Senators Concerned over EU State Aid Probes

A bipartisan group of senators from the Senate Finance Committee are asking the Treasury Department to intervene with European Commission officials who have been investigating special deals set up by U.S.-based multinationals with countries in the European Union allowing them to lower their taxes.

Senate Finance Committee chairman Orrin Hatch, R-Utah, ranking member Ron Wyden, D-Ore., and committee members Rob Portman, R-Ohio, and Chuck Schumer, D-N.Y., called on Treasury Secretary Jack Lew Monday to ensure the foreign officials do not issue tax rulings that inappropriately target U.S.-based companies.

Among the companies that have set up state aid deals are Apple, McDonald’s, Amazon and Starbucks.  Last week, the European Commission released a document describing measures that will reduce EU member states’ ability to issue rulings cutting the taxes of foreign businesses (see EU Lays Down the Law on Tax Deals as Apple Probe Continues).

“We encourage Treasury to continue its active engagement with officials of the EC and Member States and to work with other agencies, such as the United States Trade Representative, to ensure the United States is using all of the tools at its disposal to protect U.S. interests in these matters,” the senators wrote in a letter to Lew on Monday.

In recent years, the EC has launched a series of formal investigations into its member countries’ tax treatment of various multinational companies. The Senate Finance Committee, which has jurisdiction over tax policy, held a hearing last December examining the potential impact these investigations could have on U.S. firms.

In January, Hatch, Wyden, Portman and Schumer wrote an earlier letter to Lew asking the Obama Administration to increase its engagement with the EC on the investigations to avoid unfair rulings that would impose retroactive results that are inconsistent with international tax standards and, ultimately, cause harm to U.S.-based companies.

While the U.S. Treasury Department has focused efforts on this issue, even exploring Section 891 of the Tax Code to retaliate and allow the administration to double U.S. taxes on EU entities and individuals, the EC is continuing to pursue the investigations. 

“We are disappointed that, to date, EC officials generally have dismissed our concerns and continue to insist they are not targeting U.S. companies,” the senators wrote in their letter to the Treasury. “At the same time, their responses have actually shown our concerns are justified.”

In their letter today, the senators urged Lew to continue his efforts to urge the EC to reconsider its approach of applying new theories of state aid retroactively targeted at U.S. companies and sought further clarification on the administration’s view of the state aid investigations.

“Our concerns are driven not only by the initial cases, but also by the precedent they will create and their long-term implications,” they wrote.