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One set of U.S. tax break for big exporters were repealed in 2006 after two decades of fighting and sanctions threats from the European Union.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

West Lafayette
Clear
76° wxIcon
Hi: 92° Lo: 67°
Feels Like: 76°
Kokomo
Clear
73° wxIcon
Hi: 89° Lo: 66°
Feels Like: 73°
Rensselaer
Clear
73° wxIcon
Hi: 88° Lo: 64°
Feels Like: 73°
Fowler
Clear
73° wxIcon
Hi: 89° Lo: 66°
Feels Like: 73°
Williamsport
Clear
76° wxIcon
Hi: 90° Lo: 66°
Feels Like: 78°
Crawfordsville
Clear
76° wxIcon
Hi: 90° Lo: 66°
Feels Like: 76°
Frankfort
Scattered Clouds
78° wxIcon
Hi: 90° Lo: 67°
Feels Like: 80°
Delphi
Clear
76° wxIcon
Hi: 91° Lo: 66°
Feels Like: 78°
Monticello
Clear
76° wxIcon
Hi: 90° Lo: 65°
Feels Like: 78°
Logansport
Clear
75° wxIcon
Hi: 90° Lo: 64°
Feels Like: 75°
WLFI Radar
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 45952

Reported Deaths: 2650
CountyConfirmedDeaths
Marion11387679
Lake4872240
Elkhart308543
Allen2677114
St. Joseph184965
Cass16369
Hamilton1484100
Hendricks136699
Johnson1235118
Porter68537
Madison64363
Tippecanoe6408
Clark62244
Bartholomew57844
Howard54356
LaPorte53925
Kosciusko4952
LaGrange4596
Jackson4553
Noble44728
Vanderburgh4306
Hancock42935
Delaware42648
Boone42242
Shelby41625
Marshall4123
Floyd36344
Morgan32031
Montgomery28720
Grant28526
Clinton2792
Dubois2606
White25810
Monroe25628
Decatur24632
Henry23515
Lawrence23124
Vigo2248
Harrison20822
Dearborn20422
Warrick20129
Greene18431
Miami1802
Jennings16911
Putnam1658
DeKalb1594
Scott1547
Daviess13916
Orange13323
Wayne1286
Franklin1248
Steuben1232
Perry1209
Ripley1127
Carroll1092
Jasper1092
Wabash1072
Fayette967
Newton9510
Whitley814
Randolph764
Starke733
Huntington702
Wells681
Jay670
Fulton661
Jefferson651
Washington641
Pulaski631
Knox620
Clay594
Rush573
Benton480
Adams451
Owen451
Gibson442
Sullivan441
Brown381
Blackford372
Posey350
Spencer311
Tipton301
Crawford290
Fountain292
Switzerland250
Martin220
Parke220
Ohio140
Warren141
Union130
Vermillion130
Pike80
Unassigned0194

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