US and Brussels in dispute over Apple tax investigations

European Commission urged to reconsider inquiries into firm’s arrangements in Ireland

US treasury secretary Jack Lew: has called on the European Commission to reconsider the inquiries. Photograph: Nicholas Kamm/AFP/Getty Images

US treasury secretary Jack Lew: has called on the European Commission to reconsider the inquiries. Photograph: Nicholas Kamm/AFP/Getty Images

 

Political tension is escalating between Washington and Brussels over EU state-aid inquiries into Apple’s tax arrangements in Ireland and the affairs of other US groups in Europe.

With a ruling from Brussels in the Apple case expected some time after the election, US treasury secretary Jack Lew has called on the European Commission to reconsider the inquiries. A letter from Mr Lew to commission chief Jean-Claude Juncker opens up a new political front in the US campaign against the investigations as previous public criticism was confined to top treasury officials.

The Government, the Revenue and Apple have each rejected the commission claims that the group received preferential tax rulings, giving it an unfair trading advantage in breach of state aid rules.

In his letter to Mr Juncker, Mr Lew said the state-aid inquiries presented the prospect of disturbing precedents being set. “While we recognise that state aid is a long- standing concept, pursuing civil investigations – predominantly against US companies – under this new interpretation creates disturbing international tax policy precedents,” Mr Lew wrote. “We respectfully urge you to reconsider this approach.”

In addition to the Apple case, the commission has also been investigating the affairs of McDonald’s and other groups such as Amazon and Starbucks.

Last month Apple chief Tim Cook privately in Brussels met competition commissioner Margrethe Vestager to press the company’s case. Neither Apple nor the commission has disclosed the substance of their discussion, which led to some speculation in Dublin that a settlement might be in play.

In his letter, Mr Lew said the commission appeared to be targeting US companies disproportionately and warned they may be more heavily penalised than other companies.

He said regulators were pursuing income which EU countries were not entitled to tax under international rules, adding that such action could undermine bilateral tax treaties.

The commission has denied any bias, saying EU law applies to all firms undertaking business in Europe.

Mr Lew said Washington was was already working to stamp out the practice of American companies moving their revenues overseas to avoid paying taxes at home.

However, he said “well-established international tax standards” don’t give the EU a right to increase levies.

“US multinationals generally do not conduct the cutting- edge research and development that creates substantial value in the European Union, and as a result, comparatively little of their income is attributable to their European operations.”