Wednesday

20th Nov 2019

Apple's tax deal illegal, EU commission tells Ireland

  • The European Commission is investigating Apple's tax arrangements in Ireland, as well as cases in the Netherlands and Luxembourg. (Photo: EUobserver)

Ireland's tax arrangement with software giant Apple constitutes illegal state subsidy, the European Commission has said.

In a letter made public on Tuesday (30 September), but sent to the Irish government in June, the EU executive stated that its "preliminary assessment" was that Ireland's agreement with Apple did "confer an advantage" on the firm.

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"That advantage is obtained every year and on-going, when the annual tax liability is agreed upon by the tax authorities," the commission added, before concluding that there was "no indication that the contested measure can be considered compatible with the internal market."

The commission launched an investigation in June into the tax arrangements for Apple, as well as car manufacturer Fiat in Luxembourg and Starbucks in the Netherlands. The investigations are all ongoing, with the governments required to provide details about tax payments, the number of employees, and income declared by the respective companies.

The investigations are likely to last several years.

Should it win its case, the Commission has the power to force firms to pay a sum equivalent to the "unlawful aid" they received from governments.

Apple was revealed to be paying a tax rate of 3.7 percent, and a total of less than €20 million in taxes to the Irish tax authorities between 2010 and 2012 on their profits made outside the US, by designating their office in the city of Cork as the firm's international headquarters.

In question are the validity of agreements between the Irish tax authorities and Apple in 1991 and 2007 which calculate how much tax Apple is expected to pay. The EU executive states that the special tax rulings for individual companies must not result in them getting preferential treatment, and paying less than rival firms.

However, Apple denied that it was receiving special treatment from the Irish government, insisting that it had received "no selective treatment from Irish officials over the years".

"We're subject to the same tax laws as the countless other companies who do business in Ireland," the company added in a statement on Tuesday.

For its part, Ireland's finance ministry issued a statement that it was "confident that there is no breach of state aid rules" in its dealings with Apple.

Meanwhile, in its letter to Luxembourg's government, the Commission signalled that the Duchy's tax arrangement with car manufacturer Fiat were also in breach of state aid rules.

The EU executive estimates that tax avoidance and evasion in the EU costs about €1 trillion each year, while the bloc's competition chief, Joaquin Almunia, has described the practice of "aggressive tax planning" as "socially untenable" and contrary to the principles of the EU's single market.

With governments across Europe anxious to increase their tax revenues, a number of ministers have promised to close the loopholes that allow companies to pay minimal taxes.

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