EU launches investigation into corporation tax treatment of Apple in Ireland
Also investigating transfer pricing arrangements for Starbucks in Netherlands and Fiat Finance in Luxembourg
THE European Commission has begun a formal investigation into the Irish tax affairs technology giant Apple.
The probe is part of a three pronged investigation to see whether the corporate income tax treatments of Apple by Ireland, Starbucks in The Netherlands and Fiat Finance and Trade in Luxembourg broke state aid rules, the Commission said.
“Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously,” the Department of Finance said in a statement.
“However, we understand that the European Commission has a responsibility to investigate potential breaches of state aid rules, so we will continue to do everything we can to ensure that they have the full information they require,” the Department said.
The opening of an in-depth investigation gives interested third parties, as well as the three Member States concerned, an opportunity to submit comments.
It does not prejudge the outcome of the investigation.
Commission Vice President in charge of competition policy Joaquín Almunia said: "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes.
Under the EU's state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way."
Algirdas Šemeta, Commissioner for Taxation, said: "Fair tax competition is essential for the integrity of the Single Market, for the fiscal sustainability of our Member States, and for a level-playing field between our businesses. Our social and economic model relies on it, so we must do all we can to defend it."
A US Senate subcommittee investigation revealed last year that Apple had cut billions from its tax bill by declaring companies registered in the Irish city of Cork as not tax resident in any country.
Senator Carl Levin, chairman of the subcommittee, said the Apple structure represented "the Holy Grail of tax avoidance."
Apple in the United States entered into deals with the Irish subsidiaries whereby the Irish units received the rights to certain intellectual property that were subsequently licensed to other group companies, helping ensure almost no tax was reported in countries such as Britain or France.
Apple's Irish arrangement helped it achieve an effective tax rate of just 3.7 percent on its non-U.S. income last year, its annual report shows – a fraction of the prevailing rates in its main overseas markets.