Brussels risks becoming a “supra-national tax authority”, the US government has said in advance of an EU decision that could force the American technology giant Apple to pay billions of euro in allegedly underpaid tax.
European Commission investigations into multinational corporate tax arrangements will, moreover, “undermine” global collaboration, Washington argued this week.
Starting in June 2014, the commission opened a series of inquiries into the tax rulings issued by several EU member states. These include the cases of Apple in Ireland; Starbucks in the Netherlands; and Amazon, Fiat Chrysler and McDonald’s in Luxembourg. The commission suspects the national tax deals amount to state aid which is illegal under EU law.
Because tax “rulings are generally available to any taxpayer”, the commission had not previously considered them to be an “advantage”, amounting to illicit state aid, according to the US Treasury white paper. That changed with the recent investigations. “Now, the commission can find advantage if it disagrees with the member state’s application of the arm’s length principle to particular, and often highly complicated, facts and circumstances.”
“This shift in approach appears to expand the role of the [commission’s competition authority] beyond enforcement of competition and state aid law under [EU treaties] into that of a supra-national tax authority that reviews member state transfer price determinations,” the report stated.
It “also sets an undesirable precedent that could lead to other tax authorities, particularly those in developing countries that look to the EU as a model, to seek large and punitive retroactive recoveries from both US and EU companies.”
“While we recognize that state aid is a longstanding concept, pursuing civil investigations--predominantly against U.S. companies--under this new interpretation creates disturbing international tax policy precedents,” Lew wrote.
“It could undermine the well-established basis of mutual cooperation and respect that many countries have worked so hard to develop and preserve,” he stated.
The hands of Barack Obama, the US president, are seen during his meeting with Gene Sperling, director of the National Economic Council (left), and Jack Lew, America’s treasury secretary, on 18 December 2013. Credit: Official White House Photo/Pete Souza