Five of Europe’s finance ministers complained in a letter to Treasury Secretary Steven Mnuchin on Monday that the Republican Tax Cuts and Jobs Act will favor American trade.
The European ministers suggested that the tax reform legislation could impact their domestic trade and unfairly favor American trade.
“The inclusion of certain less conventional international tax provisions could contravene the U.S.’s double taxation treaties and may risk having a major distortive impact on international trade,” they complained.
The five finance ministers wrote in a letter to Mnuchin that although tax reform legislation remains a vital part of American sovereignty, they also complained that the Republican Tax Cuts and Jobs Act should also adhere to America’s previously established agreements on international trade.
“While the establishment of a modern, competitive and robust tax system is one of the essential pillars of a state’s sovereignty, 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 European ministers whined.
The Tax Cuts and Jobs Act, which Republicans hope will pass before Christmas, will transition America’s tax scheme from a worldwide tax system to a “territorial” system that taxes companies’ profits based on their location rather than where they reside. Transitioning to a territorial tax system would mean that American companies would no longer pay additional taxes on their profits when they are brought back to the United States.
The Treasury Department argued in a new report on Monday that the Tax Cuts and Jobs Act will add $1.8 trillion over ten years, which would serve as enough additional revenue to pay for the tax cuts for middle-class families and small businesses.
“The Administration has been focused on tax reform and broader economic policies to stimulate growth, which will generate significant long-term revenue for the government,” Treasury Mnuchin said in a statement.
Germany’s acting Finance Minister Peter Altmaier, French Finance Minister Bruno Le Maire, Italian finance minister Pier Carlo Padoan, Spanish minister Cristobal Montoro, and U.K. Chancellor Phillip Hammond signed the letter, urging Mnuchin to consider adjusting the Republican tax reform legislation so that it may not unfairly favor American trade over her European competitors.
The ministers concluded, “The inclusion of certain less conventional international tax provisions could contravene the U.S.’s double taxation treaties and may risk having a major distortive impact on international trade.”