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The European Commission’s recent action to crack down on special deals some European Union governments offer to corporations could be a blow to multinational corporations’ tax-dodging strategies.

As we noted in a report earlier this year, three European countries (Ireland, Luxembourg and the Netherlands) are among the top twelve tax haven countries for U.S.-based multinationals. Corporations use these and other tax havens to artificially shift their profits to foreign jurisdictions and avoid U.S. tax.

Now it seems these European tax havens are offering additional tax deals to corporations that may amount to unfair competition, according to the European Commission. During the past week, The EC notified several multinational corporations that some of the special tax deals they have made with EU member states may not survive. The EC has characterized the arrangements as illegal “state aid” to the companies.

European Union rules do not prohibit member states from offering lower tax rates to lure companies. But they do prohibit countries from making special deals that aren’t available to all companies. The Commission’s investigations appear to focus on transfer pricing – the way multinational corporations price goods and services transferred between members of the affiliated group of companies. According to the EC, tax authorities in Ireland, Luxembourg, and the Netherlands (so far) have agreed to transfer-pricing practices that improperly allow certain multinationals to reduce their tax rate.

Apple. Last Tuesday the EC released to the public a letter sent to the Irish government in June regarding the country’s tax agreements with Apple. If the Commission’s decision stands, the company could owe billions in back taxes to Ireland and possibly other countries.

The EC is challenging what is, in effect, an advance pricing agreement between the Irish tax authority and Apple that allows the company to shift profits to subsidiaries that are not taxable in Ireland—in fact, taxable nowhere in the world. Apple has avoided billions in tax through these arrangements.

Amazon: Discover Anything Any Way to Avoid Tax. This Tuesday the EC revealed that it is investigating Amazon’s deal with Luxembourg. Joaquín Almunia, the Commission’s vice president responsible for competition issues, said the investigation involves a web of Luxembourg subsidiaries and an agreement that capped Amazon’s Luxembourg tax regardless of the amount of its European profits.

Starbucks. The EC has also opened an investigation into Starbucks’ agreements with Netherlands. The company’s Dutch subsidiary charges other subsidiaries for use of  intellectual property it holds, such as the “coffee roasting process,” the recipes, and the Starbucks brand. These payments move earnings from high-tax jurisdictions to the Netherlands where they are taxed at a very low rate.

A New Era. The EC’s actions are potentially quite a blow to multinational corporations’ European tax-dodging strategies. Multinational corporations can’t avoid the EC crackdown by simply moving headquarters outside the European Union. For many reasons, including tax, trade, and currency issues, it’s important for companies to have  European operations headquartered in an EU country. If the EC is successful in undoing the tax agreements, it will severely hamper multinationals’ ability to shift profits out of the EU to low-tax jurisdictions.

The Commission’s actions may signal the beginning of the end for this kind of tax competition among member states. But Congress will have to act to solve profit-shifting out of the U.S.