Europeans say US tax plans may violate international accords, distort trade

BRUSSELS — The European Union’s top five economies are warning the United States that its massive tax overhaul could violate some of its international obligations and risks having ‘‘a major distortive impact’’ on trade.

In a letter to US Treasury Secretary Steven Mnuchin, the finance ministers of Germany, France, Britain, Italy, and Spain wrote they had ‘‘significant concerns’’ about three tax initiatives, in particular.

In the letter, seen by The Associated Press, the five wrote that ‘‘it is important that the US government’s rights over domestic tax policy be exercised in a way that adheres with international obligations to which it has signed-up.’’


EU nations have been warily eyeing President Trump’s domestic tax proposals as they make their way through Congress and have long expressed fears they might hurt world trade and EU companies, in particular.

‘‘The inclusion of certain less conventional international tax provisions could contravene the US’s double taxation treaties and may risk having a major distortive impact on international trade,’’ the five wrote.

They specifically targeted the so-called Base Erosion and Anti-abuse Tax (or BEAT) Senate bill. This measure aims to combat what is called base erosion and profit shifting, the practice by some multinationals to avoid taxes by exploiting mismatches in countries’ tax rules to artificially report their profits in countries with low or no taxes.

The finance ministers lauded the measure’s aim to ensure that companies pay their fair shares in taxes to the United States. But they said that under the current plans, the measures would hurt genuine commercial deals. In the financial sector, in particular, ‘‘the provision appears to have the potential of being extremely harmful for international banking and insurance business.’’

They said it ‘‘may lead to significant tax charges and may harmfully distort international financial markets.’’

The EU’s 28 finance ministers had already expressed concern about the US plans at a meeting last week, but now its five biggest economies have gone ahead with their own warning.


In Washington, Republicans are upbeat about finalizing the tax bill from the House and Senate versions for Trump’s first major legislative accomplishment in nearly 11 months in office.

Trump has set a Christmas deadline for signing the bill into law, giving lawmakers named to a special conference committee two weeks to iron out major differences in the House and Senate versions of the legislation. The conference committee has scheduled its first formal meeting for Wednesday.

Both measures would cut taxes by about $1.5 trillion over the next decade while adding billions to the $20 trillion deficit, combining steep tax cuts for corporations with more modest reductions for most individuals. Together, the changes would amount to the biggest overhaul of the US tax system in 30 years, touching every corner of society.