US Tax Reform: Opportunities and Risks: Winners and Losers

The tax reforms introduced by US President Donald Trump feature significant tax breaks for companies and modest tax cuts for individuals. They are expected to stimulate the economic situation in the USA and give it a massive competitive advantage by reducing corporate tax rates. How should European countries react? Christoph Spengel, Marcel Olbert and Kathrin Stutzenberger, ZEW, Mannheim, make it clear that European countries that charge high taxes like Germany may potentially stand to lose out from the US tax reform, while the USA's positon as an investment location will be significantly improved in terms of global taxation. Thomas Straubhaar, University of Hamburg, suggests not taxing income and companies in general. This is the right response to globalisation and digitisation. Johannes Becker and Joachim Englisch, University of Münster, see tax specialists as the only clear winners to date. The clear loser, by contrast, is the OECD, which clearly shows the limits of an internationally coordinated procedure against so called "Base Erosion and Profit Shifting (BEPS)" and whose authority has suffered as a result. Global competition among business locations, intensified by the US reform, could also make it necessary to consider cutting corporate tax rates in Germany. For Joachim Lang, BDI, the major winners of the reform are primarily US companies: they stand to benefit directly from the corporate tax rate and the option of immediate write-offs. For Germany as a business location, on the other hand, major risks could emerge. For Patrick Kompolsek, Michael Riedle and Martin Ruf, University of Tübingen, there is no simple answer to the "winners and losers" question. Among companies there will be both winners and losers.