National Taxpayers Union has applauded Treasury Sec. Steven Mnuchin for his comments to the Senate Finance Committee earlier this week indicating his engagement with international leaders on supranational tax schemes that would harm American taxpayers. Furthermore, NTU urges that concrete steps be taken if these international organizations fail to respect rule of law and established tax policy norms.
The European Union (EU) and the Organization for Economic Cooperation and Development (OECD) have for years been considering (and in some cases employing) various discriminatory tax policy and enforcement schemes intended to intimidate American companies abroad. The latest proposals could even target those companies that have no physical presence in certain EU member countries. As President Obama’s Treasury Department argued, the case for many of these actions has been built on “circular logic” and “previously unarticulated theories.” As NTU contends, these unprecedented international overreaches affect Americans at home because the companies operating abroad support tens of millions of U.S. jobs, hamper small business contractors, and hurt shareholders, many of whom are retirees or state government pension funds. In addition, taxpayers in other countries will ultimately suffer, since extraordinary powers that are initially portrayed as affecting just a few businesses or individuals rarely remain that way. Furthermore, the recently-passed Tax Cuts and Jobs Act addresses many of the "base erosion" concerns that had been fueling much of the EU's and OECD's actions.
Treasury is widely expected to express its views to its European counterparts shortly, ahead of an OECD report on "tax challenges" in the digital economy. In a letter sent to Secretary Mnuchin, NTU has recommended several steps that Treasury could take, including a clear communication that member countries' businesses and individuals could face higher taxes if U.S. firms are further targeted overseas.
"As Treasury formulates its responses to the overbearing, protectionist revenue grabs of the EU and OECD, NTU urges its leadership to consider our comments in creating the strongest possible stance that protects taxpayers here and abroad," said NTU President Pete Sepp. "Many of the gains from the Tax Cuts and Jobs Act be endangered if EU and OECD plans go unchallenged. Ultimately, however, no one is safe when tax administrators are allowed to cast aside rule of law and act arbitrarily."