EU launches probe into Revenue 'special deals' for multinational firms
Ireland is to be investigated by the European Commission amid allegations that the Revenue Commissioners have offered special deals to multi-national companies.
The formal probe is to begin as early as next Wednesday and could result in businesses being forced to repay money to the authorities.
However, Taoiseach Enda Kenny – who is on a trade mission in Silicon Valley – has indicated that the Government will fight to defend its reputation on the issue.
"We believe our legislation is robust, that the application of that legislation is ethical and obviously we will be prepared to defend that very strongly in the event of any further statement or requirement from the European Commission," he told the Irish Independent.
The investigation comes amid worries that some agreements between tax officials and US multinationals amount to state aid.
The Netherlands will also face a full probe, while Luxembourg may also be investigated.
The probe will examine whether the Revenue Commissioners have been too lax when it comes to taxing some transactions known as transfer pricing.
The commission is not questioning this country's 12.5pc corporation tax rate but EU officials are worried that some complex taxes have been wrongly applied.
In California yesterday, Mr Kenny announced that Hewlett Packard is to create 100 new jobs in Galway. Another 100 jobs will be announced for Dublin today at review site Yelp.
The Taoiseach said it was too early to make a detailed response to the commission's probe.
"Clearly, when the commission decide to make a statement on the matter, Ireland will react to it," Mr Kenny said.
The US multinationals at the centre of the Irish and Dutch probes can appeal to the courts if they are unhappy with the outcome. Governments are unlikely to be fined because any mistakes reflect decisions by tax officials, rather than governments.
The EU investigation comes at a time when many countries are becoming increasingly concerned about how multinationals such as Apple and Google manage their tax affairs.
Parliaments from London to Canberra have scrutinised US multinationals with headquarters here and complained that these companies are using their Irish bases to avoid taxes.
The commission has said that tax avoidance and evasion cost €1trn a year.
The new probe will examine the once arcane issue of transfer pricing, which is the way in which companies within a multinational group deal with sales to other companies within the group.
The tax law in this area is often very complex and poorly understood, which means that agreements between companies and tax authorities are difficult to police.