At the informal meeting of the finance ministers in Bratislava on Saturday 10 September, a number of member states expressed concern at the uncertainty that may be brought about by the European Commission's investigations into state aid granted by tax breaks.
The Commission is taking a close look at many tax rulings awarded by several countries to multinationals. The aim of these rulings is to offer businesses legal clarity and certainty on how the tax authorities will deal with their specific situations.
At the end of August, the Commission ordered Ireland to recover €13 billion in tax advantages granted to the American giant Apple (see EUROPE 11612). It also wants Belgium to carry out a tax adjustment with some 30 businesses, calling an entire system of tax rulings into question. The Netherlands and Luxembourg received the same requests for Starbucks and Fiat.
Unsurprisingly, it was these countries that expressed the most concern in Bratislava. The Luxembourg and Belgian ministers voiced misgivings at the retroactive nature of the Commission's decisions, with Belgium arguing that this would bring with it an element of uncertainty. The Irish minister is reported to have referred to uncertainty in the context of the decision on Apple. However, the charge was not mounted only by countries under a Commission investigation. For instance, the Italian minister Pier Carlo Padoan, said that there was a lack of clarity: is it a competition matter, or a taxation one?
The OECD has itself received certain verifications from the Commission. "We understand that they intend to apply the OECD Transfer Pricing Guidelines in their analysis. It is critical that this common standard be used to avoid double taxation and uncertainty", Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, told EUROPE.
The other question that occupied the ministers in Bratislava is the option for countries other than Ireland to see whether they are entitled to claim a chunk of the €13 billion owed by the American multinational (see EUROPE 11620). "The Commission has said two things. The first: 'this money belongs to Ireland' and the second is that: 'anybody who thinks that they are owed some of this money can make a claim", said the Secretary General of the OECD, Angel Gurria.
When it returned the conclusions of the Apple investigation, the Commission said that other countries could also require the American IT giant to pay them more tax on their profits over the same period under their national tax rules. This would reduce the amount to be recovered by Ireland. Apple has organised its sales activities in Europe in such a way that it registers sales, and the accompanying profits, directly in Ireland. In light of the information revealed by the Commission' investigation, other countries may take the view that Apple's commercial risks, sales and other activities should have been registered on their territory. Austria has expressed such an interest.
During the Bratislava session, the Spanish minister, Luis De Guindos, explained that the tax rulings of certain member state had a negative impact on the tax revenue of other countries and suggested that the Commission do a few sums. His German opposite number, Wolfgang Schäuble, is reported to have made a similar request.
The Commission is therefore expected to present the ministers with a document at their next meeting, clarifying how these countries could potentially work out whether they are owed any tax.
Ireland, however, is reported to have said that if anything, the money was owed to the American Treasury. According to Gurria, the American president said at the G20 summit that he was prepared to cooperate. Barack Obama is reported also to have said that countries wishing to claim some of the money should have access to the Commission's decision. This institution, which said that it was quite happy to be transparent over its legal reasoning, however said that it was unable to publish the decision without the agreement of Ireland and Apple.
Gurria, however, stressed that the American government was sometimes forced by its own tax code not to tax certain revenue. Maybe it will consider changes, given the context, he said.
Ultimately, the decision on Apple makes the Commission's forthcoming proposal on a tax dispute resolution mechanism, which is anticipated for 9 November, even more relevant. (Original version in French by Élodie Lamer)