(Via NewsWars)
German economists have admitted that the Republican tax overhaul is a huge win for the U.S. economy, having the potential to siphon investment and jobs from Europe.
Christoph Spengel, chairman of the corporate tax department at the University of Mannheim, explained in a recent press release that the move to cut the corporate tax rates in the U.S. is a game changer.
“This tax reform in the US isn’t just going to stoke tax competition between the United States and Europe; competition between EU Member States for US investment is also going to intensify and Germany is going to lose out,” said Spengel, who is also a research associate at the Center for European Economic Research (ZEW).
ZEW and a group of tax experts released a study in mid-December detailing how the massive tax cut would substantially benefit the United States in international tax competition as rates are now closer to the European average (20.9%).
“The tax competition will have a new dimension,” Spengel says.
The idea that Germany would lose out to the new incentives provided by the recently passed tax bill is also shared by Clemens Fuest, head of the German Ifo economic think tank, who said, “Investments and jobs will migrate to the US.”
According to reporting by Handelsblatt Global, the potential capital influx from Germany to the U.S. could be as high as $42.29 billion, or 39 billion euros.
It seems as if worry is spreading across Europe over America’s new competitive position in the global economy.
Finance ministers of Europe’s five biggest economies, including France and Italy, wrote a letter to US Treasury Secretary Stephen Mnuchin in clear panic over tax cuts.
“The United States is Europe’s single most important trade and investment partner,” the finance ministers wrote. “It is important that the U.S. government’s rights over domestic tax policy be exercised in a way that adheres with international obligations to which it has signed-up. The inclusion of certain less conventional international tax provisions could contravene the US’s double taxation treaties and may risk having a major distortive impact on international trade.”
A similar letter was sent to Mnuchin by the European Commission’s four most senior economic officials which made many of the same points.
So, while the U.S. mainstream media and Democrats rallied against the tax plan with a laser focus on potential corporate profits, economic officials and tax experts in Europe were giving the overhaul the greatest endorsement with their panic over the America first move.