EU wants to become ‘final arbiter’ of global tax standards, US senators say

31 January 2017 9:56am

24th May 2016. Matthew Newman & Lewis Crofts

US Treasury Secretary Jacob Lew has been urged by US senators to question the European Commission's role as a "final arbiter" of how EU governments apply international tax standards.

Senior members of US Senate Finance Committee wrote in a letter to Lew that the US should use "all of the tools at its disposal" to derail the commission's state-aid investigations into alleged tax breaks to US multinationals, including Apple, and McDonald's.

"The commission appears to be asserting supremacy over and becoming the final arbiter of transfer pricing and other international tax determinations in the EU," Senate Finance Committee Chairman Orrin Hatch and other senators said in the letter.

The EU regulator has investigated tax arrangements struck with Starbucks in the Netherlands, with Apple in Ireland, and with Amazon and the finance arm of Fiat Chrysler Automobiles in Luxembourg. The regulator has also ruled against a Belgian regime that allowed multinationals to deduct "excess profits" from their tax liabilities.

The senators had already raised their concerns to Lew in January. The treasury secretary expressed those concerns in a letter to commission President Jean-Claude Juncker in February, writing that the commission's "new interpretation" of EU state-aid rules "creates disturbing international tax policy precedents".

The senators' latest salvo comes as EU antitrust chief Margrethe Vestager met today with Luxembourg finance minister Pierre Gramegna to discuss the tax investigations.

The senators have been vocal opponents to the EU probes, arguing that they unfairly target US companies. Senior US officials have said that the commission has taken a "novel" approach to state-aid rules and shouldn't apply this new approach "retroactively" - in effect demanding millions of euros in back taxes.

The commission, for its part, has argued that its investigations are in line with previous state-aid probes and EU jurisprudence.

Last Friday, Johannes Laitenberger, director general of the commission's competition department, denied that the regulator was targeting specific companies.

"All cases are equal and none is more equal than others," he said. "Every case - regardless of its visibility - is investigated and assessed on its own merits. We try to obtain the best possible information; we look at the facts; and we reach a decision based on evidence and the law."

In June, Vestager plans to publish detailed information about what the commission has learned from investigating more than a 1,000 tax rulings by EU governments. These rulings are issued to companies seeking assurances about their future tax liabilities.

Laitenberger said most of the rulings "don't seem to grant a selective advantage" to companies. But there are "significant outliers," he said.

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