In recent years, the European Commission initiated formal investigations as to how various EU Member States treat certain multinational companies. In June 2014, the EC issued opening decisions with respect to Ireland, the Netherlands, and Luxembourg. In October 2014, the EC issued an opening decision with respect to Luxembourg, and then in December 2015, the EC announced its opening decision with respect to yet another Luxembourg case.
In October 2015, the EC announced final decisions in the Netherlands case and the Luxembourg case. In those decisions, the EC ordered these countries to recover amounts that the EC believed should have been collected in tax revenue from the companies, going back up to 10 years.
The Senate Finance Committee in December 2015 examined the potential impact these investigation could have on U.S. firms. Read TaxNewsFlash-Legislative Updates
Today's letter (available on the Finance Committee website) requests that Secretary Lew increase efforts to caution the European Commission to avoid imposing retroactive results that are inconsistent with international tax standards. The letter concludes:
Our concerns are driven not only by these initial cases, but also by the precedent they will set that could pave the way for the EU to tax the historical earnings of many more U.S. companies – in some cases, the earnings in question could have been generated up to a decade ago. We urge Treasury to intensify its efforts to caution the EU Commission not to reach retroactive results that are inconsistent with internationally accepted standards and that the United States views such results as a direct threat to its interests. We also ask that you consider, under section 891, whether U.S. corporations are being subjected to discriminatory taxation.
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