The US government is taking on Europe in defending tax practices of US companies such as Apple, the world’s most valuable.
The US treasury published a white paper (pdf) Aug. 24 that accuses the European Commission’s competition arm, which investigates tax and anti-trust issues, of acting as a “supra-national tax authority” that second guesses EU member states’ tax arrangements. The paper also said the commission doesn’t have grounds to demand back taxes from previous years and that its current approach undermines global norms on policing tax evasion.
It’s the US treasury’s second public stand against the EC on behalf of US multinationals. In the first salvo last February treasury secretary Jack Lew sent a letter to the EC president Jean-Claude Juncker, saying that the tax investigations were “targeting US companies disproportionately.” The white paper doubles down, saying that the US treasury remains “concerned” about the possibility of bias against American firms because most of the funds that stand to be recovered accrue from US firms. “This concern will be further heightened if the commission continues to initiate disproportionately more investigations against US companies,” the paper says.
Under competition chief Margrethe Vestager, the EU has aggressively pursued multinationals for flouting “state aid” rules by cutting favorable tax deals with member states. Apple is being investigated for its allegedly illegal deal with Ireland; the iPhone maker may be asked to pay back taxes of up to $19 billion, according to one estimate by JP Morgan. Amazon is facing a similar probe for its dealings with Luxembourg. Starbucks was found to have benefitted from illegal aid from the Netherlands and ordered to pay up to €30 million back to the Dutch government last October. That case is being appealed.
Beyond state aid probes, another US company in the EU’s competition crosshairs is Google, which is embroiled in two antitrust investigations probing its shopping-comparison service and its Android mobile operating system. The search giant could face billions in fines in both cases. They await a final decision from Vestager’s department.
The EU’s competition authority denies charges of anti-Americanism. Indeed, the EU slapped fines on Italian automaker Fiat at the same time as the Starbucks decision was issued. The fines were of a similar size. The competition authority also points to a January finding against 35 multinationals, mainly European concerns, that used an illegal tax scheme in Belgium, with €700 million to be recovered. It did not publish a list of the companies; the New York Times reported (paywall) they included BP and BASF.
“EU law applies indiscriminately to all companies operating in Europe–there is no bias against US companies,” the EU competition authority said in a statement.
Tell that to secretary Lew.