Trust Bloomberg BNA's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Joe Kirwin
U.S. President Donald Trump’s plans to slash corporate taxes by more than half will accelerate a “race to the bottom” and undermine global efforts to combat corporate tax evasion by multinationals, according to a second political group in the European Parliament.
The Socialists and Democrats, made up of 190 European Parliament lawmakers, insisted the Trump tax reform, announced April 26, threatens the current work in the Organization for Economic Cooperation and Development and the Group of Twenty to establish a fair and efficient tax system that puts an end to base erosion and profit shifting by companies.
“Lowering the corporate tax rate to 15 percent and moving toward a territorial taxation system would encourage a race-to-the-bottom in corporate tax rates and thereby largely favor the big multinational enterprises by imposing unsustainable competitive disadvantages on the rest of the international business sector,” the Socialist and Democrat political group said in a statement.
“The announced proposal risks to undermine the ongoing reform efforts, in which the EU plays a leading role,” the EU lawmakers said.
Paul Tang—who heads the Group of the Progressive Alliance of Socialists and Democrats and leads the European Parliament negotiations on the pending EU Common Corporate Tax Base (CCTB) proposal—accused the Trump administration of pursuing a “beggar-they-neighbor policy similar to those in the 1930s.” He added that it could trigger a “competitive devaluation of exchange rates.”
The Dutch parliamentarian said the EU’s answer to the “shameful” Trump administration proposal should be approval of the pending CCTB-CCCTB proposal.
The European Commission proposed in October 2016 a plan to revive the EU’s hopes on a common consolidated corporate tax base when it called for a two-step approach that would begin with an agreement on a CCTB before moving onto a law that would allow for cross-border consolidation of profits.
“The CCCTB is the opportunity to level the playing field between large corporates and the small firms, but is also an opportunity to set global standards right,” Tang said.
The European Commission was more measured in its response. “As a very influential economic power, the U.S. must play a central role in the fight against tax avoidance, just as the EU is doing,” it told Bloomberg BNA April 27 in an emailed statement. “The U.S. supported the international work at the OECD and G-20 to increase tax transparency and tackle base erosion and profit shifting (BEPS) and we trust that it will remain fully committed to this agenda.”
Sven Giegold, a European Green Party member and leading tax expert in the European Parliament, told Bloomberg BNA in a April 27 telephone interview that the Trump tax plan further cemented the U.S. as a tax haven. He added the German government must put the issue on the agenda during its current term as holder of the G-20 presidency.
Giegold also lamented the failure by the Trump administration to include a border tax in the reform plan because he said the levy had the potential, if properly implemented, to resolve conflicts between the EU’s value-added tax scheme and the U.S. sales tax system as well as other international tax disputes.
“Unilaterally introduced, the border tax would have a protectionist effect because imports would be significantly more expensive,” Giegold said. “However this form of tax would have a major impact and would therefore probably be copied internationally.”
Concerning the Trump administration’s tax reform plan to allow multinational companies to repatriate trillions of dollars of profit held outside the U.S. in order to avoid a corporate tax rate of 35 percent, Giegold said this “creates a tax avoidance general amnesty with a one-off tax on gains collected in tax havens.
“And thus this creates additional incentives for aggressive tax planning,” Giegold said.
The European Green Party insists the U.S. has become an international tax haven because, among other things, it has not committed to implement the OECD Common Reporting Standard and various U.S. states, including Delaware, Nevada and South Dakota, have laws that allow companies to hide beneficial owners.
To contact the reporter on this story: Joe Kirwin in Brussels at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)