Treasury weighs options to pressure EU on tax probes

Treasury weighs options to pressure EU on tax probes
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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.”

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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 HatchDisconnect: Trump, GOP not on same page Overnight Tech: Dem wants to see FCC chief's net neutrality plans | New agency panel on telecom diversity | Trump calls NASA astronaut Lighthizer expected to win committee approval to lead trade office MORE (R-Utah), Ron WydenRon WydenTrump to impose tariffs on Canadian softwood lumber State removes post highlighting Trump Mar-a-Lago resort Lighthizer expected to win committee approval to lead trade office MORE (D-Ore.), Rob PortmanRob PortmanFive things to know about Trump's steel order Mexico: Recent deportations 'a violation' of US immigration rules EPA union asks Pruitt for meeting over talk of closing office MORE (R-Ohio) and Charles SchumerCharles SchumerSchumer: 'Good for country' if Trump punts on border wall fight GOP senator: There will never be full U.S.-Mexico border wall GOP fundraiser enters crowded primary for Pa. Senate seat MORE (D-N.Y.) asked Treasury Secretary Jack LewJack LewWhite House divide may derail needed China trade reform 3 unconventional ways Trump can tackle the national debt One year later, the Iran nuclear deal is a success by any measure 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.”