Top officials in the US have raised concerns over Europe's probes into the tax arrangements of companies such as Apple, an investigation of which is due to be wrapped up imminently and could result in a multi-billion pound bill for the tech company.
The US Treasury argues it will create an "unfortunate" precedent in international tax policies and leave taxpayers across the pond footing the bill while further investigations into more companies could have a "chilling effect" on cross-border investment between the US and EU.
The investigation by Brussels into Apple's so-called sweetheart tax deal began in 2014. The EU Commission claims that a favourable tax deal with Ireland, which gives them a surprisingly low rate of corporate tax, amounts to state aid. Apple and Ireland both reject the claims.
Previous cases against Starbucks and Fiat have already resulted in huge backdated tax bills for the firms while Amazon is also accused of similar state aid infringements in relation to its offices in Luxembourg, in investigations led by EU competition commissioner Margarethe Vestager.
The US Treasury raised these concerns in February in a letter to EU President Jean-Claude Juncker from Treasury Secretary Jack Lew.
Now, the Treasury has issued a near point-by-point rebuttal of the bloc's legal arguments in a white paper published by the department.
Amid a new tax cooperation agreement between 31 countries orchestrated by the OECD at the start of the year, the US believes the state aid investigations could undermine progress.
"We are concerned that the European Commission’s state aid investigations threaten to undermine progress in this area and could create an unfortunate international tax policy precedent," said deputy assistant secretary to the treasury Robert Stack.
"Over the last several months, treasury secretary Jacob J. Lew and his staff have engaged extensively with the Commission to express our concerns related to its State aid investigations."
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Outlining the concerns, Stack said:
These investigations have major implications for the United States. In particular, recoveries imposed by the Commission would have an outsized impact on US companies. Furthermore, it is possible that the settlement payments ultimately could be determined to give rise to creditable foreign taxes.
If so, US taxpayers could wind up eventually footing the bill for these State aid recoveries in the form of foreign tax credits that would offset the US tax bills of these companies. The investigations have global implications as well for the international tax system and the G20’s agenda to combat BEPS [base erosion profit shifting] while improving tax certainty to fuel growth and investment.
It also accused the EU of essentially moving the goal posts, arguing the EU's approach on state aid was "unforseeable" by either the companies or the European countries they chose to be based in, while warning that seeking to recover back taxes retroactively under the rulings sets a bad precedent.
The US treasury department remains ready and willing to look for a path forward that achieves the shared objective of preventing the continued erosion of the corporate tax base while ensuring our international tax system is fair for all," he said.
A ruling in the Apple case is expected in September or October, according to Irish authorities. In a recent interview with the Washington Post marking five years leading the company Tim Cook defended its tax arrangements at home and abroad.