Europe to probe Apple further over Irish tax deals

European regulators are looking into Apple's Irish tax deals that it believes broke the law.
Written by Liam Tung, Contributing Writer

European regulators are set to examine whether Apple violated EU law by striking special tax deals with the Irish government.

The European Commission opened an initial investigation into Apple's tax affairs in June, looking at whether the company's two percent tax rate in Ireland — far less than the standard 12.5 percent corporation tax in the country — amounted to illegal state aid under European law.

Launching the first probe earlier this year, Europe's competition commissioner Joaquín Almunia said the EC had reason to believe that the Irish government had allowed Apple to lower its taxable profits.

Because the European Union investigated Apple's tax arrangements through the prism of state aid laws, Apple could find itself ordered to pay additional tax which, according to the Financial Times, could total billions of euros.

The investigation set to be announced this week will focus on transfer pricing agreements between Apple and the Irish government that lasted between 1991 and 2007. According to the publication, the agreements amounted to special treatment because they weren't arms-length transactions between corporate subsidiaries.

Apple CFO Luca Maestri told the FT that Apple did not have any special deals that guaranteed local jobs in return for better tax treatment of its Irish subsidiaries.

A US Senate committee last year found Apple had established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30bn, but which declined to declare any tax residence, filed no corporate income tax return, and paid no corporate income taxes to any national government for five years.

A second Irish affiliate, Apple Sales International, received $74bn in sales income over four years, but due in part to its alleged status as a non-tax resident, paid taxes on only a tiny fraction of that income, the committee said in its report at the time.

Maestri denied to the FT that Apple had broken any law and said he was confident the investigation won't turn up selective treatment in Apple’s favour.

The European Commission is also expected to release its assessment of the tax situations of Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg, whose tax arrangements also came under investigation this June.

A spokesman for the Irish government told the New York Times that it had sumitted a formal response to the commission earlier this month "addressing in details the concerns and misunderstandings". The publication said that Apple has 30 days to respond to the accusations.

ZDNet has asked Apple for comment and will update this story if any is forthcoming. It said in June:

"Apple is proud to have been doing business in Cork, Ireland since 1980. We have grown our workforce to more than 4000 employees, who serve our customers through manufacturing, tech support and other critical functions. These employees play an important part in Apple’s success and continued growth in Ireland.  Success and growth come from the hard work of our Irish employees not from any special tax deal with the Irish government. We have received no selective treatment from Irish officials. Apple is subject to the same tax laws as scores of other international companies doing business in Ireland. Apple pays every euro of every tax that we owe. Since the iPhone launched in 2007, our taxes in Ireland have increased tenfold."

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