US: Treasury letter to EC on state aid investigations

US: Treasury letter to EC on state aid investigations

U.S. Treasury Secretary Jacob Lew today wrote to President Jean-Claude Juncker of the European Commission concerning the EC state aid investigations.

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In his letter [PDF 1.8 MB], the Treasury Secretary expressed concerns that the EC’s “…sweeping interpretation of the EU legal doctrine of ‘state aid’ threatens to undermine…” current efforts to curtail corporate tax base erosion. The letter continues to report that the OECD / G-20 base erosion and profiting shifting (BEPS) project has produced a board set of measures to prevent and deter international corporate tax avoidance, but that the EC state aid investigations and enforcement actions appear to be inconsistent with and contrary to the BEPS project.

 

While we recognize that state aid is a longstanding concept, pursing civil investigations—predominantly against U.S. companies—under this new interpretation creates disturbing international tax policy precedents…. we respectively urge you to reconsider this approach.

 

The Treasury Secretary’s letter sets out the following four points:

  • The EC’s imposition of penalties is retroactively based on a new and expansive interpretation of state aid rules.
  • The EC appears to be targeting U.S. companies disproportionately.
  • The EC approach appears to target income that EU Member States have no right to tax under established international tax standards.
  • The EC approach could undermine U.S. tax treaties with EU Member States.

The letter concludes with a request that the EC reconsider pursuing “…unilateral actions and instead focus on our collective work through the BEPS project.”

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