US slams EU competition policies

The Treasury says it "continues to consider potential responses should the Commission continue its present course".

Last October, EU competition commissioner Margrethe Vestager imposed a €20-30 million fine on Fiat as well as on US coffee chain Starbucks. In December, she also opened a case against McDonald's.

The commission is also investigating Google, but in antitrust cases related to suspicions that the firm is abusing its dominant market position. Earlier this year, the commission said it was studying how to make US multinationals like Google and Amazon reveal their earnings and the tax they pay.

"In the state aid cases, the commission is charting a course that sets aside years of multilateral efforts to develop workable transfer pricing rules and combat BEPS," the report says, referring to tax avoidance strategies known as base erosion and profit shifting (BEPS).

"The commission’s path runs the risk of the EU being perceived as having used its unique structure to undermine and reverse international progress on this important issue."

In this unprecedented take on EU competition policies, the US Treasury argues that "the commission’s approach is new and departs from prior EU case law and commission decisions".

It says that the commission "is seeking to recover amounts related to tax years prior to the announcement of this new approach - in effect seeking retroactive recoveries".

Transfer of revenue

It also says that this new approach "is inconsistent with international norms" because the EU does not follow rules on transfer pricing set up by the OECD, the Paris-based club of mostly wealthy nations.

"The commission’s state aid investigations, if continued on their current trajectory, have considerable implications for the United States," the report goes on.

It says in particular that "repayments ordered by the commission will be considered foreign income taxes that are creditable against US taxes owed by the companies in the United States". In effect, this will constitute "a transfer of revenue to the EU from the US government and its taxpayers".

Assessing cases involving US firms, the US Treasury also provides its own view of EU institutional mechanisms.

It says that the commission has expanded the role of the it Directorate-General for Competition (“DG COMP”) "beyond enforcement of competition and state aid law under the TFEU [the EU treaty] into that of a supranational tax authority that reviews member state transfer price determinations".

'No bias against US companies'

A commission spokeswoman said in reaction to the report that there was "no bias against US companies" and that "EU law applies indiscriminately to all companies operating in Europe".

"All companies, no matter their nationality, generating and recording their profits in an EU country should pay taxes in line with national tax laws," she said.

She said that "state aid rules and the relevant legal principles have been in place for a long time" and that it was a "standard feature of EU state aid rules" that a member states must recover benefits that are declared incompatible with the rules.