US Lawmakers Further Challenge EU’s Tax Ruling Probe
Members of the US Senate Committee on Finance have called on the US Secretary of the Treasury, Jack Lew, to continue aggressive engagement with the European Commission to ensure its ongoing tax ruling probe does not inappropriately target US multinationals.
In their letter submitted to Lew on May 23, 2016, Chairman Orrin Hatch (R-Utah), Ranking Member Ron Wyden (D-Ore), and Committee members Rob Portman (R-Ohio) and Chuck Schumer (D-NY) said: “We encourage Treasury to continue its active engagement with officials of the Commission and member states and to work with other agencies, such as the United States Trade Representative, to ensure the US is using all of the tools at its disposal to protect US interests in these matters.”
The members wrote: “We are disappointed that, to date, Commission officials generally have dismissed our concerns and continue to insist they are not targeting US companies. At the same time, their responses have actually shown our concerns are justified. Commission officials have tried to assure us that these investigations are routine and that our concerns are merely due to our ‘misunderstanding’ of European Union law.”
They added: “In fact, however, in her February 29 letter to you, Commissioner Vestager states that the Commission is now using state aid as one of its ‘tools’ to achieve a ‘reform agenda,’ which confirms our suspicion that these cases are about more than objectively enforcing existing competition policies. The retroactive effect of these state aid investigations contradicts the notion of reform, and any retroactive application of a ‘reform agenda’ is improper and plainly undermines legal certainty and the rule of law.”
The members pointed out that the Commission “appears to be ignoring the national practice and law of its member states and to be imposing its own new standard for transfer pricing determinations. In effect, the Commission appears to be asserting supremacy over and becoming the final arbiter of transfer pricing and other international tax determinations in the EU.”
The members urged the Treasury to consider whether the Commission’s continued insistence that it is not disproportionately targeting US companies is accurate; and whether the Commission’s investigations appear to be based on the application of international tax standards in place during the recovery period, or even those developed through the base erosion and profit shifting project.
They also urged the Treasury to consider the competency of the EC Directorate-General for Competition in applying international tax standards; and the implications of the Commission being the final arbiter of how members states apply international tax standards, including the impact on reaching multilateral consensus with respect to such standards at the OECD; and bilateral tax treaties with member states and the ability of the US to rely on such treaties.
