Brussels, 12/02/2016 (Agence Europe) - On Friday 12 February, the European Commission responded to criticisms from US Treasury Secretary Jack Lew about investigations into potential state aid granted to companies by means of tax rulings.
In a letter sent the previous day to the president of the European Commission, Jean-Claude Juncker, and leaked by Bloomberg, Lew said that these investigations are creating “disturbing international tax precedents and seem to target US-based firms without sufficient justification.” He said the Commission “appears to be adopting an entirely new legal theory and applying it retroactively in a broad and sweeping manner. We respectfully urge you to reconsider pursuing these unilateral actions and instead focus on our collective work. US multinationals generally do not conduct the cutting-edge research and development that creates substantial value in the European Union, and as a result, comparatively little of their income is attributable to their European operations.”
The Commission replied: “All companies, no matter their nationality, generating profits in an EU country should pay taxes in line with national tax laws. Under EU state aid rules, national tax authorities cannot give tax benefits to selected companies that are not available to others. In case such benefits have nevertheless been granted and are subsequently declared incompatible with EU state aid rules, the Member State concerned must recover the amount that should have been paid from the company concerned. This is a standard feature of EU state aid law,” explained a Commission spokesperson, explaining that there was not prejudice against US companies.
The Commission said: “The US taxation system recognises tax credits for non-US profits of US companies repatriated to the US but already duly taxed elsewhere. Thus, if a US multinational decides to repatriate European profits already taxed in an EU country, this would ordinarily give rise to tax credits in the US. The purpose is to avoid double taxation of non-US profits. It is how the US taxation system operates irrespective of the Commission's state aid investigations. In any event, it is a reality that many US multinationals decide not to repatriate their non-US profits to the US,” commented the spokesperson.
Finally, the Commission said: “There is no retroactivity in the Commission's tax state aid investigations - EU state aid rules and the relevant legal principles have been in place for a long time.”
In October, the Commission said that companies Starbucks and Fiat Finance and Trade had benefited from special treatment via tax rulings from the Netherlands and Luxembourg respectively. It ruled that the Belgian system of tax exemptions for excess profits ran counter to the EU state aid rules. All three companies have said they will appeal. Other investigations are under way against tax rulings for Amazon and McDonald's granted by Luxembourg and a tax ruling for Apple granted by Ireland. (Original version in French by Elodie Lamer)