Treasury weighs options to pressure EU on tax probes

Treasury weighs options to pressure EU on tax probes
© Getty Images

The Treasury Department says it is considering “all modes of engagement” to make it clear that the European Union should reconsider its approach to investigating tax breaks provided to U.S. companies.

The European Commission, the EU’s executive body, has been investigating whether tax breaks that European countries have provided to American companies are illegal “state aid.”

ADVERTISEMENT
Treasury officials and members of the Senate Finance Committee have expressed concern that the commission is causing uncertainty by applying a new interpretation of the state aid rules, is disproportionately targeting U.S. multinational companies and may impose penalties that could result in U.S. companies paying retroactive taxes on earnings that EU countries don’t have the right to tax.

In January, Sens. Orrin HatchOrrin Grant HatchMcConnell names Senate GOP tax conferees Ryan pledges 'entitlement reform' in 2018 Utah governor calls Bannon a 'bigot' after attacks on Romney MORE (R-Utah), Ron WydenRonald (Ron) Lee WydenDemocratic senator predicts Franken will resign Thursday Avalanche of Democratic senators say Franken should resign Lobbying world MORE (D-Ore.), Rob PortmanRobert (Rob) Jones PortmanMcConnell names Senate GOP tax conferees Overnight Finance: House approves motion to go to tax conference — with drama | GOP leaders to consider Dec. 30 spending bill | Justices skeptical of ban on sports betting | Mulvaney won't fire official who sued him How four GOP senators guided a tax-bill victory behind the scenes MORE (R-Ohio) and Charles SchumerCharles (Chuck) Ellis SchumerAmerica isn't ready to let Sessions off his leash Schumer celebrates New York Giants firing head coach: ‘About time’ GOP should reject the left's pessimism and the deficit trigger MORE (D-N.Y.) asked Treasury Secretary Jack LewJacob (Jack) Joseph LewSenator demands answers from DOJ on Russia bribery probe Koskinen's role in the ObamaCare bailout another reason Trump must terminate him The debt limit is the nation's appendix — get rid of it MORE to consider whether U.S. companies are being subjected to “discriminatory or extraterritorial taxes” under section 891 of the tax code. If they are, the president could double the tax rate on citizens and corporations of the foreign countries that are imposing the discriminatory taxes.

In letters sent to the senators last week, Anne Wall, Treasury's assistant secretary for legislative affairs, said that no president has invoked section 891 since it was enacted in 1934, but “nonetheless, we are reviewing this provision and its history closely.”

Wall also updated Hatch, Wyden, Portman and Schumer on recent Treasury efforts to make the commission aware of its concerns.

Lew has sent a letter to European Commission President Jean-Claude Juncker urging him to reconsider the “unilateral actions” and instead focus on cooperative efforts to tackle base erosion and profit shifting, she said. Lew and other Treasury officials have also discussed the matter with Commissioner Margrethe Vestager and her staff, and Lew brought up the topic with his European counterparts during recent meetings of the G-20, Wall added.

Hatch said in response to Wall’s letter that “Treasury should remain vigilant in oversight and be prepared to take action to ensure American businesses do not fall victim retroactively to a novel legal theory that undermines the U.S.-EU tax treaty network and disproportionately targets U.S. companies.”