#FairTaxation: EU rows into US tax bill debate

| December 18, 2017 | 0 Comments

The European Commission informed journalists that two vice-presidents and two European commissioners have sent a joint letter to United States Secretary of the Treasury Steven Mnuchin, concerning the content of the US tax reform bill, writes Catherine Feore.

Last week, Vice-President Katainen raised his concerns following the weekly meeting of European commissioners. He said that the US tax bill as it currently stands is incompatible with WTO rules as well as existing double taxation treaties. He believes that it could be damaging to both the EU and US as almost half of transatlantic trade is intra-company in nature (so within the same group).

Katainen said:

“The European Commission expects that any reform of the US tax code will be non-discriminatory and in line with international commitments.”

Commission Spokesperson, Vanessa Mock, said that the EU expects the US to ensure that their tax reform bill will be non-discriminatory and in line with WTO obligations. The discussions are still on-going but the EU hopes that the US will uphold G20 agreements and the global fight against tax avoidance.

EU member states have raised concernstheir concerns with the Commission about three proposals in the bill

Base Erosion and Anti-abuse Tax (BEAT) – proposal from the US Senate

Both the EU and US are committed to tackling tax base erosion and profit shifting (BEPS) – the moving of profits from where the real economic activity takes place; usually from a higher tax to a lower tax jurisdiction with the aim of avoiding tax.

The Commission believes that the Senate’s proposal could result in discrimination and be incompatible with WTO rules. It is thought that the finance sector, in particular, could be hit with double taxation of the same payments.

Global intangible low-tax income (GILTI) – a proposal from the US Senate

This bill would focus on the deduction for foreign derived ‘intangible’ income, this refers to intellectual property but it would be much broader in scope than has been hitherto agreed with the OECD under the so-called ‘modified nexus approach’. The Commission’s letter argues that this could amount to an illegal export subsidy under WTO rules.

Excise tax – a proposal from the House of Congress

The bill appears to be discriminatory because it does not apply to comparable payments that would be made between domestic US companies. The Commission says that this could potentially breach the WTO General Ageement on Tariff and Trade, as well as the WTO General Agreement on Trade in Services.

The commissioners are anxious to point out that tax reform is a matter for the US government and that they fully support the US’ efforts to reform the tax code, wishing the Secretary of the Treasury well “in this final phase of your important legislative work”. The EU says that it hopes that the US and EU will continue to co-operate through the G20 and OECD, as well as bilaterally on these issues.

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Category: A Frontpage, Economy, EU, EU, European Commission, US, World

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