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EU regulator signals that Apple just the start of tax probes

Tuesday, September 20, 2016 - 10:46
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The European Union's top competition regulator stood by her decision to demand more than US$14 billion in tax repayments from Apple Inc and tweeted that she may investigate other major US companies, ahead of meetings with officials in Washington.

[WASHINGTON] The European Union's top competition regulator stood by her decision to demand more than US$14 billion in tax repayments from Apple Inc and tweeted that she may investigate other major US companies, ahead of meetings with officials in Washington.

Margrethe Vestager, the EU's commissioner for competition, on Monday met with US Treasury Secretary Jacob J Lew; Federal Trade Commission chairwoman Edith Ramirez; Senator Orrin Hatch of Utah, chairman of the Finance Committee; and other key lawmakers.

Mr Hatch said Ms Vestager failed to make "an effective case for this highly politicised ruling rooted in an erroneous interpretation of law." "Rather than working with countries to strengthen the international tax framework and improve the rule of law, the European Commission, in its recent state aid ruling, opted to run roughshod over an American firm by retroactively overriding a tax opinion between a sovereign country and a company," the Utah Republican said in a statement.

Mr Lew, in his meeting with Ms Vestager, told her that the European Commission's moves call into question the tax rules of individual countries and could undermine the overall business climate in Europe, according to a Treasury statement Monday evening.

Ms Vestager appeared to confirm on Twitter that probes may be launched against companies associated with the Business Roundtable, which on Sept 16 sent a sharply worded letter to the heads of 28 EU member states.

The group says it represents chief executive officers of US companies with US$7 trillion in annual revenue. Its members include Jeffrey Immelt of General Electric Co, Jamie Dimon of JPMorgan Chase & Co and Kenneth Chenault of American Express Co.

Ms Vestager was contacted on Twitter by Davide Serra, CEO and founder at Algebris Investments, who wrote on Sept 17: "Apple : so in the USA there are 185 CEO which think it's legal to pay 0.05% Taxes in Europe! @vestager pls check what they pay asap!"

She promptly responded: "I will. And I keep thinking about all the CEOs who just make sure that their companies do pay their taxes. They exist too."

In the letter, the Business Roundtable said the EU's decision to recover 13 billion euros (S$20 billion) from Apple for alleged illegal state aid "must not be allowed to stand."

"If you're this large US competitor and all your competitors are offshore, under the tax code you have, you're putting yourself at a significant disadvantage," Business Roundtable president John Engler said in an interview with Bloomberg Television Monday. "There's a point at which the shareholders and investors are saying, 'Wait a minute, can we remain competitive?'"

The group's interest in the matter "is for respect of the rule of law," Mr Engler said. "Unless set aside, this EC decision sets a precedent that EU member states do not control their tax affairs."

Last year, EU regulators alleged that McDonald's Corp side-stepped corporate taxes in Luxembourg for about five years. The Financial Times reported that the potential tax bill in the country could be US$500 million, citing its own analysis of the probe.

McDonald's hasn't been told by the EU that it owes US$500 million, said Terri Hickey, a company spokeswoman. From 2011 to 2015, McDonald's companies paid more than US$2.5 billion in corporate income taxes in the EU, with an average rate approaching 27 per cent, she said.

"We pay the taxes that are owed and have not received any preferential treatment," Ms Hickey said.

In a separate interview with Germany's Handelsblatt published on Sunday, Ms Vestager defended the decision to pursue the tax-repayment order against Apple.

Mr Lew has said the EU's use of state-aid rules is "not appropriate". "It is 100 per cent legitimate to tax profit where it is generated," Ms Vestager told the newspaper. "From our perspective, it is irritating when American companies pay less in taxes than European ones."

US officials have derided Brussels on the Apple decision. Washington's claim that the Apple taxes rightly belong to the US is "difficult to comprehend," Ms Vestager told Handelsblatt.

BLOOMBERG