by Julie Martin
Four influential US Senators have urged the Obama administration to examine whether it should use its regulatory authority to impose additional taxes on EU citizens and corporations in retaliation for EU State aid decisions that require recovery of taxes from US multinationals.
In a January 15 letter to Treasury Secretary Jacob Lew, Senator Orrin G. Hatch of Utah, chairman of the tax-writing Senate Finance Committee; Senator Ron Wyden of Oregon, the ranking Democrat on Committee; and Committee members Senator Chuck Schumer, a New York Democrat, and Senator Rob Portman, an Ohio Republican, condemned EU Commission decisions to requiring “retroactive” recovery of taxes in State aid cases involving US multinationals. The decisions are “inconsistent with internationally accepted standards,” the Senators wrote.
Treasury should “consider, under section 891, whether US corporations are being subjected to discriminatory taxation,” the Senators asserted. Section 891 allows the administration to double the rate of some taxes imposed on citizens and corporations of a foreign country “[w]henever the President finds that, under the laws of any foreign country, citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes.”
Robert Stack, US Treasury Deputy Assistant Secretary (International Tax Affairs), has previously suggested that the EU Commission has targeted US multinationals in its State aid cases, citing the high percentage of cases involving American firms. Such cases include an October 15, 2015, decision finding that the Netherlands granted State aid to Starbucks through advance pricing agreements, and pending the EU State aid cases involving private rulings granted to Apple, Amazon, and McDonalds.
EU Competition Commissioner Margrethe Vestager has publicly denied the charge, though. “We do not target companies [based on] nationality or ownership,” Vestager asserted last Monday, while announcing the Commission’s decision that Belgium’s excess profits tax ruling scheme violates EU State aid law.
Vestager made a point of noting that, of the 35 companies ensnared by the Belgium State aid decision, most were European companies and most of the recovery will be from European companies — about €500 million of the estimated €700 million total.
In their letter, the Senators said that US taxpayers may wind up footing the bill for State aid settlements paid by a US multinationals because companies may be able use the foreign tax credit to reduce their US taxes in an amount equal to the recovery.
“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,” wrote the Senators.
They urged Treasury to “intensify” its effort to “caution the EU to not reach results that threaten US interests.”
– Julie Martin is a US tax attorney and a member of MNE Tax’s editorial staff.
Related MNE Tax articles:
Be the first to comment