Tax tensions between the US and Europe hit new high

In the final session of the two day Global Tax Conference at Dublin Castle yesterday, a senior Canadian tax advisor used the analogy of children playing football to describe the relationship between multinationals and government when it comes to tax.

In a kids football match, he said, when the ball goes one way, all the children chase it. At a professional level, the players are disciplined and stick to their position.

“The professional football side is the multinational corporation,” said Professor Brian Arnold, of the Canadian Tax Foundation.
“The six and seven year olds are the national governments. The ball is, of course, the money.”

The remarks received a hearty laugh from delegates at the Irish Tax Institute-organised conference.

Tensions between tax practioners and Government are to be expected. Tensions between two of the world’s biggest economies over tax are not.

The row between the US and Europe over the latter’s state aid investigations have come to a head in recent weeks as Treasury Secretary Jack Lew wrote to European Commission President Jean-Claude Juncker and EU antitrust chief Margrethe Vestager warning the probes potentially represented dangerous precedents.

Brussels has initiated a raft of investigations into the tax arrangements involving various US companies and their European host countries, including Apple, Starbucks, Amazon and McDonalds.

The issue was raised at the Dublin Castle conference, with some of the strongest remarks coming from senior Intel executive Ronald Dickel, who accused Brussels of attempting a “naked revenue grab” and of targeting US firms in particular.

Alongside Dickel at the panel discussion, former US Congressman David Camp took a more diplomatic line, but noted the attention from politicians in Washington.

Representatives of both the US government and the EU at the tax conference attempted to play down the row, saying there was no threat of a tax war.
But in a joint interview with the Irish Independent and Reuters, Robert Stack, assistant secretary at the US Treasury, said Washington was taking the matter very seriously. “We’ve expressed our views on that and among the things that we have taken seriously are suggestions by Congress that we would look at statutory provisions that would give us some ability to retaliate,” he said.

These include a never-used statute that would allow Washington to raise US taxes on EU firms and individuals in retaliation for discriminatory taxes.
“We are looking at those but we are not commenting one way or the other,” Mr Stack said.

Valere Moutarlier, head of taxation at the European Commission, told Reuters that there was a healthy dialogue between the two sides, and there was no sign of things escalating.

For Ireland, the row is of particular importance as it is at the centre of a state aid probe involving Apple. The timing of a decision on that has become a bit of a mystery.

Asked recently when the probe would come to a conclusion, Vestager was quoted as saying: “don’t hold your breath”.

Europe came in for broader criticism at the conference yesterday also, in terms of its approach to the OECD’s Base Erosion and Profit Shifting (BEPs) project.

Simon Henry, CFO of Shell, said all the “European corporates that I deal with are very concerned about Brussels looking at BEPs and saying ‘well that’s all well and good, but we’re going to do something completely different’.” He said Brussels, which is introducing its own anti tax avoidance directive, risks undermining the BEPs work. Moutarlier said as far as the EU is concerned, it is not just about implementing the minimum BEPs standards.

Brussels has been keen to emphasise that it wants to clamp down on tax avoidance by multinationals. One wonders if it expected this level of tension.