The US Treasury has just set down a big marker in the transatlantic battle over corporate tax.
The publication of a White Paper on Wednesday is a clear message to Brussels of the level of concern – indeed anger – in Washington over cases taken by the EU Commission relating to the tax arrangements between US companies and EU member states.
This is of crucial interest to Ireland, given the case taken by the commission over Apple's tax treatment here. We are caught right in the middle of this row, under which Washington has just turned up the heat considerably, shortly before the commission is due to give its final verdict on the Apple case.
The timing, of course, is no coincidence, and the length of time the commission has taken to reach its final verdict on Ireland and Apple is surely a sign of some nervousness about the likely reaction.
The EU Commission is investigating the tax affairs of a number of major companies, many of them US-owned. It has already called for the Netherlands to recoup €30 million from Starbucks (a case facing challenge), while other big US names in the frame are Amazon and McDonald's.
However, there is no doubt that the Apple case is the big one, given the high-profile nature of the company and estimates that billions of euro could be involved, depending on how the decision goes.
The US had already fired a number of shots, with US treasury secretary Jack Lew and EU competition commissioner Margrethe Vestager crossing swords. Lew had already written to the commission president, Jean-Claude Juncker, and Washington's concerns have been made repeatedly clear.
Now the treasury paper sets out the US case in a forthright manner. It questions the power of the EU Commission and underlines the US view that it is unfairly targeting American companies.
The White Paper is closely argued. It says that the commission is taking a new approach here, about which US companies had no warning and where it may be going beyond its powers. Because it is a new approach, it is not reasonable to collect “ back taxes”, Washington argues, clearly with an eye on the fact that the Apple case dates back to the 1980s. There has been speculation that it could involve a message too that Apple owes Ireland billions.
To add spice to this, the paper argues that US companies might be able to use this to reduce their own tax bills in America. And it underlines the US position that unilateral European action could undermine the nexus of international co-operation and tax treaties, which currently set the rules under which big companies operate.
There is, of course, more than a touch of irony here, given that tax avoidance by big US companies is essentially based on US law. The US tax code allows domestic companies to hold cash offshore in the first place and avoid paying tax on it, provided it remains outside the US.
US companies have stashed an estimated $2,400 billion (€2,119 billion) offshore, mainly in tax havens. This is a live issue in the presidential election, with Donald Trump proposing a major cut in US corporation tax, from 35 per cent to 15 per cent, and a 10 per cent rate applied to this money held offshore.
The downside for US corporations is that the deferral provisions, which allow them to avoid paying tax once the money is earned outside the US, would end. International discussions brokered by the OECD are also examining the issue in depth, under the so-called BEPS process, although progress is slow.
For the moment, Washington’s focus is on defending its turf and its companies. It has now outlined to the EU Commission just what it believes is at stake, particularly in the Apple case.
The next move lies with Brussels. It is sure to confirm its initial adverse ruling against Apple, but the key question will be the terms of the decision – and whether it attempts to impose a massive bill for taxes it believes date back to the 1980s.