US corporate tax cut could be mixed bag, experts warn
Economists at the European Central Bank (ECB) have said the US corporate tax cut should lift the world's largest economy in the short term - but warned that it could erode the tax base in European countries by intensifying global competition for lower rates.
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ECB economists said the cut in business taxes will provide a "significant fiscal stimulus" to growth in the US in the short-term. However, it warned that long-term effects were less clear, especially if the cut leads to larger US budget deficits.
Effects on the 19-country eurozone are "highly uncertain and complex" but could include an erosion of the tax base if countries around the world compete by lowering their tax rates to attract businesses.
"Lower US corporate tax rates raise the tax attractiveness of the United States relative to other countries," the report said.
"Prior to the reform, the US corporate tax rate stood above the rates of all large euro area countries, while, after the reform, it is close to the lower end of rates in those countries."