U.S. tax code may allow dramatic retaliation in EU Apple case
U.S. tax code may allow dramatic retaliation in EU Apple
case
By Jason Lange | WASHINGTON Thu Sep 1, 2016 12:49am EDT
U.S. tax law gives the Obama administration power to
double tax rates for European companies should it choose to dramatically
escalate a dispute with the European Union over Apple's tax bill.
Experts said the administration was unlikely to take such
a drastic measure, and even if it did, courts might strike down that action
because of treaties.
Section 891 of the U.S. tax code, passed in 1934 but
never used, allows the president to double tax rates for citizens and
corporations of any country the administration considered was discriminating
against U.S. companies.
The U.S. Treasury on Wednesday declined to comment on
whether Washington was considering such drastic measures, which Democratic and
Republican lawmakers have proposed putting on the table due to what they see as
overreach by the European Commission in a tax grab targeting American
companies.
The European Commission on Monday ordered the U.S.
technology giant to pay up to $14.5 billion in back taxes to Ireland.
"This is an option that is viable only in the minds
of a handful of analysts who seem willing to put the entire global trade order
at risk," said Edward Kleinbard, a professor at the University of Southern
California in Los Angeles.
Treasury Secretary Jack Lew has said the European
Commission action appeared highly focused on U.S. companies but did not mention
measures the United States might take. A Treasury spokesperson on Tuesday said
the department would work with the EU to prevent erosion of tax bases.
Legal scholars considered it highly unlikely Washington
would take drastic measures against one of the country's closest allies and
biggest trading partners.
"This is crazy talk," said Daniel Shaviro,
professor of tax law at New York University.
Lawmakers including Republican Senator Orrin Hatch and
Democratic Senator Ron Wyden have pressed the administration to consider
implementing Section 891 over the European Commission moves to scrutinize how
U.S. companies minimize their tax bills in Europe.
Georgetown University law professor Itai Grinberg drew
attention to the obscure tax code provision in January on the website
taxnotes.com. The next month Grinberg appeared before a House of
Representatives committee laying out the case for invoking Section 891.
The Treasury's Assistant Secretary for Legislative
Affairs, Anne Wall, told lawmakers in a letter in March the department was
reviewing the provision.
It was unclear whether treaties with European countries
since 1934 would supersede the provision if it were challenged in court.
(Reporting by Jason Lange; Editing by David Gregorio)
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