U.S. Relationship With EU Over Tax Likely to Worsen: Stack

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By Kevin A. Bell

Dec. 5 — U.S. Deputy Assistant Treasury Secretary for International Tax Policy Robert Stack said his successor will have to manage an increasingly difficult international tax relationship with individual European Union countries.

“One of the big challenges moving forward at the OECD is going to be managing what is becoming an increasingly difficult relationship with the EU member states at the OECD,” Stack said at a Dec. 5 luncheon sponsored by Bloomberg BNA and hosted by Buchanan Ingersoll & Rooney PC.

Stack, whose term in office will end on inauguration day Jan. 20, said he used the words “member states” consciously because some of the countries that are the most dominant in setting the EU’s tax policy agenda don’t seem to want to acknowledge that fact when approached individually.

“They like to play the game of, ‘we are just France and Germany’” rather than representing some of the most important voices of the European Commission or the European Parliament, he said.

From the U.S.'s point of view, Stack said, “you are dealing with the EU member states in all their various manifestations, whether they are national tax authorities or through the EU. And it makes it very difficult” for the U.S. Treasury.

Emerging Themes

Stack said he expects three themes will emerge as problematic in the U.S. relationship with the EU member states. The first is that some European governments are walking away from multilateral solutions reached at the Organization for Economic Cooperation and Development.

The second is “the degree to which they take what is agreed at the OECD and use it as the baseline to ratchet it up to the next thing they want to do as a political matter,” and the third is that EU countries are harmonizing tax rules in Europe so that the U.S. is “kind of simultaneously dealing with one mega tax authority that gets 22 seats around the table.”

Parliamentary Systems

Stack said the political pressure in Europe on governments regarding multinational tax avoidance “is very front and center for them.”

When the ministers of Stack’s British or French counterparts “want some kind of deliverable because the Panama Papers just hit the news over the weekend,” his counterparts show up at the OECD wanting to “storm the barricades.”

It is partly because of their parliamentary system that Stack’s European counterparts are “very much closer to the direct implementation of policy,” he said, noting the U.K.'s swift adoption of a diverted profits tax.

“It changes the tenor of the work we all do together,” Stack said. “I don’t see that changing, but I do see it creating a great deal of risk and difficultly in the work as we go forward.”

To contact the reporter on this story: Kevin A. Bell in Washington at kbell@bna.com

To contact the editor responsible for this story: Molly Moses at mmoses@bna.com

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