Who’s wrong between the US/EU multinationals, EU Member States, the EU Commission, EU law, OECD arm’s length principle and the U.S. Treasury?

In the new world/international fiscal order, non-mobile income went through increased tax pressure. Politicians also had no choice but to go after mobile income, international structuring and multinationals for the tax increase to become acceptable or at least fair to the public opinion. That’s the beginning of the new age of a fiscally super active G20 with an empowered OECD, finally happy with a long-expected political push on proposed technical materials (transparency, anti-abuse etc.). Taxpayers and tax practitioners are now navigating through a BEPS universe of proposals, copied and pasted domestic law and EU BEPS hard law effective in the euro zone.

Within the framework of the current transparency trends, international taxation and tax planning hit the headline. State aid investigations on taxation and in particular private tax rulings practices from EU Member States to MNEs is one illustration among others.

Since 2015, these investigations have been relentlessly focusing the attention of the media and have aroused tensions between, on the one side, the States involved and the U.S. Treasury and, on the other side, the European Commission.

For EU tax practitioners, the potential risk that tax rulings could fall within the scope of the EU State aid legislation could not have been totally ignored since the mid - 1990s. Nonetheless, the fact that the European Commission relies on transfer pricing analysis, and more particularly on an arm’s length principle which have been presented as possibly deviating from the OECD guidelines, may seem more surprising. However, the European Commission seems to reserve such possibility in very limited circumstances.

In this article, we will revisit the background of the current Commission’s state aid investigations (I.) before going through the current several state aids investigations in order to discuss the position held by the U.S. Treaty in the White Paper (II).