European Union finance ministers have issued a warning to Donald Trump’s administration over its planned tax reform, saying it would “be at odds” with free-trade international rules because it risked being discriminatory towards foreign companies.
In a letter to US treasury secretary Steven Mnuchin, the finance ministers of France, Germany, Italy, Spain and the UK said some of the Bill's measures would "contravene" the rules of the World Trade Organisation's principles as well as double taxation resolutions.
Some measures “may risk having a major distortive impact on international trade,” the letter read.
Notably, the ministers say the 20 per cent “excise tax” on transactions, including a US company’s imports of products from its own foreign factory, would have an impact on “genuine commercial arrangements” and could “discriminate in a manner that would be at odds with international rules” of the WTO, the ministers wrote.
This tax would also be “inconsistent with existing double taxation agreements” because it would impose a tax on the profits of a non-US resident company that does not have a US permanent establishment, they added.
Another provision in the Bill, intended to limit US tax base erosion, would hurt international banks and insurers doing business in the US because cross-border intra-group financial transactions would be treated as non-deductible and subject to a 10 per cent tax, the EU ministers wrote. – Copyright The Financial Times Limited 2017
