Home » International Taxation » Will US-EU Trade Undermine Tax Justice?

Will US-EU Trade Undermine Tax Justice?

This is a controversial question that has been brought up through a new study report. Based on information from the study, multinational companies in the U.K. could escape from paying millions of dollars following a secretive deal (labeled TTIP – Transatlantic Trade and Investment Partnership) between Europe and the United States that was brought up mid-February. The deal comes under the guise of free trade, but critics have warned that it would create a loophole through which major corporations would sue EU member states over measures such as windfall taxes on exceptional profits.

The deal is still an agreement that is currently being negotiated between the US and the EU. It has raised alarm bells especially amongst groups that advocate against unbridled free trade. While the stakeholders put forward the argument that it will bolster global trade, critics have stood their ground that the agreement may devastate both environmental and consumer protections while at the same time benefiting large international companies.

Published by the Transnational Institute in collaboration with Global Justice Now, the report warns that investor-protection embedded within its terms could put big companies beyond the reach of national taxation. Mr. Nick Dearden, a director at Global Justice, says that companies such as Google and Amazon are already paying minimal taxes in Europe and that this deal could even make this situation worse. Mr. Dearden has pointed out similar investor-protection in other deals that potentially prioritized corporate profitability over public welfare. A key example highlighted in the report was a dispute involving Mexico and several American agribusiness companies. This dispute reportedly happened in the early 2000s and centered on sales tax imposed on soft drinks containing high-fructose corn syrup by the Mexican government. The purpose of this tax was to reduce the increasing consumption of soft drinks. The tribunal tasked with addressing this dispute made a ruling that favored the investors. More so, Mexico was ordered to part with millions of dollars in damages.