TRUMP CUTS SPARK
Growing number of countries already moving to lower rates to stay competitive
PRESIDENT Donald Trump’s plans to slash corporate taxes in the United States have sparked concerns of a new global fiscal race to the bottom, possibly involving a wave of negative social consequences, experts say.
In what Trump’s economic adviser Gary Cohn described as “the most significant tax reform legislation since 1986, and one of the biggest tax cuts in American history”, the White House plans to dramatically cut taxes for US businesses and individuals, slashing the corporate rate from a top rate of 35 per cent to 15 per cent.
The aim, according to US Treasury Secretary Steven Mnuchin, is to “bring back trillions of dollars that are offshore to be invested here in the US” and create jobs.
Trump’s goal is for the reforms to propel the US economy to three per cent annual growth.
But the long-anticipated overhaul — details of which remained unclear beyond a handful of headline measures — could face stiff opposition in Congress, including from some Republicans, with lawmakers sharply divided over the prospect of fuelling already-rising deficits.
And the plans have also raised eyebrows at non-governmental organisations and non-profit organisations.
They could accelerate “the race to tax competition on an international level and all of us will pay the price,” said Oxfam spokesman Manon Aubry.
“When the world’s most powerful country decides to slash tax revenues as much as this, a number of other countries may follow suit, bringing with it imbalances that will have enormous impacts on our societies,” she said.
Falling tax revenues would make it harder for governments to pay for welfare, healthcare and other benefits without going too deep into the red, she said.
To make up the shortfall, governments could be tempted to hike valued-added tax (VAT), often criticised for placing a disproportionate tax burden on the less well-off, said Aubry.
Jean-Pierre Lieb, a tax lawyer at consultants EY, said “the cut in corporate taxes in the US will fuel tensions between countries”.
At the moment, corporate taxes in the US are the highest among Organisation for Economic Cooperation and Development (OECD) countries, followed by France with a rate of 34 per cent, Belgium with 33 per cent and Australia with 30 per cent.
The OECD average is currently around 24 per cent.
But in order to become more attractive, a number of countries have decided to lower their corporate tax rates.
Britain is planning to cut its rate from 20 per cent to 17 per cent in 2020, a decision that predates Trump’s move and was strongly prompted by fears that corporations may find the United Kingdom a less attractive place after it leaves the European Union.
France, meanwhile, is poised to take its corporate tax rate from 34 per cent to 28 per cent in 2020. Other countries, including Italy and Israel, have similar ambitions.
“What we’re seeing is a headlong rush” said EY’s Lieb, pointing
The problem stems in part from the collapse of a decadelong property bubble in 2008 that left thousands of buildings empty across Spain.
There are 3.4 million empty properties in Spain, the equivalent of 13.7 per cent of all real estate in the country, the national statistics institute says.
Many are in the hands of banks to the case of Hungary where the corporate tax rate is to be slashed from 19 per cent to just nine per cent.
Nevertheless, there is sufficient doubt as to whether Trump will actually be able to get the cuts past Congress.
According to a US think-tank, the Tax Policy Centre, Trump’s plans could reduce Washington’s budget by as much as US$6.2 trillion (RM26.9 trillion) over the next decade and massively push up the US public debt by US$20 trillion by 2036. AFP which inherited them after builders or buyers were unable to pay back their loans.
Just in Catalonia alone, banks own 45,000 empty apartments, according to the regional government’s housing department.
These are the most sought after since lenders usually take longer to act against an occupation. AFP
Organised gangs in Spain are changing the locks of vacant properties and hooking them up illegally to electricity, gas and water before selling the keys to squatters.
White House plans to dramatically cut taxes for United States businesses and individuals, slashing the corporate rate from a top rate of 35 per cent to 15 per cent. MIKE BLAKE