Concerned EU set to assess impact of US tax
BRUSSELS: European Union finance ministers will discuss yesterday a planned reform of taxes in the United States that European officials said could affect EU business and global tax rules.
The US Senate approved on Saturday a major tax overhaul that could cut the corporate tax rate from 35 per cent to 20 per cent in what would be the largest change to US tax laws since the 1980s.
Recent talks within the EU have instead focused on making sure that firms pay more taxes, after multiple disclosures of financial documents caused public outcry against the widespread use of schemes to slash corporations’ tax bills.
After the US move, EU finance ministers rushed to add the issue to the agenda of their monthly meeting on Tuesday.
“If these reforms materialise as they stand now, it could create serious difficulties,” a French finance ministry source said.
Of particular concern is an aspect of the reform that would give the US government a broader
If these reforms materialise as they stand now, it could create serious difficulties. French finance ministry source
scope to tax European subsidiaries on goods they sell in the United States, a second source said.
The EU is also concerned about the wider impact of the US reform on global tax rules and even on financial stability.
“We don’t discuss the full right of the United States to deliver on their own tax rate, but we also have to consider what are the effects on the US deficit and if there are spillover effects on the way we consider taxation at the worldwide level,” EU tax commissioner Pierre Moscovici told reporters in Brussels.
“We will monitor that closely. We need to have a deep analysis,” he said.
Moscovici declined to comment on the reform’s impact on markets and the risk of bubbles, as the tax cut is set to boost an already growing economy. US stocks and the dollar went up on Monday in the first day of trading after the Senate’s approval.
The US move could strengthen the hand of EU states like Luxembourg and Ireland that oppose stricter tax rules, fearing they could make Europe less competitive and weaken economic growth.
On Tuesday, EU governments are expected to adopt a blacklist of global tax havens in a bid to discourage the use of offshore structures by corporations to optimise their tax bills.
They are also set to agree on ‘exploring’ changes to corporate taxation to make sure that tech firms pay their fair share.
While some EU states support moves to effectively raise taxation on companies like Facebook or Apple, others would prefer a deal at global level before any action in the EU.
International agreements on tax matters have proved very difficult. — Reuters