Business Irish

Sunday 25 September 2016

EU's hard line gives US a chance to fix 'broken' tax system says Lew

Published 14/09/2016 | 02:30

Jacob
Jacob "Jack" Lew, US Treasury secretary

The ruling from the European Commission on Apple may provide a new opportunity to reform the United States tax system, US Treasury Secretary Jack Lew has said.

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In an article published in the 'Wall Street Journal', Mr Lew said America's corporate tax system was "broken".

It comes as a Belgian MEP said Ireland has a "close to zero chance" of winning its appeal against the Apple ruling.

Philippe Lamberts also told RTE that the ruling is not being used as a way of attacking the 12.5pc corporation tax rate. Ireland made global headlines earlier this week after the European Commission ruled that Apple owed up to €13bn in back taxes to the State in a ruling handed down by Competition Commissioner Margrethe Vestager.

The ruling by the Brussels competition watchdog - described by Finance Minister Michael Noonan as bizarre and outrageous - found that Ireland gave Apple a sweetheart deal which ultimately allowed the iPhone maker to pay as little as 0.005pc tax on its European, and some international, profits.

Mr Lew has previously had strong words for the European Commission's state aid probes against US companies, warning they risk undermining international tax.

But in his article, he pointed out that the US Treasury agrees with the Commission that there is a "serious problem with tax avoidance". And his focus was in pointing out the need for reform of the US system.

"American corporations alone are avoiding paying US taxes by holding more than $2 trillion in deferred overseas income," Mr Lew said.

"In recent years we have made considerable progress toward combating corporate tax avoidance by working with our international partners through what is known as the Base Erosion and Profit Shifting (BEPS) project, agreed to by the Group of 20 and the 35 member Organization for Economic Cooperation and Development.

"But the fundamental problem remains: America's broken business tax system. The Apple decision, and the bipartisan reaction to it, may present a new opportunity to make reform a reality. That opportunity should not be lost."

Mr Lew said the United States' current tax code is "riddled with loopholes that allow corporations to artificially lower their tax bills by shifting income from higher tax countries to low or no tax jurisdictions.

"The combination of the relatively high US corporate rate, our complicated system for taxing multinational businesses, and our aging infrastructure has encouraged and facilitated the erosion of our tax base and made America a less attractive place to do business."

Commissioner Margrethe Vestager, who handed down the ruling, said last week that Ireland is a good place to do business and should not be a location for tax avoidance. But she said tax rulings had been offered to companies that existed solely on paper, with no employees, premises or activities.

Irish Independent

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