Chancellor Philip Hammond has raised ‘significant concerns’ with US president Donald Trump’s tax cuts plans.
In a controversial play, Hammond has joined with ministers from France, Germany, Italy and Spain in signing a letter which criticises the US tax cuts plans and warns they will have ‘a major distortive impact on international trade’, the Telegraph has reported.
Trump is on the cusp of seeing his first major legislative victory with a tax reform package that would see corporation tax cut from 35% to 20%. The reforms, which received the backing from the US senate earlier this month, would also see corporation tax cut to 12.5% for income coming from exports, the Telegraph reported.
However such policies have been seen as a threat to the international trade system, Hammond, along with other European finance ministers, said.
‘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 seen by the Telegraph said.
‘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. We would therefore like to draw your attention to some features of the proposals being discussed that cause significant concerns from a European perspective.’
The US tax plans would go against World Trade Organisation (WTO) rules which prohibit nations from introducing incentives which make imports more expensive, the Treasury believes.
Despite this letter which could further destabilise US-UK relations, Woody Johnson, US ambassador to the UK, told the BBC this morning he doesn’t think Trump will cancel a planned UK visit in early 2018.
A US Treasury spokesman told the Telegraph: ‘We appreciate the views of the finance ministers. We are closely working with Congress as they finalise the legislation through the conference process.’