US Treasury calls for tax reforms after EU ruling on Apple

US Treasury calls for tax reforms after EU ruling on Apple
The European Commission's decision to impose a €13 billion ($14.6 billion) tax bill on Apple revealed the need for US corporate tax reform to discourage tax avoidance, according to US Treasury Secretary Jack Lew.

“Our current tax code is riddled with loopholes that allow corporations to artificially lower their tax bills by shifting income from higher-tax countries to low- or no-tax jurisdictions,” Lew wrote in an op-ed column for The Wall Street Journal.

A complicated system for taxing multinational businesses, aging tax infrastructure as well as the relatively high US corporate rate promote the erosion of the tax base and make America less attractive for business activity, the Treasury boss stressed.

READ MORE: Europe wants a slice of Apple

The current American tax code has a 35 percent corporate tax rate, one of the world’s highest. It allows companies defer taxes on offshore revenues until they bring them back to the US. The corporations may claim foreign tax credits against their tax bills in the US for any tax-related payments to European Union countries.

American companies alone have avoided paying taxes to the US by holding more than $2 trillion in deferred overseas income.

READ MORE: US exceptionalism: How dare the EU demand US companies pay more tax!

Lew highlighted the importance of President Obama’s proposed plan for business tax reform and infrastructure investment.

As for the EU's ruling on Apple, the US Treasury warned the new approach to investigations might undermine the European business climate. The retroactive business penalties contradict established legal principles, according to Lew.