European Finance Ministers are voicing concern and outrage over Trump’s tax reform. They wrote numerous letters to Steven Mnuchen and all senior Republican Senators and members of Congress weeks ago asking/demanding that they vote against the Bill because the policies were unfair to Europe…
I wasn’t aware that Europe had control over our US tax policy. But apparently, they do, or at least they did.
Even more curious is what they were targeting. Apparently they are quite furious over the fact that Excise and Base Erosion fees will be levied on corporations that utilize the fake tax haven headquarter scheme by establishing a base in an EU country that offers lower tax rates. An Excise fee of 20% will latch to corporations utilizing goods and/or services of a foreign corporate entity. And lastly, Intangible Income such royalties derived from the EU would no longer have preferential tax treatment which resulted in what was considered a subsidy payment benefiting EU property.
In other words, Trump went through with his promise to entice corporations back to the US. Good for the US, bad for the EU. And so, they are miffed.
The EU Economists are concerned because their revenue base will suffer given they recognized that corporations relocated to preferred EU countries in order to avoid/evade higher tax rates in the US. With Trump’s reform, corporations will likely do exactly that – return home giving the US a bump in revenue, and burning the EU advantage.
As a result of the Tax Reform, over time the economies of these EU tax haven countries will begin to contract without the boost of US corporate tax revenue, and ultimately the withdrawing of jobs as headquarters and employees move back to the states.
Obviously this tax haven arrangement has been bolstered and supported by the EU for decades and might help explain why their PM’s and President’s are roiling while making derogatory comments about Trump. Their argument is that making ‘America First’ comes at their expense given they have reaped our rewards and thus international trade between the EU and the US will falter. But given that trade was built on a tax subsidy at the expense of our economy seems to allude their ‘me first’ agenda.
Bottom Line, the call to arms by the EU Ministers is that the US tax reform is ‘not fair’, because it puts US money back in the US instead of in the EU… Awwww, shucks.