Why Eu­ro­pe Must Fight the U.S. on Ta­xes

Handelsblatt Global Edition Magazine - - Front Page - BY MO­RITZ KOCH

In an esca­la­ting batt­le over tax dod­ging by so­me of Ame­ri­ca’s big­gest cor­po­ra­ti­ons, Washington and Brus­sels ha­ve lo­cked horns. Eu­ro­pe must stay firm.

For on­ce, the po­la­ri­zed camps in Washington agree: Re­pu­bli­cans and De­mo­crats, Con­gress and the Whi­te Hou­se. Ame­ri­ca, they all say, must join in the batt­le against an ag­gres­si­ve ene­my threa­ten­ing vi­tal U.S. in­te­rests. The ene­my’s na­me? The Eu­ro­pean Uni­on.

That’s be­cau­se the Eu­ro­pean Com­mis­si­on has tur­ned on so­me of Ame­ri­ca’s lar­gest cor­po­ra­ti­ons, in­clu­ding App­le, Star­bucks and Ama­zon, de­man­ding that they pay vast sums in un­paid cor­po­ra­te ta­xes. With mo­ney, po­wer and pres­ti­ge at sta­ke, con­flict looks in­e­vi­ta­ble.

Al­re­a­dy the drum­beat is qui­cke­ning. Washington has threa­te­ned “re­ta­lia­to­ry ac­tion” against an EU or­der for App­le to pay €13 bil­li­on ($14.6 bil­li­on) in ta­xes on ye­ars’ worth of glo­bal pro­fits fun­ne­led through two du­bious sub­si­dia­ries in Ire­land. The thre­ats lack spe­ci­fics: The Ame­ri­cans ho­pe to in­ti­mi­da­te Eu­ro­pe by ke­eping va­gue their plans for any pos­si­ble esca­la­ti­on. But the­re is no doubting the po­ten­ti­al for a dan­ge­rous esca­la­ti­on. What be­gan as an EU in­ves­ti­ga­ti­on in­to il­le­gal sta­te sub­si­dies now looks set to jeo­par­di­ze a long-stan­ding re­la­ti­ons­hip that’s cru­ci­al to both par­ties.

The ten­si­ons, of cour­se, aren’t new. But the mood is uglier this ti­me. The cur­rent dis­pu­te co­mes at a ti­me when chau­vi­nism and eco­no­mic na­tio­na­lism are being re­vi­ved on both si­des of the At­lan­tic. Glo­ba­liza­t­i­on’s pro­mi­ses of pro­spe­ri­ty ha­ve not pan­ned out for all, and po­pu­lists li­ke Donald Trump ha­ve ex­ploi­ted a wi­de­s­pre­ad ye­arning to re­fo­cus on pu­re­ly na­tio­nal in­te­rests. “Ame­ri­ca First” was the slo­gan de­ploy­ed by Trump du­ring his cam­pai­gn in an at­tempt to over­turn the glo­bal eco­no­mic or­der that dates back to the end of World War II.

The tax dis­pu­te isn’t about whe­ther ta­xes should be paid at all. Ame­ri­cans and Eu­ro­peans agree that the cur­rent sta­te of af­fairs – whe­re ma­ny mul­ti­na­tio­nals escape mea­ningful ta­xa­ti­on – is de­eply un­fair, in­de­ed of­fen­si­ve. Both par­ties want a new de­al which will ob­li­ga­te com­pa­nies to pay their fair sha­re. The dis­pu­te is over who will get the wind­fall of cla­wed-back ta­xes. Eu­ro­pe? Or the Uni­ted Sta­tes?

Thus, the Com­mis­si­on’s ca­ses against App­le and others is not just an in­ter­nal Eu­ro­pean mat­ter, even if the ca­ses in­vol­ve Eu­ro­pean ju­ris­dic­tions. Ire­land, for ex­amp­le, has be­co­me a po­pu­lar place for Ame­ri­can high-tech com­pa­nies to set up shop be­cau­se of its ge­nerous cor­po­ra­te tax ra­tes. What’s mo­re, Ire­land has ad­di­tio­nal loo­p­ho­les – and spe­cial deals with the com­pa­nies – that can re­du­ce the tax bill al­most to ze­ro. Ire­land wants to keep the­se spe­cial re­la­ti­ons­hips and has ap­pea­led the ru­ling.

The Ame­ri­cans, in turn, ac­cu­se the Eu­ro­peans of uni­la­te­ral ac­tion, of chan­ging its tax

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