U. S. Senate Approves Repeal of Withholding Tax

A measure that would repeal the 30% alien withholding tax and allow the pari-mutuel industry to further export racing to foreign markets was approved by the U.S. Senate Monday, Oct. 11.

The Foreign Sales Corporation bill had been passed by the U.S. House of Representatives Oct. 7 by a 280-141 vote and it now goes to President Bush for his signature, said American Horse Council president James J. Hickey, Jr. "President Bush has indicated he's comfortable with the bill," Hickey said.

The primary focus of the FSC legislation is to repeal subsidies for U.S. exports that the World Trade Organization has deemed illegal. Supporters of the horse racing industry in Congress included language that would eliminate the 30% withholding tax
foreigners pay on winnings for wagers into U.S. pools.

The withholding tax effectively precludes common-pooling by foreign countries into U.S. pools. The National Thoroughbred Racing Association believes elimination of the 30% withholding tax will help open the $85 billion international market. If 5% of that money were to enter U.S. pools, another $4.25 billion in handle and about $135 million in commissions (at the standard 3% host fee) would be realized by domestic racing interests, the NTRA said in a release.

"This is a significant step in expanding the international market for American Thoroughbred racing," NTRA commissioner D.G. Van Clief Jr. said. "We are grateful to the NTRA members who have helped make this possible by contributions to the NTRA Legislative Action Campaign and Political Action Committee."

"It is a great victory and it opens up the possibility of worldwide betting pools on U.S. races," Hickey said. "It has been a priority of the American Horse Council and the NTRA, which has put a great deal of work into passing the legislation."

Should the FSC bill pass and the provisions to which the WTO objects are repealed, retaliatory tariffs imposed by the European Union will expire. The large list of products to which the tariffs are applied includes Thoroughbreds.

The tariffs began in March at 5% and have increased 1% each month since. They now stand at 12% and can go as high as 20%, the NTRA reported.

Hickey said a capital-gains provision for horses didn't make the version of the FSC legislation passed by the House.