The EU’s Misguided Tax War on US Companies

The European Commission’s intentions to force Ireland and Luxembourg to collect additional taxes from US companies marks the latest escalation in a war between the Commission and US corporations. Although the Commission has also targeted some European companies, its most prominent cases have been against American firms, many of them Internet companies. These efforts are partly motivated by legitimate frustrations about a broken international system for taxing multinational corporations. But as Joe Kennedy writes in International Tax Review (subscription or free trial required), their unilateral nature and the extreme penalties inflicted jeopardize ongoing international efforts to negotiate better solutions. Continuing down this path is likely to lead to strong objections from the US, resentment by EU countries with low tax rates, and less innovation in a continent that desperately needs more economic growth.