EU Fears 'Unfair' U.S. Tax Bill Will Incentivise Companies
to Move to America
Dec. 20, 2017
European finance ministers are "worried" the Republican's
newly passed tax bill will make the US "go from being a
high-tax to a low-tax country" and "unfairly" incentivise
companies to move to America from the EU and the UK.
This is truly terrifying.
From Deutsche Welle:
Last week, the finance ministers of Europe's five
biggest economies -- Germany, France, the UK, Spain and
Italy -- wrote an anxious letter to their American
colleague, US Treasury Secretary Stephen Mnuchin, and copied
it to all senior Republican politicians in the Congress and
The letter's thrust: The draft US tax bill, if passed as
written a week ago, would represent a break with global
fair-taxation rules as applied to corporations, and
represent a thinly disguised form of trade war.
"The United States is Europe's single most important
trade and investment partner," the finance ministers wrote.
"It is important that the U.S. government's rights over
domestic tax policy be exercised in a way that adheres with
international obligations to which it has signed-up. 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
A day later, a similar letter was sent to Mnuchin by the
European Commission's four most senior economic officials
and made many of the same points.
Their letters reportedly "didn't get much of an answer."
Clemens Fuest, the president of the Ifo Institute for
Economic Research in Munich, said: "The European
Commission's criticism of the US tax plans is justified. The
proposed measures would disrupt international trade and lead
to double taxation."
Tobias Hentze, an economist at the German Economic
Institute in Cologne, told DW that he was worried the tax
reforms could be the spark for the next round of a
"race-to-the-bottom" of jurisdictions competing to offer
corporations ever-lower tax rates.
If the reforms go through, Hentze said, the US will go
from being a high-tax to a low-tax country. Until now, the
tax burden on companies has been significantly higher in the
US, with a tax rate of 39 percent, compared to 30 in Germany
or 34 in France.
They go on to lament the tax bill will unfairly put "America
The US also proposes to play unfairly by taxing profits
that have already been taxed in Europe, Hentze said,
concluding: "The underlying message to multinational
companies is: If you produce here in the US, you will be
spared the double taxation."
The reform package provides further incentives for
companies, too. With the creation of a so-called patent box,
US legislators want to incentivize companies like Apple to
register their patents and trademarks in the US, by means of
a preferential tax rate on profits generated (12.5 percent).
A fair tax regime, in Hentze's view, should not offer tax
rebates for certain types of profits.
"However, countries like Ireland or the Netherlands
already do that too," Hentze pointed out. "Therefore, the
indignation of EU finance ministers is not very credible on
this particular point."
This is the greatest endorsement of the bill to date.
Posted on RetroBBS II