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Leading US politicians criticise EU ruling on Apple

Treasury secretary says the tax order ‘undermines economic co-operation’

Leading US politicians have criticised the European Commission’s order that Apple pay billions in back taxes to Ireland. File photograph: Mike Segar/Reuters

The European Commission’s order that Apple pay billions in back taxes to Ireland could hurt the European economy and “undermines the spirit of economic co-operation”, US treasury secretary Jack Lew has said.

In his first comments since Brussels directed the California tech giant to pay €13 billion in back taxes over “illegal” state-aid agreements in Ireland, Mr Lew said that the EU’s actions were “inconsistent with well-established tax law”.

US president Barack Obama’s finance minister said that the European Commission appears to be targeting US multinationals for taxation.

“Our concern with the European Commission action is that it is using a state-aid theory to make tax law.

“It is doing it in a way that is retroactive and that overrides national tax law authority, in our view,” he said, during a public interview at the Brookings Institution in Washington.

“And we think it undermines the environment in Europe for international business because it creates uncertainty that ultimately will not be good for the European economy.

“As the head of the US tax agency, I have been concerned that it reflects an attempt to reach into the US tax base to tax income that ought to be taxed in the US.”

Mr Lew spoke before he is due to leave for China to attend the G20 meeting of world leaders with Mr Obama.

The White House has expressed concern that the EU Commission’s tax demand against Apple will ultimately be paid for by US taxpayers and said that Brussels was unfairly targeting US firms in “unilateral” actions, rather than working “collaboratively” with the US to make the international tax system fair.

The US treasury department called the ruling “unfair” in its official response and warned that it “could threaten to undermine foreign investment, the business climate and the important spirit of economic partnership between the US and the EU”.

Last week, the treasury complained that the EU was becoming “a supra-national tax authority” by meddling in countries’ tax systems, and warned that it would consider “potential responses” to the EU Commission’s actions.

The EU Commission’s ruling drew angry responses elsewhere in the US and from both sides of the political aisle on Capitol Hill.

‘Awful decision’

US speaker of the House of Representatives Paul Ryan, a Republican, described the decision as “awful”.

“Slamming a company with a giant tax bill - years after the fact - sends exactly the wrong message to job creators on both sides of the Atlantic,” he said.

“It’s also in direct violation of many European countries’ treaty obligations.

“This is precisely the kind of unpredictable and heavy-handed taxation that kills jobs and opportunity.”

Democratic senator for New York Chuck Schumer, who will be the majority leader in the US senate if his party wins control of the chamber in November’s elections, called it “a cheap money grab” by the European Commission.

“By forcing their member states to retroactively impose taxes on US companies, the EU is unfairly undermining our ability to compete economically in Europe while grabbing tax revenues that should go toward investment here in the US,” said Mr Schumer.

Republican Orrin Hatch, the chairman of the influential senate finance committee, described the commission’s move as “an extraordinary decision that targets US business by rewriting already-existing tax policies”.

Presidential candidates Donald Trump and Hillary Clinton have not voiced opinions on the Apple decision, but they have offered policies that would, in Mr Trump’s case, encourage firms to repatriate profits to the US at a lower rate or, in Ms Clinton’s case, deter companies from relocating in the first place by imposing “an exit tax”.

The EU has been in the crosshairs of US politicians for years, as US multinationals have shifted their tax base to European countries in so-called corporate tax “inversions” to avoid the US rate of 35 per cent.

Ireland is a destination of choice for big corporations because of the 12.5 per cent corporate tax rate.

Republicans and Democrats agree on the extent of the problem but are divided on how to solve it.

Republicans want a broad reform of the US corporate tax base and a reduction in the tax rate, while Democrats want corporate loopholes closed.

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