Apple Logo

The world's western powers are all talking about cracking down on tax avoidance among the biggest multi-national corporations. But the US is taking a stand to defend its own.

With the European Commission set to deliver its ruling against Apple next month, the US Treasury Department has warned the EU risks becoming a "supra-national tax authority", overriding the tax laws of member states.

The US Treasury said a ruling forcing US companies to pay back owed taxes could dramatically effect revenues generated by the department in the US.

In its report, it said: "There is the possibility that any repayments ordered by the Commission will be considered foreign income taxes that are creditable against US taxes owed by the companies in the United States."

It added: "To the extent that such foreign taxes are imposed on income that should not have been attributable to the relevant Member State, that outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers."

The US Treasury also warned that the investigation only concerns three US companies, a ruling against them could lead to a "chilling effect" on investment between the EU and US.

The Commission is currently investigating several instances of multi-national companies, mainly US and Apple, Amazon and Starbucks among them, setting up headquarters in countries with low corporation tax rates after coming to special arrangements with national governments. Profits are then diverted through those headquarters, resulting in a low tax bill.

In particular, the EU has accused Apple of funnelling billions of pounds through the Republic of Ireland thanks to a deal with the Irish government. It effectively pays no tax on those profits. JP Morgan, which holds a stake in Apple, believes the worst case scenario could see the tech giant hit will a $19 billion tax bill.

The European Commission is investigating whether or not these special deals between multi-nationals amount to state aid, which would violate EU laws.