The big five of the EU give a touch to the US for its tax reform

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They send a letter to Trump warning of the illegality of some of the measures studied by Congress and its threat to free trade
The finance and finance ministers of Germany, France, the United Kingdom, Spain and Italy have sent a letter to the president of the United States, Donald Trump, and to some of the main figures involved in the political debate on tax reform across the Atlantic expressing concern about several aspects that they consider threatening to free trade and clearly discriminatory for foreign companies.

The letter, signed by Cristóbal Montoro, Philip Hammond, Bruno Le Maire, Pier Carlo Padoan and German acting minister, Peter Altmaier, is addressed to Treasury Secretary Steven Turner Mnuchin, and arrives in copy to nine prominent senators and congressmen, as well as those responsible for the National Economic Council.

And he says that “although the establishment of a modern, competitive and solid tax system is one of the essential pillars of the sovereignty of a State,” it is “important that the US Government’s tax policy rights comply with international obligations and subscribed. “What do the big five of the EU have in mind?

The inclusion of certain less conventional international tax provisions could contravene US double taxation treaties and may have a great distorting impact on international trade, “the ministers warn.” For this reason we would like to draw your attention to some particular features of the proposals that they are being discussed as causing important concerns from a European perspective. “Among them, a provision on indirect taxes of up to 20% for payments to affiliated foreign companies, which could violate double tax treaties.

A second one that “would have an impact on trade agreements that involve payments to foreign companies taxed at a rate equivalent to or higher than the US” and especially in the financial sector “where the provision seems to have the potential to be extremely harmful to banking international and the insurance business, since financial transactions within the same group would be treated as non-deductible and subject to a 10% tax “, which in the opinion of the ministers” can generate significant tax burdens and can distort harmfully the international financial markets “.

And thirdly, a Senate proposal that “will subsidize exports compared to domestic consumption.” Therefore, it could be an illegal export subsidy under the rules of the Agreement on Subsidies and Countervailing Measures of the World Trade Organization. Consumption “and contrary to the position agreed by more than 100 countries to try to fight against the Erosion of Taxable Bases and transfer of benefits (BEPS).

The five ministers say in the text, of only three pages, that they value the “action of the USA in the fight against the erosion of the taxable base and the transfer of benefits”, but they point out that they have “a great concern if this is done through measures that are not aimed at abusive agreements, as this would have an impact on genuine business activities and lead to distortions in the international fiscal consensus, as well as in the trade and investment environment. ”

Europe believes that “the OECD and the inclusive framework of BEPS are the relevant forums for working on the evolution of international tax principles on a multilateral basis” and therefore they ask Washington to reconsider during the legislative process. “We would be very grateful if you took these concerns into account during the procedure.

We agree that you will find a sensible and balanced commitment in your mission to create a new and modern tax code of the USA “concludes a letter that will undoubtedly not be well received in the US capital. Congress has been furious with Brussels for years precisely for the treatment fiscal that is giving to its large multinationals.

Representatives and senators are responsible to the Commission and in particular to the Competition to go for Amazon, Google or Apple, as before for Microsoft, given the inability of European firms to compete in the market against them. And there are several voices that asked for a proportional reply. There are no warnings, threats or hostile tone, but the mere fact of a public letter from the ministers of the five major economies, including the United Kingdom in the midst of the Brexit negotiations, is a clear message

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