May 30, 2024

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Solar Magazine – China challenges US tax credit for electric cars and solar panels

Solar Magazine – China challenges US tax credit for electric cars and solar panels

China will challenge US tax breaks on electric vehicles and solar panels at the WTO. The country has submitted a request for this to the World Trade Organization.

China is seeking advice from the WTO on its dispute with the United States over certain tax incentives provided by the Anti-Inflation Act. These are offered by President Biden to boost production of electric vehicles, batteries and solar panels.

China argues that the US tariff credits discriminate against goods of Chinese origin, which would, among other things, violate the General Agreement on Tariffs and Trade (GATT) of 1994.

The request for advice that China has just submitted is a dispute with the World Trade Organization. Counseling gives the parties an opportunity to discuss the matter and find a satisfactory solution without further litigation. If the consultations do not lead to a resolution of the dispute after 60 days, the complainant – in this case China – can seek settlement through a WTO panel.

5 Tax benefits
China did not object to the entire IRA, but specifically to the 5 tax credits. It covers the Clean Vehicle Credit, Investment Tax Credit for Energy Property, Clean Electricity Investment Tax Credit, Production Tax Credit for Electricity from Renewables and Clean Electricity Production Tax Credit.

The Clean Vehicle Credit provides nearly $8,000 in tax credits for electric vehicles manufactured in the United States with American batteries, while the Investment Tax Credit (ITC) and Production Tax Credit (PTC) stimulate domestic production of solar panels. Both the ITC and the PTC include a bonus subsidy component that continues on the use of US products.

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A few years ago, the WTO ruled in favor of the US after China challenged US import duties on solar cells for solar panels.