European finance ministers issue warning on US tax plan

12 Dec 17

Finance ministers across Europe have called on the US to rethink its tax reform proposals, arguing they are discriminatory and could harm both the financial sector and international trade.

The ministers of the UK, France, Germany, Italy and Spain wrote in a letter to treasury secretary Steven Mnuchin that the proposed excise tax would contravene World Trade Organisation rules and violate double taxation treaties, Reuters said.

The letter, seen by Reuters, also warned that a proposed “base erosion and anti-abuse tax” could target genuine commercial arrangements involving payments to foreign countries, harming international banking and insurance businesses, as well as discourage non-US financial institutions from operating in the US.

The ministers reportedly wrote: “The inclusion of certain less conventional international tax provisions could contravene the US’s double taxation treaties and may risk having a major distortive impact on international trade.”

The US Senate narrowly approved the plans to change the tax system last week, paving way for President Donald Trump’s “massive tax cuts”, which could see more than a trillion dollars added to the national debt.

The proposed tax reform would cut corporate tax from 35% to 20% while the standard tax deduction would increase from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples.

The corporate profits from abroad would no longer be taxed, but US foreign subsidiaries could see a minimum 10% tax rate.

Trump said as the new legislation was unveiled: “My administration will work tirelessly to make good on our promise to the working people who built our nation and deliver historic tax cuts and reforms – the rocket fuel our economy needs to soar to higher than ever before.”

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