TPT November 2016

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56 NOVEMBER 2016
G LOBA L MARKE T P L AC E
A Europe-US tax war?
As the European Commission mulls tax
arrangements at home and abroad, the
US protests EC tax probes into American
companies
The competition department of the European Commission
(EC) has rejected US claims, made in a 24 August white paper
issued by the Treasury Department, that it is unfairly targeting
American companies in its effort to curb tax avoidance in
Europe.
The charge of bias was flatly rejected by an EC spokesperson,
Lucia Caudet. “This is very clear if we look at the facts,” she
wrote. “In October 2015 the first [EC] state aid decisions on
tax rulings concerned a European company, Fiat, as well as
a US company, Starbucks. In January 2016, the Commission
adopted a negative decision concerning a Belgian tax scheme
with recovery concerning 35 mostly European companies.”
In the 25 August edition of its “Brussels Playbook”, the
independent news and commentary site Politico (Arlington,
Virginia) recommended that “tech pros” seeking the full story
consult “US Treasury Slams EU Tax Probes ahead of Possible
Apple Verdict” at But Politico’s
Brussels-based senior EU correspondent Ryan Heath thought
that an introduction in question-and-answer form might also be
useful. Here, lightly edited and abridged, is his insider’s view
of a complex issue in its early stages:
How did we get to this point? Most governments now
agree that it has been too easy for multinational companies
to minimise tax; and they have been working, slowly, to close
loopholes. Instead of examining only generic tax breaks – to
see if they amounted to an unfair subsidy to certain companies
– the EU competition authority decided in 2014 to get more
aggressive. They’re now looking at individual tax rulings
(special low-tax deals) that some European governments
have granted to individual companies.
Why would the US feel targeted? Because their successful
tech companies are the ones that find it easiest to cut tax
deals in Europe. That’s because they have most or all of
the following attributes: they’re big, have lots of tax lawyers,
offer high-skill jobs (thereby creating bidding wars among
governments), and they’re new and thus not weighed down by
tradition and contracts. Plus, unlike big industrials they don’t
have massive factories to move from one country to another.
Michael Mandel of the Progressive Policy Institute, which
first pushed the US Treasury to intervene on the issue, has
blogged: “The European Commission has the right to impose
whatever rules it wants on state aid. But it doesn’t have the
right to unilaterally decide what share of multinational income
it gets to tax.”
[Fact check by Politico: One of the Treasury Dept arguments
is that the Commission “should not seek retroactive recoveries
under its new approach.” This is Treasury wanting to have
its cake and eat it, too. By definition, all Commission state
aid cases are retroactive – because they deal with past
behaviour.]
Who will win? European competition authorities have been
underestimated before, at great cost to their opponents.
They’re tough, and they know companies will do a lot to
maintain access to the EU’s 500 million consumers. That said,
the EU has been pushing boundaries (and hitting walls) with
a number of its competition cases, and the costs of a massive
tax dispute with a key ally probably outweigh the benefits.
We’re headed for a hidden compromise.
[“Reality check” by Politico: The US government is the only
advanced-economy government to run a policy of citizenship-
based taxation for individuals. That policy leaves many
Americans living overseas facing double taxation, and leaves
companies that offer those people banking services subject
to huge penalties if they don’t share their American clients’
details with US authorities. In other words, the US government
has no problem unilaterally deciding what share of individual
income it wants to tax. It just wants foreign authorities to be
less unilateral in their own tax approaches.]
Of related interest . . .
› More than half of American tech start-ups valued at
$1 billion or more had at least one immigrant founder,
according to a recent study by the National Foundation for
American Policy, a research group that focuses on immigration
issues. Now, under a rule proposed on 26 August by the
Department of Homeland Security, foreign entrepreneurs
in any industry could soon be eligible for a new immigration
option that would grant them temporary entry to the US for up
to five years.
The proposal, which does not require congressional approval,
would allow immigration officials to admit entrepreneurs
case by case. To qualify, an applicant must have an “active
and central role,” and a significant ownership stake, in an
American company founded over the previous three years.
In a presidential election campaign season roiled by
acrimonious immigration issues, the move is one of several
efforts by President Barack Obama to liberalise America’s
immigration policies without action from a resistant Congress.
Gaining an immigration route for start-up founders has been
one of Silicon Valley’s political priorities for years.
Oi l and gas
A protest against a pipeline by a tribe of the
Sioux nation of Native Americans is
‘an environmental and cultural flash point’
“[In the week of 22 August], an impassioned fight over a 1,170-
mile oil pipeline moved from the prairies of North Dakota to a
federal courtroom in Washington.”