Friday

18th Aug 2017

EU to launch corporate tax probe into Ireland and others

  • Apple's tax arrangements in Ireland are set to be a focal point in a Commission investigation (Photo: EUobserver)

The European Commission is to launch a formal investigation into whether tax breaks used to attract international companies breach the EU’s state aid rules.

The probe, which is likely to target Ireland, Luxembourg and the Netherlands, is set to be announced at a news conference on Wednesday (11 June) by EU competition chief Joaquin Almunia.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Irish broadcaster RTE on Tuesday reported the launch of an investigation into the arrangements of US-based software giant Apple, but EU officials have also been gathering information on tax deals in Luxembourg and the Netherlands since last autumn.

EU countries have promised to crack down on loopholes which have allowed companies such as Amazon, Starbucks and Apple to pay tiny amounts of tax on their European operations.

Last November, the Commission unveiled plans to prevent firms from setting up 'letter-box' companies in different countries to reduce their tax bills.

But although combating corporate tax avoidance has climbed the political agenda in recent years as governments look at ways to bolster tax revenues lost during the economic crisis, the EU executive estimates that tax avoidance and evasion in the EU cost about €1 trillion each year.

Almunia has previously described the practice of "aggressive tax planning" as going against the principles of the EU's single market and "socially untenable".

"Because of the gaps in national tax laws, many of the largest multinational companies pay very low taxes, and they don't need to break the law to do it," he told the European Competition Forum earlier this year.

Apple was revealed to be paying a tax rate of 3.7 percent on their profits made outside the US by designating its office in the Irish city of Cork as the firms' international headquarters.

Elsewhere, coffee shop giant Starbucks paid UK corporation tax of £8.6 million between 1998 and 2011 despite reaping sales of over £3 billion during that period.

Meanwhile, Amazon and Skype have set up bases in tax haven Luxembourg where their profits are taxed at just 4.5 percent.

"[Some firms] manage to avoid paying their proper share of taxes by reaching out to certain countries and shifting their profits there," said Almunia.

The Irish government has maintained that all foreign corporations registered in the country pay its minimum corporate tax rate of 12.5 percent.

"We believe that our legislation ... is very strong and ethically implemented and we will defend that very robustly," prime minister Enda Kenny told journalists in Dublin on Tuesday (10 June).

Setting tax codes is one of the policy areas most jealously guarded by national governments in the EU. In 2011 Ireland resisted French and German demands that it increase its tax rates on companies in return for more generous terms to its bailout programme.

The last legislature also saw national ministers kick a Commission plan to establish rules on a common corporate tax base into the long grass.

Ireland on the defensive in Apple tax row

Ireland has come under fire for its low-tax regime amid US revelations that Apple and other large corporations are using EU-based subsidiaries to avoid paying taxes.

News in Brief

  1. Mixed Irish reactions to post-Brexit border proposal
  2. European Union returns to 2 percent growth
  3. Russian power most feared in Europe
  4. Ireland continues to refuse €13 billion in back taxes from Apple
  5. UK unemployment lowest since 1975
  6. Europe facing 'explosive cocktail' in its backyard, report warns
  7. Danish police to investigate misuse of EU fishing rules
  8. German constitutional court questions ECB's €2tn spending

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  2. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  3. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  4. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  5. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  6. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  7. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  8. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  9. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  10. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  11. ACCAAnnounces Belt & Road Research at Shanghai Conference
  12. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides