Top officials in the USA have raised concerns over Europe’s probes into the tax arrangements of companies such as Apple, an investigation of which is due to be wrapped up imminently and could result in a multi-billion pound bill for the tech company.
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“This shift in approach appears to expand the role of the commission’s Directorate-General for Competition” that goes “beyond enforcement of competition and state aid law”, the Treasury wrote in the paper. If so, U.S. taxpayers could wind up eventually footing the bill for these State aid recoveries in the form of foreign tax credits that would offset the USA tax bills of these companies. The EU Commission claims that a favourable tax deal with Ireland which gives them a surprisingly low rate of corporate tax amounts to state aid.
Vestager has repeatedly denied she is deliberately taking aim at United States firms, insisting that probes into tax rulings are part of the watchdog’s responsibility to police fair competition within the EU. The U.S. contends that the European Union has made an “unforeseeable departure from the status quo” and is acting inconsistent with.
Treasury officials are concerned that if European authorities hit US companies with major repayments, they’ll reduce potential tax collections in the USA, the white paper said.
The US tech company stands accused of benefiting from a number of tax rulings here.
Apple is not the only company to face scrutiny over its tax deals. Currently, U.S. corporations have about $2.4 trillion accumulated offshore.
It argued that a charge from the European Commission could be considered a foreign tax credit in the USA – a classification that could reduce Apple’s U.S. tax bill significantly possibly wiping it out entirely. “If so, the companies’ USA tax liability would be reduced dollar for dollar by these recoveries when their offshore earnings are repatriated or treated as repatriated as part of possible US tax reform”.
The government, Revenue and Apple reject the accusations.
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President Barack Obama has proposed taxing companies’ accumulated offshore profit at a 14 percent rate, well below the US statutory rate for corporate income tax, which is 35 percent.
