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By | Jennifer Baker 30th September 2014 11:57

It's official: EU chiefs WILL probe Apple's Irish tax deal

But if impropriety found, Ireland, not Apple, will have to fix it

The European Commission officially announced today that it is looking into the possibility that Apple received illegal state aid from Ireland in 1991 and 2007.

The Commish is examining whether deals done with the Irish tax authorities constitute state aid. Apple’s European arm is incorporated in Ireland and, like most multinationals, it moves its profits about so as to pay as little tax as possible. This is not illegal in itself, but according to the Commission: “Tax rulings may involve state aid within the meaning of EU rules if they are used to provide selective advantages to a specific company or group of companies.”

The big issue at stake is Apple’s so-called transfer pricing arrangements. These are the prices charged by one part of a group to another part of the same group in order to shift the taxable profit between subsidiaries from a country with high taxation to one with lower taxation.

If, by accepting this move, the Irish tax authorities are shown to have given Apple an unfair advantage, they could be ordered to reclaim the difference. This difference between unfair advantage and appropriate taxation is measured in part by what prices Apple would have charged a non-Apple subsidiary for the same goods.

Competition Commissioner 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."

Taxation Commissioner Algirdas Šemeta added: “Fair tax competition is essential 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.”

The process was begun in June 2013, when the Commission asked Ireland to provide information on the practice of tax rulings – in particular any rulings granted in favour of Apple. The formal investigation is the latest stage in the process and may not in the end find any wrong-doing on the part of Ireland. Even if it does, it is the country that will have to recover any lost taxes, and Apple will not be held accountable.

The investigation is being carried out in tandem with those of two firms taxation issues: Starbucks in the Netherlands and Fiat in Luxembourg.

The Irish department of finance said it was “confident that there is no breach of State aid rules in this case.” ®

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