European Union's big five economies criticise US tax plans, seek 'compromise'

PARIS: The finance ministers of the European Union's five biggest economies have written to their American counterpart to voice concerns over a US tax overhaul, saying Washington should adhere to "international obligations to which it has signed up".

The letter, signed by the British, French, German, Italian and Spanish finance ministers, warned that "certain less conventional international tax provisions could contravene" tax treaties and could have "a major distortive impact on international trade".

US Republicans in the House and Senate are working to come up with a final unified version of the reform that President Donald Trump can sign before the end of the year.

Both versions call for slashing taxes for corporations and business partnerships while eliminating many deductions for individuals.

"While the establishment of a modern, competitive and robust tax system is one of the essential pillars of a state's sovereignty, 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," the letter said yesterday.

Germany's Finance Minister Peter Altmaier, Britain's Philip Hammond, France's Bruno Le Maire, Italy's Pier Carlo Padoan and Spain's Cristobal Montoro told US Treasury Secretary Steven T. Mnuchin they remain "confident that you will find a wise and well-balanced compromise in your mission to create a modern and robust new US tax code".

The United States is Europe's biggest trade and investment partner.

A US Treasury spokesperson responded by saying: "We appreciate the views of the finance ministers. We are closely working with Congress as they finalise the legislation through the conference process." Last Tuesday the 28 EU finance ministers, meeting in Brussels, has a preliminary discussion on the subject at France's request.

The Republicans' text calls for company tax to be dropped to 20 per cent from 35 per cent and would encourage US multinationals to repatriate their profits rather than enjoy preferential tax rates overseas.