reduced by 40 percent, the commercial aerospace industry will still be paying an estimated $4.8 billion in B&O taxes over 20 years to the state.
The B&O tax rate adjustment is intended to strengthen the local economy and make Washington more competitive with other states. Most states and much of Europe have similar programs. Airbus and its parent companies have received millions in local tax breaks and other incentives for placing facilities in Florida, Mississippi and Louisiana, as well as launch aid in Europe.
The B&O tax rate adjustment that makes up most of Washington's package is available to any company doing aerospace work in the state. Suppliers to both Boeing and Airbus can take advantage of this lower rate. Airbus, itself, can take advantage of the lower B&O tax rate if it chooses to place work in Washington.
Aren’t the state and Boeing in violation of international agreements?
Washington state's program was designed to be consistent with international agreements. However, we recognize that our trading partners have the right to challenge the consistency of the 7E7 package under various trade agreements just as the United States has the right to invoke trade dispute mechanisms that will judge the laws and programs of other countries. In the event that the 7E7 package is challenged the United States Government will lead the defense, assisted by Washington state officials.
Did Boeing receive special treatment by having its B&O rate reduced?
No. The B&O tax rate reduction applies to all manufacturers of commercial airplanes or their component parts. With few exceptions, the other tax benefits in the tax adjustment package also apply to any company manufacturing commercial airplanes or their component parts. The cost reductions under the tax adjustment package for these Washington aerospace suppliers and manufacturers are meant to increase their ability to compete.
Isn't a rate reduction like this itself an unusual benefit?
Not at all. Over the years the Legislature has enacted numerous rate reductions and credits against the B&O tax to help level the playing field for Washington businesses. Washington has given rate reductions to certain industry sectors to help keep them competitive.
Besides the multi-billion dollar tax package the state enacted, the City of Everett is also proposing a tax package. Can you explain what Everett is offering?
Under a proposal approved by the Everett City Council, the B&O tax for all businesses in the City limits would be calculated using a flat formula – one-tenth of a percent for gross sales up to $6 billion with .25 percent for sales thereafter. These new rates become effective January 1, 2006.
What’s the difference between Washington state’s tax adjustment package and the incentives received from European governments by Airbus?
Certain parties have attempted to label the Washington state tax adjustment package as government subsidies comparable to the billions in launch aid that Airbus receives from sponsor states in Europe. Such comparisons are without merit.
Launch aid and other forms of government support to Airbus remove the commercial and financial risk of aircraft development. Launch aid frequently takes the form of a government “loan”. However, in a very real sense, launch aid as it has been provided to Airbus by the European sponsor states is risk-free money that comes up front in the development of a program and that kind of money has an enormous impact on risk mitigation (i.e., providing incentive for a manufacturer to undertake a program that a non-subsidized competitor would not).
A simple comparison can be made with the Washington state tax package, which (rather than money up front) is merely a reduction in tax. Boeing and other commercial aerospace suppliers still pay, and critically will receive full benefits in the form of reduced B&O tax only years after the program has been launched; i.e., long after the company assumed full commercial risk in deciding to build the aircraft in the first place. Thus, the reduced Washington B&O tax rate requires Boeing to take all the risks associated with developing and producing the plane before receiving any tax reductions.
For More Information
Please contact the state 7E7 Project Coordination Office:
Robin Pollard, 7E7 Project Coordinator
360-725-4063
robinp@cted.wa.gov
Russ Brubaker, 7E7 Tax Commitment Coordinator
Department of Revenue
360-570-6131
russb@dor.wa.gov
Stephanie Barnett, 7E7 Project Assistant
360-725-4050
stephanieb@cted.wa.gov
Robert Hamilton, Governor’s Advisor for Trade Policy
Governor’s Executive Policy Office
206-256-6100
roberth@cted.wa.gov
It may not be the US per se but still, Boeing/subcontractors do receive gargantuan loans, and yes, they were threatened by Boeing over withdrawal of contracts because Japan failed to give the go-ahead or several months.bits44 wrote:If it looks like a duck, quacks like a duck, and swims in water,
no matter how you try to justify it, its still a DUCK
I'm not slagging anybody, just repeating whats reported in your own newspapers, and so far I've never seen nor heard anybody threatened by Boeing over withdrawal of contracts because the United States Government failed to loan money to Boeing.
http://www.flightinternational.com/fi_i ... 7&Code=123
Also, the 787 program is particular because it involves both domestic and foreign subsidies.
Boeing will only be a system integrator for the 787 and this is where the problem is. 70% of the added value will be shared across the production network essentially in Japan (Mitsubishi, Fuji and Kawasaki) where, among other things, the wing will be designed and built and Italy, (Alenia) where the empennage and the aft fuselage will be built. In comparison, less than 30% of the production of the 777 is outsourced (outside the US).
Parts of the subsidies for the 787 are illegal because they are related to the production itself, and not just the development. Since infrastructure and production subsidies are clearly deemed illegal by the WTO rules on civil aircraft, this program is actionable. FYI, Mitsubishi is the biggest beneficiary of the Japanese financial support for the 787.
The Japanese subsidies are in violation of WTO’s TRIM Agreement (more specifically, the article 2.1) but more importantly, this financial support is illegal because it is related to the production of the aircraft itself as well as the construction of facilities needed for the development of the 787 (which can only be subsidized in the order of 2% or 3% of the total cost as per WTO rules. In this case, 38% of the cost is subsidized so there’s a clear violation there.
If you want to read more about WTO rules:
http://www.ita.doc.gov/td/aerospace/aer ... sidies.pdf
http://www.ita.doc.gov/td/aerospace/agr ... air-79.htm