The Trump administration has specified first details of their long-announced tax reform. Accordingly, the reform seeks to cut corporate tax rates to 15 per cent, down from 35 per cent. For now, this tax cut will, however, not be combined with a border adjustment tax on all imports. Professor Friedrich Heinemann, head of the "Corporate Taxation and Public Finance" Research Department at the Mannheim Centre for European Economic Research (ZEW), comments on the reform.

"This first piece of concrete information on Trump's tax plans is good news for both Europe and the world trade. The concerns that Donald Trump might use his reform to fiscally isolate the US import market remain yet unconfirmed. Most EU Member States have little difficulty withstanding the new competitive pressure resulting from the strongly reduced US tax rate, since up until now the USA has been a high-tax country in international comparison.

A 15 per cent corporate tax rate is by no means a particularly low rate from a European perspective. According to ZEW calculations, the US effective tax burden still exceeds that of 17 EU countries after the announced reform. Germany, however, would considerably lose attractiveness as a business location compared to the US due to its substantially higher tax burden as a result of the reform. The US budget deficit is set to rise even further now. It is delusional to think that tax shortfalls can be compensated through higher growth."

Please find below two detailed ZEW analyses on the US tax plans

ftp.zew.de/pub/zew-docs/policybrief/pb02-17.pdf

www.zew.de/PM5024-1

 

For further information please contact:

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail heinemann@zew.de

Date

26.04.2017

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