US warns Europe over $19bn tax crackdown on Apple

The US has warned it will be forced to retaliate if the European Union (EU) goes ahead with plans to demand billions of euros in unpaid taxes from Apple.

A white paper released by the Treasury Department said the EU was behaving like a "supranational tax authority" and warned it could "create an unfortunate international tax policy precedent".

Brussels is expected to rule next month on allegations that Apple sheltered billions of euros in the Republic of Ireland while paying little to no tax as part of a "sweetheart deal" with Dublin.

It is the biggest ever investigation into corporate tax avoidance in European history, with analysts estimating that Apple could be asked to pay up to $19bn (£14.4bn). Both the Cupertino-based firm and Ireland deny any wrongdoing.

The US has accused the EU of singling out US companies such as Apple, Amazon, Fiat Chrysler and Starbucks for tax investigations, but Brussels denies this.

The Treasury said the EU was endangering international tax reform agreements and warned it will "consider potential responses".

'Deeply troubling'

"We are concerned that the European Commission's state aid investigations threaten to undermine progress in [tax reforms] and could create an unfortunate international tax policy precedent," said Robert Stack, deputy assistant secretary at the Treasury Department.

"The investigations have global implications as well for the international tax system and the G20's agenda to combat [tax avoidance] while improving tax certainty to fuel growth and investment."

The white paper said the US stands to lose out on tax collections due to the EU's demands, as companies can legally defer paying taxes on their overseas earnings until they repatriate them back to America.

"That outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers," it stated.

"The US Treasury Department continues to consider potential responses should the Commission continue its present course," the paper added.

"A strongly preferred and mutually beneficial outcome would be a return to the system and practice of international tax cooperation that has long fostered cross-border investment between the United States and EU member states."