HANDELSBLATT EXCLUSIVE

Germany warms to Trump tax plan

Trump speech on economy in Detroit
Donald Trump promised to cut the U.S. corporate tax rate during an economic speechin Detroit back in August. Source: DPA

There’s no love lost in Germany for U.S. President-elect Donald Trump, but economists and even government officials are willing to give credit where credit is due.

Mr. Trump’s plan to slash corporate taxes could help reduce global tax avoidance, according to a study by the Center for European Economic Research, ZEW, that Handelsblatt has obtained.

“Europeans could actually make an exception and applaud the new U.S. president once,” Friedrich Heinemann, the economist who authored the study, told Handelsblatt.

“If Trump implements his tax plans, it would solve half of the problems with base erosion and profit sharing.”

German government official

Mr. Trump has proposed slashing the U.S. corporate tax of 36.5 percent, the second-highest rate in the world next to France, by more than half to 15 percent.

Including the taxes levied on companies by U.S. state governments and municipalities, the corporate tax would fall to 21.6 percent overall, just above the average rate in the European Union of 21 percent.

“Trump’s plans actually seem like a much overdo adjustment to international standards when it comes to tax burdens,” said Mr. Heinemann, a senior economist at ZEW, based in Mannheim in central Germany.

The president-elect’s tax plan would reduce the incentive for U.S. companies to shift their profits abroad in order to avoid high taxes in the United States, Mr. Heinemann said.

That is a key priority for Germany, which has led a fight against tax evasion and helped broker an international agreement to reduce tax avoidance practices around the world.

A German government official, who declined to be named, also praised Mr. Trump’s tax plan, though there are concerns about whether he will stick to the international agreement reached last year.

“If Trump implements his tax plans, it would solve half of the problems with base erosion and profit sharing,” the official told Handelsblatt.

Germany is likely to keep the pressure up on Mr. Trump when it comes to combating tax evasion as it takes over the leadership of the G20 group of leading economies this year.

 

Martin Greive is a financial correspondent for Handelsblatt based in Berlin. To contact the author: greive@handelsblatt.com

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