US steps up fight against EU tax crackdown on Apple

The US Treasury said the EC is effectively changing the tax rules now, but planning to apply them retroactively to the companies

The US stepped up its fight against the European Commission’s (EC) crackdown on tax avoidance by Apple and other multinational companies, accusing the commission of unilateralism and overstepping its mandate.

In a white paper, the US Treasury said the EC probe into alleged special tax treatment that certain EU countries gave Apple, Amazon, Starbucks and Fiat Chrysler “undermines the international tax system.”

With potentially billions of dollars in tax levies at stake, the Treasury also reiterated its view that the investigations “disproportionately” target US companies and would prevent Washington from recovering taxes that it is eying from the companies’ offshore earnings.

“These investigations have major implications for the United States. In particular, recoveries imposed by the Commission would have an outsized impact on US companies,” said Treasury Deputy Assistant Secretary for International Tax Affairs Robert Stack in a statement.

“US taxpayers could wind up eventually footing the bill” if the commission forces the companies into tax settlements, he said.

The US acknowledged the problems around the issue of multinational firms obtaining state aid, in the form of secret and extremely lucrative tax breaks, from Ireland, Belgium and Luxembourg for setting up business in those countries.

But it said those deals were made under international treaties and accepted tax practices. The Treasury accused the EC in the white paper of taking a “new approach” to established European Union tax law in challenging EU member states’ legal tax breaks offered to multinational firms.

In addition, the Treasury said the European Commission is effectively changing the tax rules now, but planning to apply them retroactively to the companies, which the US said was inconsistent with EU law and international practice.

“The Commission should not seek retroactive recoveries under its new approach,” the white paper said.

Moreover, the white paper said the commission was acting as “a supra-national tax authority” that oversteps its powers in EU challenging member state tax policies.

In a statement, an EC spokesperson denied it was targeting US companies in particular and said that EU rules do not allow national tax authorities to give tax breaks to some companies that are not available to others.

If such breaks are ruled illegal, the benefits from them have to be repaid.

“This is a standard feature of EU state aid rules,” the spokesperson said.