EU tax ruling on Apple a sign that US companies being targetted: Jacob Lew

WASHINGTON: US Treasury Secretary Jacob J Lew said the European Union is singling out American companies for tax investigations as shown by its ruling this week for Apple Inc. to pay Ireland more than 13 billion euros ($14.5 billion) in back taxes.

In a strong signal the European Commission seeks to end member nations’ policies that may give certain companies unfair advantages over others, the regulator in its decision on Tuesday said Ireland illegally slashed Apple’s tax bill.

It was a record crackdown that risks straining tensions with the US. “I have raised the issue that the pattern of the action appears to be highly focused on US firms,” Lew said on Wednesday in response to questions after a speech in Washington. “They point to some small actions against non-US firms, but the largest actions do appear to be aimed squarely at our tax base.”

Lew said he understands frustration with slow progress of tax reforms in the US, but “what I don’t think is right is for these issues to be addressed in a way that undermines the spirit of economic cooperation and is inconsistent with well-established principles in tax law.”

The US Treasury has repeatedly pushed back hard against EU state aid probes, saying last week that the commission is taking on the role of a “supra-national tax authority” that has the scope to threaten global tax reform deals.

Lew said that tax laws should make it “impossible” to escape taxes and he sees a growing consensus in Congress to move forward with tax reforms. The timing of Europe’s decision, ahead of the US presidential election in November, means tax reform may become a more prominent issue.

Republican nominee Donald Trump has proposed taxing companies’ accumulated offshore profit at 10%, compared with the current top corporate rate of 35%. The taxes that US companies pay abroad can be credited against the taxes they owe when they bring offshore profits home — reducing their effective tax rate.