Vestager defends EU right to rule on tax deals in first US visit

EU competition commissioner Margrethe Vestager has used her first visit to the United States following the inauguration of Donald Trump to defend the right of the European Commission to rule against countries who use selective tax deals to attract companies.

With last year's record EU ruling against Apple's tax arrangements with Ireland looming large over the visit, Ms Vestager used her appearance at the American Bar Association to highlight the powers of the EU to rule on tax matters related to state aid.

Speaking to reporters in Washington, she said that while EU competition law drew extensively from the US system, there were differences – namely the ability of the EU to rule on the tax practices of member states when they are deemed to be anticompetitive.

“We have the same worries when it comes to how companies can harm competition, but we’re also concerned if governments undermine fair competition,” Ms Vestager said. “For us we have a double approach. Companies can harm fair competition but so can governments, and they can do that by giving money or privileges to just a few selected favourite companies.”

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She said the EU treaties gave the commission the rules to tackle state aid in all its forms, including tax – something she said that did not have an equivalent elsewhere.

Relations between the US and the European Union have been strained following the European Commission's ruling against Apple, which ordered Ireland to recoup up to €13 billion plus interest in State aid from the US computer giant.

‘Unfair targeting’

The US treasury last year accused the commission of unfairly targeting US multinationals. In its appeal to the judgment lodged at the European Court of Justice in Luxembourg, Apple accused the European Commission of making “fundamental errors” in its analysis, arguing that the profits in question were attributable to the US and not to Ireland.

Speaking to The Irish Times, Ms Vestager said it was "no surprise" that Apple stated its case, adding the commission would answer the case in court.

“If you want to stay clear of state aid issues, you should use prices approximating arms-length prices,” the commissioner said, as she fielded questions about whether the EU had acted retroactively in its ruling against Apple.

She said that “what is important for us is that profits are generated and legitimately registered in Europe, for them to be taxed where they are generated in accordance with national legislation and European legislation”.

While Ms Vestager met Maureen Olhausen, the head of the US Federal Trade Commission, she did not hold meetings with the Trump administration, which has yet to appoint senior competition officials.

The US president has pledged to repatriate the activity and profits of US multinationals, with some analysts arguing that the European Commission’s use of competition law to target the tax practices of European countries will help to drive US multinationals out of Europe.

Ms Vestager said that it was not the EU’s business “when and if US companies repatriate their profits and how the US tax system works”.