Europe News

Tax reform should not hurt US trade partners, says incoming Eurogroup chief

Key Points
  • Finance ministers of France, Germany, Italy and Spain sent a letter to the U.S. noting that its tax reform plans were "at odds" with international trade rules
  • Centeno argued that the tax reform should be done in a way that doesn't hurt its trade partners
Portuguese Finance Minister Mario Centeno gestures as he speaks during a press conference to present the state budget in Lisbon on February 5, 2016.
Jose Manuel Ribeiro | AFP | Getty Images

U.S. plans to reform its tax system should not hurt its trade partners, the incoming euro zone finance chief told CNBC on Wednesday.

Mario Centeno, the current finance minister of Portugal who will take over as Eurogroup president on January 13, said that tax policy should be coordinated in a way that prevents disruptions to trade. The Eurogroup is a regular meeting of the finance ministers of the 19 countries that share the euro.

His comments follow a letter sent Monday to Steven Mnuchin, the U.S. treasury secretary, by the finance ministers of France, Germany, Italy and Spain. It noted that tax reform in its current state would "be at odds" with free-trade international rules and could create a "major distortive impact," the Financial Times reported.

However, Centeno told CNBC in an exclusive interview: "We understand the concerns of national authorities — in this case, U.S. authorities — vis-a-vis tax revenue and the way this tax revenue is generated."

"But, we think that the way the globalization process helped our economies to advance and to go further cannot be now put into question by policies that, even if they are understandable in a national perspective, they have to be coordinated among trade partners."

There are concerns that U.S. tax reform could hurt American companies when importing goods from their own foreign factories. This would mean that a company located outside the U.S could still be taxed by U.S. authorities.

"We have been working together quite closely for a long period of time in OECD Forum with the BEPS (base erosion and profit shifting) process, for example," Centeno said. "A key example (being) on how the cooperation among different tax jurisdictions may have an impact on reducing tax evasion and preventing countries from competing among themselves in a detrimental way."

"And we think it's our obligation to work with the U.S. authorities in order to prevent this to happen," he added.

Related Tags