New York Times, U.S. and Europe May Collide on Taxing Apple and Amazon:
President Trump and congressional lawmakers are not the only ones interested in collecting taxes on global profits that American corporations are hoarding overseas. European regulators, knee deep in a campaign to stamp out tax avoidance, have their own plans for that money.
Last week, for instance, the European Commission billed Amazon for $293 million in unpaid taxes in Luxembourg, arguing that the country’s failure to collect the tax amounted to an illegal state subsidy. It also took Ireland to court for not following up on the $15.2 billion tax bill imposed on Apple last year.
“The Europeans are targeting U.S. dollars overseas that the U.S. believes should be taxed here,” said Dave Camp, a former Republican representative from Michigan who was chairman of the House Ways and Means Committee and the author of an unsuccessful tax overhaul in 2014. “We have to address this problem before the Europeans get there first.”
The rulings on Amazon and Apple — which those companies are disputing — are byproducts of a race among governments to lure corporate giants to their shores in the hunt for new sources of revenue. That cutthroat competition is the reason that 73 percent of Fortune 500 companies have a subsidiary in a low-tax haven, according to the Institute on Taxation and Economic Policy.
That rivalry has the potential to fuel tensions between the United States and its allies. Yet it could turn out that the European crackdown on American multinationals will ultimately help — rather than hobble — Washington’s efforts to get them to pay up. The harder that other countries make it for American companies to take advantage of tax havens and sweetheart deals abroad, the weaker the incentives are for businesses to stash money out of the reach of the Internal Revenue Service. ...
Efforts to cooperate have not always been successful, but there are signs that coordination can help. The Europeans’ effort is gradually shutting down the most notorious tax dodges that route corporate cash through Ireland and Luxembourg, said Michael J. Graetz, a professor and tax specialist at Columbia Law School. “Those are like dinosaurs,” he said. “They’re moving towards extinction.” ...
To some experts, like Kimberly Clausing, an economist at Reed College, the only way to prevent American companies from exploiting loopholes in a new territorial regime is with a minimum tax. If a company’s tax rate fell below the floor in, say, Bermuda, it would have to pay the difference to the I.R.S.
Other experts, though, suggest borrowing another idea to broaden the tax base from foreign tax regulators — like more aggressive efforts to tax foreign multinationals.
As the Amazon and Apple cases show, “the politics in Europe are to tax somebody else’s multinationals, particularly ours,” said Mr. Graetz of Columbia. “All of these other countries are basically trying to beef up and protect their tax base by ensuring foreign multinationals pay tax on income earned in their country,” he added, “and not on income earned by their own domestic multinationals.”
This is a different tack from the one taken in the United States, where tax dodges by homegrown billion-dollar corporations have been criticized for increasing the tax burden on companies that can’t shield assets.
The complaint that the American tax code favors foreign multinationals over domestic ones did, however, arouse interest last week at Senate hearings on a tax overhaul.
“The United States corporate and international tax rules are an anticompetitive mess,” said Itai Grinberg, a law professor at Georgetown University. And one of their most senseless features, he added, is the tax advantage that permits foreign-owned corporations to artificially strip out their earnings in the United States.
Both he and Bret Wells, a law professor at the University of Houston, testified that foreign and American companies should be treated the same way.