Does tax overhaul violate global trade rules? Europe thinks so

Congress is poised to approve a tax overhaul that could spark major trade tensions between the United States and Euro...

Posted: Dec 20, 2017 1:07 AM
Updated: Dec 20, 2017 1:07 AM

Congress is poised to approve a tax overhaul that could spark major trade tensions between the United States and Europe.

The final version of the bill, which is expected to be approved by lawmakers this week, includes two provisions that European allies have lobbied against, and are likely to challenge in court.

The finance ministers of Germany, France, Britain, Spain and Italy sent a letter to Treasury Sec. Steven Mnuchin last week, arguing the rule changes would give American firms an unfair advantage over their international rivals.

Top European Commission officials asked for both measures to be removed from the final bill in a second letter to Mnuchin.

European officials argue that the bill would subsidize American companies by allowing a greater share of their income from exports to be taxed at 12.5%, instead of the general corporate rate of 21%.

The second provision that drew objections would subject cross-border transfers within banks and finance companies to a 10% tax, putting international lenders at a disadvantage.

Both rule changes were included in the final version of the bill despite the lobbying campaign.

"The concerns expressed, including regarding export subsidies, are still relevant," said Michael Mundaca, co-director of tax services at EY and a former tax policy official at the U.S. Treasury.

Related: How much you'd pay under GOP tax plan depends on a million things

Export subsidies have long been a source of trade friction between the U.S. and Europe.

One set of U.S. tax break for big exporters were repealed in 2006 after two decades of fighting and sanctions threats from the European Union.

Related: New tax code will still be complicated

Similar battles could now be revived.

"There will almost surely be [World Trade Organization] litigation over the lower [tax] rate on exports," said Rebecca Kysar, a professor at Fordham University. "The most likely outcome is that the U.S. will eventually have to abandon the export subsidy regime under threat of sanctions."

The House is expected to vote on the bill Tuesday, and the Senate will follow soon after. The legislation, which is expected to pass on party lines, could be on President Trump's desk before Christmas.

Then the lawsuits could fly.

"The EU has challenged aspects of U.S. tax law in the WTO in the past, and the rules would allow it to bring a new claim once the current bill becomes law," said White & Case partner Brendan McGivern, who is the head of the firm's WTO practice. "The whole process, including a possible appeal, would take about three years -- and the final result would be binding."

Lafayette
Cloudy
32° wxIcon
Hi: 32° Lo: 31°
Feels Like: 23°
Kokomo
Cloudy
31° wxIcon
Hi: 32° Lo: 30°
Feels Like: 21°
Rensselaer
Cloudy
30° wxIcon
Hi: 31° Lo: 29°
Feels Like: 21°
Lafayette
Cloudy
33° wxIcon
Hi: 31° Lo: 29°
Feels Like: 27°
Danville
Cloudy
31° wxIcon
Hi: 31° Lo: 30°
Feels Like: 21°
Frankfort
Cloudy
30° wxIcon
Hi: 31° Lo: 30°
Feels Like: 20°
Frankfort
Cloudy
30° wxIcon
Hi: 31° Lo: 30°
Feels Like: 20°
Monticello
Cloudy
31° wxIcon
Hi: 32° Lo: 31°
Feels Like: 22°
Monticello
Cloudy
31° wxIcon
Hi: 33° Lo: 31°
Feels Like: 22°
Logansport
Cloudy
30° wxIcon
Hi: 31° Lo: 30°
Feels Like: 21°
Snow showers......
WLFI Radar
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 587049

Reported Deaths: 9287
CountyCasesDeaths
Marion810691296
Lake44121665
Allen31797541
Hamilton28178303
St. Joseph26684369
Elkhart24057340
Vanderburgh18519213
Tippecanoe17305121
Johnson14398284
Porter14342159
Hendricks13793241
Madison10509212
Vigo10432171
Clark10151129
Monroe9029108
Delaware8782129
LaPorte8721153
Kosciusko784677
Howard7834137
Warrick636790
Hancock633297
Bartholomew624294
Floyd6098105
Wayne5903156
Grant5799109
Dubois541670
Boone531467
Morgan512388
Marshall492484
Henry491164
Cass469060
Noble458757
Dearborn454544
Jackson413145
Shelby401178
Lawrence379475
Clinton363639
Gibson355056
DeKalb336363
Montgomery333851
Harrison326042
Knox325439
Miami308243
Steuben304940
Adams294435
Whitley292325
Wabash291645
Ripley290845
Putnam282447
Huntington281257
Jasper280733
White265738
Daviess260772
Jefferson248538
Fayette241348
Decatur241282
Greene232460
Posey230026
Wells228547
LaGrange223461
Clay216432
Scott216437
Randolph207540
Jennings191335
Sullivan188531
Spencer179917
Fountain178625
Washington175018
Starke170741
Jay162021
Fulton158829
Owen157837
Carroll151315
Orange150533
Rush148118
Perry145327
Vermillion144333
Franklin142533
Parke12788
Tipton127332
Pike113125
Blackford107022
Pulaski94637
Newton89020
Brown85530
Benton84110
Crawford7479
Martin69213
Warren6537
Switzerland6175
Union6063
Ohio4647
Unassigned0374

COVID-19 Important links and resources

As the spread of COVID-19, or as it's more commonly known as the coronavirus continues, this page will serve as your one-stop for the resources you need to stay informed and to keep you and your family safe. CLICK HERE

Closings related to the prevention of the COVID-19 can be found on our Closings page.

Community Events