The US has launched a stinging attack on Brussels’ tax investigations into Apple and other companies in an escalation of the transatlantic battle over alleged EU targeting of US multinationals.
In a last-ditch shot before Brussels announces the results of its lengthy investigation into Apple’s Irish tax affairs, the US Treasury accused the European Commission of trying to become a “supranational tax authority”.
It claimed the EU’s attempts to reclaim tax from US companies threatened to undermine global attempts to reform tax rules, creating an “unfortunate international tax policy precedent”. It also claimed that perceived bias against American multinationals would have a “chilling effect” on investment in Europe.
The attack is the latest sign of growing tensions over European treatment of US companies, which has seen it accuse the likes of Google and Microsoft of abusing their dominance.
Brussels is now believed to be close to announcing the results of its three-year investigation into whether agreements struck between Apple and Irish tax authorities in 1991 and 2007 constitute illegal state aid.
Having already said it is likely to rule against Apple, it could hit the company with a tax bill amounting to billions of dollars. Tim Cook, Apple’s chief executive, has said he will appeal an unfair ruling.
US officials believe Brussels has unfairly singled out US companies in investigating alleged sweetheart deals on transfer pricing – when companies shift profits between subsidiaries in order to book them in low-tax jurisdictions. Much of Apple’s global sales are routed through Ireland, and competition authorities are concerned that this grants the company an advantage.
The commission has already declared that arrangements between Fiat and Luxembourg and Starbucks and the Netherlands amount to state aid, both of which are being appealed, while it is also investigating an agreement between Amazon and Luxembourg.
The White House is concerned that if the EU were to hit multinationals with hefty tax demands it would affect American taxpayers by allowing the companies to offset them against US taxes when they repatriate offshore earnings.
“The companies’ US tax liability would be reduced dollar for dollar by these recoveries,” a report commissioned by US Treasury Secretary Jack Lew said on Wednesday. “That outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers.”
The report said that while there have only been three transfer pricing investigations involving US companies, further cases “may lead to a growing chilling effect on US-EU cross-border investment”.
It also said attempts by the OECD group of rich nations to reform international tax laws could be damaged. “Critically, these investigations also undermine the multilateral progress made towards reducing tax avoidance,” the report said.
The Treasury claims that the European Commission has moved the goalposts by changing tack on what it considers to be illegal state aid, and subsequently seeking years of back taxes under its new definition.
“Such a change in course, which has required the Commission to second-guess Member State income tax determinations, was an unforeseeable departure from the status quo,” the report said.
“Imposing retroactive recoveries would undermine the G20’s efforts to improve tax certainty and set an undesirable precedent for tax authorities in other countries.”
The commission said that European law “applies to all companies operating in Europe” and that “there is no bias against US companies”.