Three points of particular interest in it are as follows:
1) "To state aid and EU law experts, the Apple decision came as no surprise. Those who study the development of EU law are well aware of the methods the commission uses to expand its authority over EU matters and how it has continually extended the scope of state aid and competition law. The Apple decision can be viewed as a logical progression along those paths. From the perspective of the evolution of EU law, the recent state aid decisions are simply the latest example of the commission's use of all its available tools to expand its authority into areas where it has not been granted specific powers under the EU treaty. State aid observers also view the extension of state aid principles to tax rulings as a necessary corollary of the state aid doctrine. Given that state aid is essential to protect the single market, restrictions on the commission's ability to apply those principles to tax benefits granted to individual companies -- including via tax rulings -- could render moot the entire doctrine as countries would seek to recharacterize direct subsidies as tax preferences."
She then notes that there is a genuine debate under EU law as to whether the EC's authority should indeed override that of national tax authorities. But for me an important takeaway from this passage is that it strongly suggests the state aid rulings were indeed foreseeable, and that if Apple's experts (along with those of other companies facing state aid investigations) did not realize this, it was their own failure to exercise proper due diligence. Is it asking too much for the tax experts to realize that they should talk to people who have been following broader EU legal developments, including in the state aid area? There were, after all, large stakes in accurate financial reporting (even leaving aside the underlying planning).
2) Regarding the question of whether the amounts that will be paid to Ireland and other EU countries under the state aid cases (if the EC's position prevails) will qualify for foreign tax credits: "How Ireland recovers the amount from Apple is relevant for the creditability of that amount because, as mentioned, a foreign levy is creditable only if it is made under the foreign country's authority to levy taxes as determined under U.S. principles.
"Ireland will likely do everything it can to characterize the recovery amount as a tax to help Apple claim the FTC. But regardless of how Ireland characterizes the payment, the question still remains whether an amount being levied by the Irish government because it has agreed to EU competition policies, and by virtue of having signed the TFEU and made it its national law, is being levied under its taxing authority as determined under U.S. principles.
"There do not appear to be any authorities on whether a foreign country that is not levying a tax because it claims the ability to do so under its own authority, but because it is being forced to do so as a result of a treaty obligation, should be considered exercising its authority to levy taxes under U.S. principles."
I myself would bet in favor of an ultimate U.S. legal determination that the taxes are creditable, but that basically just reflects a hunch on my part that, even if the IRS contests this point (which it conceivably might not), the basic policy behind the FTC, such as it is, supports creditability so long as we are confident, as I think we can be in these cases, that the U.S. taxpayers were not paying the extra levies voluntarily or via collusion of any kind.
3) "In an article on the history of U.S. international tax rules, Michael Graetz and Michael O'Hear have described the U.S. FTC system as extraordinarily generous ("The Original Intent of U.S. International Taxation," in Follow the Money (2016)). Others have agreed and questioned whether the United States should continue to offer a dollar-for-dollar offset against foreign taxes paid.
"In 'The Case Against Foreign Tax Credits,' (3 J. Legal Analysis 65 (2011), Daniel Shaviro of New York University School of Law questioned whether the FTC is the best tool for attaining U.S. tax policy goals and suggested it might be prudent to consider an alternative. Recent developments in international tax worldwide -- including expansive assertions of the permanent establishment concept in the U.K. and Australia, and of the existence of PEs on audit in India, and encouragement from international organizations for developing countries to assert more taxing jurisdiction at source -- indicate that this is an appropriate time to consider other options. But for now at least, the administration is instead advocating for a worldwide minimum tax, which will only continue to encourage foreign countries to increase their taxes to soak up taxes that would otherwise be paid in the U.S."
Yes, we all like being cited. But I mention this here because I agree with Herzfeld that recent developments, including the EU state aid cases, do indeed raise the issue of whether a marginal reimbursement rate of 100 percent for foreign taxes paid (as foreign tax credits offer, absent the applicability of foreign tax credit limits or the complicating effects of deferral), can create significant incentive issues for U.S. companies that ought to be of concern to U.S. policymakers.
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