International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, August 25, 2016

US Treasury Doubles Down, Issues White Paper Against EU Commission on State Aid Cases (Starbucks, Apple, Amazon & Fiat)

"The U.S. Treasury Department continues to consider potential responses should the Commission continue its present course."

I think that the U.S. Treasury follows Texas Hold ’em style and realizes it has a good hand.  Double down on the bet by languaging a bill for Section 891 and submitting it to the President and Congressional for comments!  Conduct a couple IRS “raids” of French companies to gather evidence for Section 482 intangibles audit.  (see Texas Hold’em Poker: Will U.S. Treasury Double Down? )(see Will the US Impose Double US Tax Rates on EU Companies from Countries that Retroactively Impose State Aid Claw Backs?)

Beginning in June 2014, the Commission announced that certain transfer pricing rulings given by Member States to particular taxpayers may have violated the EU’s restriction on State Starbucks_Coffee_Logo.svg aid. These investigations, if continued, have considerable implications for the United States— for the U.S. government directly and for U.S. companies—in the form of potential lost tax revenue and increased barriers to cross-border investment. Critically, these investigations also undermine the multilateral progress made towards reducing tax avoidance.  Download White-Paper-State-Aid (1)

  • The Commission’s Approach Is New and Departs from Prior EU Case Law and Commission Decisions. The Commission has advanced several previously unarticulated theories as to why its Member States’ generally available tax rulings may constitute impermissible State aid in particular cases. Such a change in course, which has required the Commission to second-guess Member State income tax determinations, was an unforeseeable departure from the status quo.
  • The Commission Should Not Seek Retroactive Recoveries Under Its New Approach. The Commission is seeking to recover amounts related to tax years prior to the announcement of this new approach—in effect seeking retroactive recoveries. Because the Commission’s approach departs from prior practice, it should not be applied retroactively. Moreover,  imposing retroactive recoveries would undermine the G20’s efforts to improve tax certainty and set an undesirable precedent for tax authorities in other countries.
  • The Commission’s New Approach Is Inconsistent with International Norms and Undermines the International Tax System. The OECD Transfer Pricing Guidelines (“OECD TP Guidelines”) are widely used by tax authorities to ensure consistent application of the “arm’s length principle,” which generally governs transfer pricing determinations. Rather than adhere to the OECD TP Guidelines, the Commission asserts it is employing a different arm’s length principle that is derived from EU treaty law.

The U.S. Congress has made similar assessments regarding the effect the Commission’s investigations may have on U.S. interests. In a January 15, 2016, letter to Secretary Lew, the Chairman, Ranking Member, and other members of the U.S. Senate Committee on Finance stated that the “United States has a stake in these cases and has serious concerns about their fairness and potential impact on the U.S. fisc,” and that “these investigations raise serious questions about our ability to rely on bilateral tax treaties negotiated with EU Member States.” In a subsequent letter on May 23, 2016, the Senators added that their “concerns are driven not only by the initial cases, but also by the precedent they will create and their long-term implications.”

The European Commission’s Recent State Aid Investigations Of Transfer Pricing Rulings U.S. Department Of The Treasury White Paper of Aug 24, 2016.  Available at (last visited Aug 24, 2016).

past posts on this subject 

US Treasury Speaks Out Against EU Commission Investigation of US Companies for Transfer Pricing

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