New US tax will only harm its military, says UAE trade council

Gulf state is the US Navy’s largest outpost outside America, says US-UAE Business Council
New US tax will only harm its military, says UAE trade council
The US military operates bases across the Gulf, in the UAE, Saudi Arabia and Kuwait
By Shane McGinley
Tue 04 Jan 2011 12:25 PM

The
American military will feel the pinch of a new US tax aimed at curbing government
deals with foreign firms rather than the suppliers it targets, the president of
the US-UAE Business Council has said.

The
US military operates bases across the Gulf, including a large naval outpost in
the UAE. It is set to pay more on its local supply contracts under a new bill
that adds a two percent tax to contracts where the goods or services come from
countries that aren’t signed to the WTO’s Agreement on Government Procurement.

The
tax may hit deals with Middle Eastern oil companies - such as Abu Dhabi
National Oil Co and the Kuwait Petroleum Corp - that sell fuel to the US
military overseas.

 “This tax is simply a wrong-headed approach by
the US, and could ultimately harm the US military more than any offsetting
benefits it provides,” Danny E. Sebright, president of the Washington DC-based council
said in a statement.

“The
UAE is the US Navy’s largest port of call outside of the United States and the
US military relies greatly on goods and services it procures directly in the
UAE.”

The
new tax is part of a bill signed on Sunday by President Barack Obama. The tax
aims to encourage US agencies to use local companies as contractors, and push companies
such as the UAE and Kuwait to sign the WTO agreement.

The
bill has met with mixed reviews in Washington. Business groups, including the
US Chamber of Commerce, tried to derail the tax amid concerns about retaliation
from other countries.

“It
will be a giant pain to implement,” said William Reinsch, president of the
National Foreign Trade Council in Washington, which advocates for open
international markets.

The
tax will raise $4.6bn over 10 years, according to the Congressional Budget
Office.

Based
on the statutory language, the tax could apply to some of the largest US
contracts with foreign suppliers.

Agility,
a Kuwait-based logistics company, is contracted to supply food to the Defense
Logistics Agency. The UAE-based ADNOC and Kuwait Petroleum each have fuel
contracts with the same unit.

In
2010, those companies each received more than $1bn through September 30,
according to data compiled by Bloomberg.

 

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