The U.S. Treasury took the unusual step Wednesday of publishing a detailed critique of the European Commission’s investigations into alleged tax avoidance schemes by a group of U.S. firms, including Apple, Starbucks and Amazon.
Treasury said the commission’s probes into whether U.S. firms unfairly benefited from low corporate tax rates in Europe “undermine” agreements on international tax law and could hurt U.S. taxpayers.
“These investigations have major implications for the United States,” wrote Robert Stack, deputy assistant secretary for international tax affairs at Treasury, in a blog post explaining the agency’s position.
Treasury’s actions are not a defense of these U.S. companies’ actions, but rather signal a disagreement with European authorities over how to resolve the delicate matter of who benefits from overseas profits.
It also comes amid President Obama’s push to discourage U.S. companies from moving their tax residences overseas to avoid U.S. taxes, a ploy known as corporate inversions.
Treasury is touting its tax policy concerns ahead of a verdict from the commission, anticipated this fall, on whether Apple’s tax dealings in Ireland violate European rules. Apple could be ordered to repay $8 billion — and perhaps much more — in back taxes.
Apple, based in Cupertino, Calif., has been pilloried for years both at home and abroad for how it handles its overseas profits — parking billions of dollars in its subsidiary in Cork, Ireland, where the corporate tax rate is 12.5 percent. In contrast, the U.S. statutory corporate rate is 35 percent.
Apple chief executive Tim Cook defended the company’s actions in a Washington Post interview published this month, denying that Apple was a “tax dodger” and that the company would happily bring back those profits home once U.S. tax law is reformed and the rate lowered to be more in line with other countries.
In Europe, the commission already has announced decisions unfavorable to other U.S. firms. Last year, it said a tax deal between Amazon and Luxembourg appeared to amount to unfair state aid by allowing the company to underpay its taxes. Amazon has since changed its tax structure. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
The commission also ruled that Fiat owed back taxes in Luxembourg, and Starbucks owed them in the Netherlands, ordering the companies to repay millions of dollars.
While Europe’s handling of corporate tax policy has worried the Treasury, a commission spokeswoman said European regulators are only trying to ensure that no company receives an unfair advantage in taxation.
The spokeswoman also said the commission has taken note of the Treasury’s opposition, which was published as a white paper, adding that “there is no bias against U.S. companies.”
The Treasury on Wednesday said any repayments ordered by Europe could reduce the amount U.S. firms pay in taxes at home, calling such an outcome “deeply troubling” because it would effectively leave American taxpayers “footing the bill.”
The federal agency also warned that if the commission brought more tax cases against U.S. firms, it “may lead to a growing chilling effect on U.S.-EU cross-border investment.”