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.”

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 HatchOmnibus includes search-and-seize provision New kid on the tech block Senate GOP: Legislation to protect Mueller not needed MORE (R-Utah), Ron WydenRonald (Ron) Lee WydenOvernight Cybersecurity: Zuckerberg breaks silence on Cambridge Analytica | Senators grill DHS chief on election security | Omnibus to include election cyber funds | Bill would create 'bug bounty' for State Senate passes controversial online sex trafficking bill GOP senator blocking Trump's Intel nominee MORE (D-Ore.), Rob PortmanRobert (Rob) Jones PortmanOvernight Tech: Zuckerberg breaks silence on Cambridge Analytica controversy | Senate passes sex trafficking bill | EU pushes new tax on tech | YouTube toughens rules on gun videos Senate passes controversial online sex trafficking bill GOP leaders to Trump: Leave Mueller alone MORE (R-Ohio) and Charles SchumerCharles (Chuck) Ellis SchumerAmtrak to rename Rochester station after Louise Slaughter Conscience protections for health-care providers should be standard Pension committee must deliver on retirement promise MORE (D-N.Y.) asked Treasury Secretary Jack LewJacob (Jack) Joseph LewBig tech lobbying groups push Treasury to speak out on EU tax proposal Overnight Finance: Hatch announces retirement from Senate | What you can expect from new tax code | Five ways finance laws could change in 2018 | Peter Thiel bets big on bitcoin Ex-Obama Treasury secretary: Tax cuts 'leaving us broke' 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.”