American tech companies hold more than $2.6 trillion of combined assets overseas.<\/p>\n<\/blockquote>\n
Not only is Europe divided between countries like Ireland, which seek to attract investment thanks to low corporate tax rates, and others like France, which are pushing to slap new levies on American tech giants. But the gap between these two camps is wider than ever.<\/p>\n
Washington\u2019s tax reforms, many in Europe argue, could undermine a years-long revamp of global tax rules, and allow the EU\u2019s low-tax states to argue they have a right to compete on taxes.<\/p>\n
But for U.S. officials, the griping from Brussels is more likely linked to the sound of billions of dollars in overseas cash holdings returning to the United States because of Washington\u2019s recent tax reform.<\/p>\n
\u201cTrump is creating a climate to attract companies with lower corporate tax rates and to keep the investments in the U.S., and I don\u2019t foresee any action from the EU side,\u201d a high-ranking eurozone diplomat said on the condition of anonymity because he was not authorized to speak publicly.<\/p>\n
\u201cThe real issue will be how to keep Europe attractive.\u201d<\/p>\n
Trump\u2019s presents<\/h3>\n
Trump\u2019s self-styled \u201cChristmas gift\u201d to U.S. companies is already having global effects.<\/p>\n
All U.S.-based firms will benefit from a one-time tax rate of 15.5 percent applied to all of their global cash reserves \u2014 whether or not they bring them home. Then, when the gift-period lapses, their U.S. corporate tax rate will drop to 21 percent from 35 percent.<\/p>\n
Apple announced last month that it would pay $38 billion in additional U.S. taxes after repatriating cash assets.<\/p>\n
And other tech giants have followed suit. Alphabet, the parent company of Google, told investors earlier this month it had booked a $9.9 billion charge related to the U.S. tax reforms. Facebook said it had earmarked $2.3 billion to cover its one-off tax liabilities, according to regulatory filings.<\/p>\n
In total, American tech companies hold more than $2.6 trillion of combined assets overseas, according to the Institute on Taxation and Economic Policy, a research group.<\/p>\n
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<\/p>\n
The New York Stock Exchange | Bryan R. Smith\/AFP via Getty Images<\/p>\n
For Europe, the major concern is that the U.S. changes will trigger a global race to lower corporate taxes \u2014 one in which welfare states could be put under more pressure just as the Continent\u2019s economy recovers from the recent global financial crisis.<\/p>\n
\u201cLowering corporate tax rates increases global tax competition for global tax revenue,\u201d said Guntram Wolff, the director of Bruegel, a think tank in Brussels. \u201cThat all puts pressure on our ability to fund our welfare states, and it\u2019s a social dumping spiral that the EU doesn\u2019t want to participate in.\u201d<\/p>\n
Pressure on the welfare state<\/h3>\n
Rather than try to compete with low-tax regimes, many EU states that are only just emerging from a growth slump hoped to keep their welfare models afloat by increasing the amount they take from global companies \u2014 particularly tech giants that have become some of the most valuable firms anywhere in the world.<\/p>\n
Starting late last year, Bruno Le Maire, France\u2019s finance minister, became the most vocal advocate for plans to start taxing digital giants, namely Google, Apple, Facebook, and Amazon (known, collectively, as the GAFA companies) on their revenue<\/a>, instead of their profits as is currently the standard practice.<\/p>\n He won support from a majority of EU states, but his initiative got bogged down<\/a> due to opposition from low-tax countries like Ireland and Luxembourg.<\/p>\n The European Commission is pushing ahead with its own, separate tax plans, and Brussels officials will outline new proposals next month.<\/p>\n Europe\u2019s institutional division of labor is not helping to deliver a common response to the U.S. tax changes.<\/p>\n<\/blockquote>\n Commission officials are tight-lipped about their plans, which need to win unanimous approval from all 28 member countries if they are to be adopted, and could be contentious.<\/p>\n But according to EU officials, the Commission, as well as the finance ministries of France, Germany, Spain, Italy, and the U.K., all have serious concerns about how the U.S. reform affects taxes in the EU, which they circulated in documents following Trump\u2019s announcement late last year.<\/p>\n Among their worries are the potential for double taxation, tax regimes on either side of the Atlantic becoming incompatible, and changes weakening global standards on the use of intellectual property, the officials said.<\/p>\n Meanwhile tech executives \u2014 who argue that their companies pay a sufficient amount of tax in the jurisdictions where they operate \u2014 are seeking to press their advantage.<\/p>\n French Finance Minister Bruno Le Maire (L) with the Eurogroup president, Portuguese Finance Minister M\u00e1rio Centeno | Emmanuel Dunand\/AFP via Getty Images<\/p>\n On Tuesday, a coalition of U.S. trade groups whose members include Google, Amazon, and Facebook sent a letter to U.S. Treasury Secretary Steven Mnuchin calling on American policymakers to push back against Europe\u2019s efforts to pocket more of this global tax revenue.<\/p>\n Europe\u2019s potential reforms to force digital giants to pay more tax \u201cwould set a troubling precedent that could deeply harm the U.S. and global business climate,\u201d the associations told Mnuchin in their letter.<\/p>\n But such EU tax initiatives are unlikely to win approval from both sides of the high- and low-tax divide in Europe. Ireland and Luxembourg will be particularly hard to convince that a Europe-wide fix is needed.<\/p>\n \u201cAs a member state, we will lose the money that was destined for our own coffers,\u201d one EU tax official said. \u201cBut it\u2019s difficult to decide on anything with 28 governments.\u201d<\/p>\n Europe\u2019s institutional division of labor is not helping to deliver a common response to the U.S. tax changes.<\/p>\n Shipping containers and vehicles wait to be loaded for export at Liverpool Docks | Christopher Furlong\/Getty Images<\/p>\n Trade \u2014 a key component of any proposed EU tax reform because it will affect transatlantic commerce \u2014 is a competence reserved solely for the Commission.<\/p>\n But when it comes to handling tax treaties between countries, the responsibility falls to EU governments, with many heads of state arguing it\u2019s up to them \u2014 not the Commission \u2014 to respond to the U.S. reform.<\/p>\n \u201cIt\u2019s difficult to do anything,\u201d said an EU tax official from the European Council, who spoke on the condition of anonymity due to the sensitivity of talks about tax policy.<\/p>\n \u201cIf U.S. companies stay in Europe, there\u2019s a risk that they\u2019ll be double taxed.\u201d<\/p>\n Original Article<\/a><\/p>\n [contf] [contfnew] Europe is trying to fight back against U.S. President Donald..<\/p>\n","protected":false},"author":1,"featured_media":64985,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50],"tags":[],"class_list":["post-64984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tech"],"yoast_head":"\n\n
![](\"https:\/\/www.politico.eu\/wp-content\/uploads\/2018\/01\/GettyImages-885273418-714x494.jpg\"\/)
<\/p>\nTension in Europe<\/h3>\n
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<\/p>\n <\/p>\n
<\/a><\/h5>\n","protected":false},"excerpt":{"rendered":"