European Central Bank: US tax law could erode Europe’s tax base
The American cut could lead to countries around the world trying to compete to attract business.
Economists at the European Central Bank said the US corporate tax cut should lift the world’s largest economy in the short term – but could erode the tax base in European countries by intensifying global competition for lower rates.
The cut in business taxes will provide a “significant fiscal stimulus” to growth in the US and would be “positive in the short term”, an article set to appear in the ECB’s regular economic bulletin said.
It warned that long-term effects are 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 tax base erosion if countries around the world compete by lowering their tax rates to attract businesses.