CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. US Treasury Urged To Act On EU Tax Ruling Probes

US Treasury Urged To Act On EU Tax Ruling Probes

by Mike Godfrey, Tax-News.com, Washington

18 January 2016


European Union's state aid investigations could lead to retroactive taxation on multinational enterprises and have an adverse impact on US-based companies, members of the US Senate Committee on Finance have warned.

In their letter submitted to the US Secretary of the Treasury, Jacob Lew, on January 15, 2016, Chairman Orrin Hatch (R-Utah), Ranking Member Ron Wyden (D-Ore), and Committee members Rob Portman (R-Ohio) and Chuck Schumer (D-NY) said: "We are writing to you to express our strong concerns regarding the state aid investigations currently being conducted by the European Commission of several of its member states regarding tax rulings and advanced pricing arrangements provided to multinational businesses, most of them US firms."

"In that regard, we urge Treasury to intensify its efforts to caution the Commission not to reach retroactive results that are inconsistent with internationally accepted standards and that the US views such results as a direct threat to its interests. We also ask that you consider, pursuant to the President's powers under Internal Revenue Code section 891 (which would impose a double rate of tax on citizens and corporations of foreign countries engaging in discriminatory taxation), whether 'corporations of the US are being subjected to discriminatory or extraterritorial taxes.'"

The Commission in October 2015 concluded that Luxembourg's tax ruling for Fiat Finance and the Netherlands's ruling for Starbucks do not reflect economic reality such that they grant selective tax advantages to the two companies in breach of EU law. The Commission ordered the countries to recover from the companies amounts that should have been collected in tax revenue going back up to ten years. It is also investigating other tax rulings, including Ireland's rulings for Apple and Luxembourg's ruling for Amazon and McDonald's.

The letter continues: "We recognize that the Commission believes it is on solid ground in pursuing these cases and enforcing EU competition law against its member states. It alarms us, however, that the Commission is using a non-tax forum to target US firms essentially to force its member states to impose taxes, looking back as far as ten years, in a manner inconsistent with internationally accepted standards in place at the time. By all accounts, these cases have taken the member states, companies, and their advisors by surprise."

"A related issue is the potential impact on the US fisc. As long as our worldwide tax system relies on the foreign tax credit to mitigate double taxation, there may be a risk of foreign governments seeing US multinationals as a source of 'easy cash.'"

The letter says the Commission's investigations raise serious questions about "our ability to rely on bilateral tax treaties negotiated with EU member states. As Mr. Stack testified, "'[if] the EU Commission is in effect telling member states how they should have applied their own tax laws over a ten-year period,' the ability of US companies and the US government to rely on bilateral treaties is thrown into doubt. Neither the US companies being targeted nor the US Government is a party to these cases, and the EU is not a party to our bilateral tax treaties. We question a process under which the US Government has no rights to protect US tax interests while ensuring US firms are not subject to double taxation because of EU state aid decisions."

The letter concludes: "Our concerns are driven not only by these initial cases, but also by the precedent they will set that could pave the way for the EU to tax the historical earnings of many more US companies – in some cases, the earnings in question could have been generated up to a decade ago. We urge Treasury to intensify its efforts to caution the EU Commission not to reach retroactive results that are inconsistent with internationally accepted standards and that the United States views such results as a direct threat to its interests. We also ask that you consider, under Section 891, whether US corporations are being subjected to discriminatory taxation."

TAGS: compliance | Finance | tax | investment | business | European Commission | tax compliance | Netherlands | tax avoidance | interest | law | Luxembourg | enforcement | tax authority | agreements | multinationals | legislation | tax planning | transfer pricing | United States | standards | regulation | trade | European Union (EU) | Europe

To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »