The European Commission is set to accuse Apple of profiting from unlawful state aid from Ireland thanks to the sweet tax deals the firm has enjoyed for the last 20 years, a newspaper has reported.
Sources whispered to The Financial Times reported (behind its paywall) that the EC’s antitrust authority will this week reveal some preliminary findings from its investigation into claims that the firm struck backroom deals with Irish authorities to end up with a tax rate of just two per cent.
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Antoine Colombaine, competition commission spokesperson, refused to confirm or deny the findings, but he told The Register that the EC would be publishing details of its decision to open an investigation into Apple’s Irish tax affairs.
"The Commission will in the coming days publish a non-confidential version of its decision to open an investigation into tax rulings granted to Apple in Ireland that was adopted in June this year. The decision will set out the Commission's reasons for opening an in-depth investigation. All decisions of this type are published,” he said in an emailed statement.
“The decision will be published tomorrow [30 September] on the Commission's website,” continued Colombaine. “A few weeks later, it will be published in the Official Journal; from then on interested third parties will have one month to submit comments to the Commission.
“We continue to investigate this case. We do not have any findings to communicate at this point in time,” he added.
The commission announced back in June that it was opening probes into tax decisions in Ireland, the Netherlands and Luxembourg over the corporate taxes of Apple, Starbucks and Fiat Finance and Trade, respectively. Competition commissioner Joaquín Almunia said at the time that it was important for member states to play fair and for big business to pay their taxes, particularly after the global recession.
"In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” said Almunia. “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," he said.
Apple's chief financial officer denied to the FT that there were any special tax arrangements for Apple's operations in Ireland.
“There’s never been any special deal, there’s never been anything that would be construed as state aid,” Luca Maestri, Apple’s CFO, said.
Transfer pricing and reducing tax bills
The probe is related to the tax rulings of the member states and transfer pricing, which is the method by which a company gets its profits into one country to benefit from the favourable tax rate it enjoys there. Simply put, in Apple’s case, transfer pricing is to do with the amount it charges for goods and services “sold” by Apple’s Irish subsidiaries to its other European branches. Charge a high enough price and all the profits end up in the Emerald Isle, while other European subsidiary profits are wiped out.
This is only an issue for this particular probe if Apple has a special deal with Ireland to allow it do that. If everyone is getting the same deal from the Irish government, then it’s not anticompetitive.
Ireland has had a favourable corporate tax rate for years and it’s not the only European country to try to get businesses to operate in the country in this way. As long as the deal is there for everyone, there’s nothing wrong with it, and the Irish government has always insisted that Apple got the same as everyone else.
Apple operated tax-free in Ireland from 1980 till around 1991, according to the FT, when the law changed. The fruity firm negotiated a new deal with the Irish government and struck an agreement that lasted until 2007, which the Pink 'Un reckons is an unusually long time for a transfer pricing deal. In 2007 Apple sought from the Irish government what chief financial officer Luca Maestri described as an “advanced opinion” that would give the firm “complete certainty” about its tax liabilities.
It is these two agreements that will be the focus of the European Commission’s investigation.
Apple had not responded to a request for comment from El Reg at the time of publication. ®