Value Added Taxation (VAT) and Tax Incentives to Automotive Sector and the World Trade Organization (WTO)

Abstract

The present article intends to discuss the legal treatment provided by the multilateral trading system to tax incentives granted to automotive industries. This discussion will focus on the national treatment clause (article III:2 “GATT”). The automotive industry has historically received tax incentives in several jurisdictions: the granting governments, however, did not always account for a precise consideration of the rules of the multilateral trading system. This situation has led to the proliferation of disputes related to the issue throughout the years – initially on the late GATT system and currently on the World Trade Organization (WTO). The case law construed by the OMC represents thus an important guidance for the action of members granting such tax benefits.