The US government has threatened the European Commission (EC) with retaliation if the body decides to proceed with its plan to demand millions of dollars in unpaid taxes from technology giant Apple.
The US Treasury Department issued a rare warning on Wednesday, accusing the Brussels-based body of becoming a “supranational tax authority” that poses a threat to international agreements concerning tax reform.
“The US Treasury Department continues to consider potential responses should the Commission continue its present course,” the Treasury said in its strongest language to date.
“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,” the warning added.
The European Union (EU) has been investigating a series of tax deals between Apple and Ireland which allow the iPhone maker to pay little or no tax on income earned across Europe.
The EC is expected to rule on the case next month. This is the biggest corporate tax avoidance investigation ever undertaken by the commission.
The EC is the executive body of the EU, responsible for implementing decisions, proposing legislation, upholding the EU treaties and managing the day-to-day business of the bloc.
According to investment bank JP Morgan, if Apple is forced to retroactively pay the Irish corporate tax rate of 12.5 percent on its pre-tax profits, the company might need to cash out as much as $19 billion.
A 2013 report by US Senate confirmed that Apple has paid little to no taxes on at least $74 billion of the profit it earned by exploiting Irish and American tax laws.
Tim Cook, who became Apple’s CEO after the death of its founder Steve Jobs five years ago, has denounced the case as “political crap.”
“There is no truth behind it,” he said. “Apple pays every tax dollar we owe.”
The EU estimates that tax avoidance by multinational corporations costs member states anywhere between $50 million to $78 billion a year in lost taxes.
In addition to Apple, other American companies like Amazon and Starbucks are also suspected of tax evasion.