10:25 GMT +315 November 2019
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    US Treasury Hits Out at EU Tax Probe Into Apple, Starbucks, Fiat, Amazon

    © REUTERS / Yves Herman
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    In a remarkably strident report, the US Treasury has criticized the European Commission's tax probe into Apple, Starbucks, Fiat (now Fiat Chrysler Automobiles), and Amazon, claiming that it should not be able to collect back-taxes on the companies in Europe.

    The European Commission launched a series of investigations into the companies for using making use of benign tax arrangements in Ireland, Luxembourg and the Netherlands in order to reduce its tax bills on profits made in other EU member states. 

    However, in a sign of tensions between the US and Brussels, the US Treasury report said that the Commission had changed its approach to the tax arrangements, classing them as "State Aid," which is banned under EU rules.

    "[The] Commission is seeking to recover amounts related to tax years prior to the announcement of this new approach-in effect seeking retroactive recoveries. Because the Commission's approach departs from prior practice, it should not be applied retroactively."

    "Indeed, it would be inconsistent with EU legal principles to do so. Moreover, imposing retroactive recoveries would undermine the G20's efforts to improve tax certainty and set an undesirable precedent for tax authorities in other countries," the report said.

    The heavyweight intervention in EU affairs — amid rising opposition to US firms using aggressive tax measures to reduce their tax bills in EU states — comes at a critical time, as the US is trying to push through the Transatlantic Trade and Investment Partnership (TTIP) trade deal.

    The strong language in the report backing the US-based companies will be seen by many critics of TTIP as a further sign that the US is using the trade agreement to favor US firms doing business in the EU. There has already been criticism of the US side attempting to water down strict EU standards on food and pharmaceutical safety, the environment and workers' rights.

    Background

    On June 11, 2014, the Commission initiated an investigation of advance pricing arrangements provided by the Irish tax authorities to Apple regarding the attribution of profits to an Irish branch of an Irish company that, under Irish law, was treated as non-resident for Irish tax purposes because it was not managed and controlled in Ireland. The Commission has not issued a final decision; however, its preliminary view is that the arrangements constitute State aid.

    On June 11, 2014, the Commission initiated an investigation of advance pricing arrangements provided by Dutch tax authorities relating to the transfer price of royalties paid by a Starbucks affiliate in Netherlands to its UK affiliate, as well as the prices paid by a Dutch manufacturing affiliate to a Swiss affiliate for roasting coffee beans. The Commission has issued a final decision that the arrangements constitute State aid. The decision is on appeal to the EU General Court.

    On June 11, 2014, the Commission initiated an investigation of an advance pricing arrangement provided by Luxembourg tax authorities to a Fiat financing company based in Luxembourg.  The Commission has issued a final decision that the arrangements constitute State aid. The decision is on appeal to the EU General Court.

    On October 7, 2014, the Commission initiated an investigation of advance pricing arrangements provided by Luxembourg tax authorities relating to the transfer price of royalties paid by an Amazon Luxembourg affiliate. The Commission has not issued a final decision; however, its preliminary view is that the arrangements constitute State aid.

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    Tags:
    tax avoidance, tax breaks, European Parliament, European Council, TTIP, US Treasury, European Union, Europe, United States, Ireland, Luxembourg, Netherlands
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