US Treasury secretary Jack Lew said the EU's far-reaching tax probe was creating "disturbing international tax policy precedents" and urged Brussels to ease up in its current investigations against US multinationals like Apple, Amazon, Starbucks and McDonald's.
In a letter addressed to European Commission (EC) chief Jean-Claude Juncker, Lew warned that current investigations into tax evasion could damage the "mutual cooperation and respect that many countries have worked so hard to develop and preserve."
Lew said the EU had "serious concerns about fundamental fairness" of the EU's tax policy, adding that the uncertainty created by tax probes "could damage the business climate in Europe and deter foreign direct investment."
The criticism from such a high-ranking official is the most significant in recent times and comes amid an increase in criticism against Brussels' pursuit of companies over suspected tax avoidance.
US companies have become increasingly frustrated at the tax crackdown, arguing that they are subjected to unnaturally high tax rates if they attempt to transfer money to the US, with many analysts suggesting this has led to many American organizations holding assets in low-tax European countries.
EU Steps Up Tax Probes
In response, the EC rejected any suggestion it was unfairly targeting American firms.
"EU law applies indiscriminately to all companies operating in Europe — there is absolutely no bias against US companies," a spokesperson said, adding that investigations had "mostly" involved European companies.
EU officials have stepped up their crackdown on tax avoidance following the LuxLeaks scandal of 2014, which revealed that a number of US multinationals, including Apple and Amazon, were among 340 firms to have negotiated highly favorable tax deals with authorities in Luxembourg.
EU Commission will present recently launched #tax avoidance package to EU Council on 12 Feb. https://t.co/R0WfBwqD4V
— EU Taxation&Customs (@EU_Taxud) February 11, 2016
The issue was hugely embarrassing for the European Commission, as current president Jean-Claude Juncker was the prime minister of Luxembourg during the time that many laws were introduced allowing such tax deals to be negotiated.
Investigations have since been ongoing to decide whether such tax deals constituted illegal state aid, amid reports in the Financial Times that Apple may be forced to pay back US$19 billion in taxes if it is found guilty of benefiting from such practices.
Corporate #tax avoidance: see the problem and the proposed solutions in pictures. https://t.co/xxYk3Pqw9r
— EU Taxation&Customs (@EU_Taxud) February 10, 2016
However, not all have been pleased with the scope EU's tax crackdown, with many critics scalding Brussels' recently announced proposals aimed at combating tax evasion.
A series of NGOs said the plans did not go far enough to stop companies from shifting assets to low tax zones, while the proposals seemed to hit a snag on Friday with officials admitting they reforms should not go beyond international guidelines.
