In a letter to Steven Mnuchin, US Secretary to the Treasury, Hammond, along with the finance ministers of Germany, France, Italy and Spain state that President Donald Trump’s flagship reforms could break international rules and may risk ‘seriously hampering genuine trade and investment flows’.

The finance ministers say the proposed measures could ‘discriminate’ in a manner which would contravene WTO provisions, would be inconsistent with double taxation rules, and would be ‘poorly targeted’ at helping to combat tax avoidance.

The letter states: ‘While the establishment of a modern, competitive and robust tax system is one of the essential pillars of a state's sovereignty, it is important that the US 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.’

One of the proposals provides for a 20% excise tax on payments to foreign affiliated companies, which the letter states ‘would impact on genuine commercial arrangements’ because it would only apply where payments are being made for foreign goods and services, this would discriminate and break WTO rules.

There are also plans for cross-border intra-group financial transactions to be treated as non-deductible from gross taxable income, and subject to a 10% tax.

The finance ministers’ letter states: ‘This may lead to significant tax charges and may harmfully distort international financial markets.’

The Tax Cut and Jobs bill has passed through both the US House and Senate and is now subject to a review process to bring the two versions in alignment.