Europe to Weigh If U.S. Tax Cuts Violate Global Trade Rules
(Bloomberg) -- European Union finance ministers will discuss U.S. legislation to slash taxes at a meeting in Brussels Tuesday and whether the new plan violates international trade rules.
The centerpiece of the tax bill that passed the U.S. Senate over the weekend is a reduction in the corporate tax rate to 20 percent from 35 percent. The bill still needs to be reconciled with a version passed by the House of Representatives before it can be signed into law by President Donald J. Trump.
“There are some elements of preoccupation -- some discriminatory measures -- and the possibility that some parts of the reform will violate World Trade Organization rules,” Spanish Economy Minister Luis de Guindos said in Brussels on Monday. “I will request the commission to make further analysis of the potential consequences of the tax plan.”
The Republican-led effort to reform the U.S. tax code has caused jitters beyond Europe’s borders, with Chinese officials expressing concern that a sweeping policy shift could cause a negative market impact domestically. The tax issue will be discussed over breakfast at a meeting of EU finance chiefs in Brussels, European Commission Vice President Valdis Dombrovskis told reporters on Tuesday.
“There are a number of more technical provisions concerning intra-group transactions as regard U.S. groups -- how they are taxed outside the U.S. and how they are taxed inside the U.S.,” Dombrovskis said. “The question is how broad the scope is, what are the potential effects on trade.”
The world’s largest trading bloc is concerned that some provisions in the U.S. tax bill currently being debated in Washington could result into a double taxation of European companies, according to EU officials. During Tuesday’s discussion in Brussels, finance ministers will seek to adopt a common stance, without taking any concrete decisions pending the final version of the bill.
Portuguese Finance Minister Mario Centeno, who was elected the new head of the Eurogroup Monday, said European nations need to consider the implications of the U.S. tax cut on the competitiveness of their own economies, adding that the discussion would be “very general.”
“It’s really important for the euro-area competitiveness to follow developments around the world,” Centeno said on Bloomberg TV. “All shocks to the constructive equilibria in the world need to be considered and certainly the domestic policy of the U.S. is of major importance to us.”
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