Apple's Tax Affairs in Ireland Are Under Investigation By The EU

Bad Apple?

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The Irish government have stepped out to defend itself against an investigation carried out by European commission looking into specific tax policies in Ireland, the Netherlands and Luxembourg.

The EC wants to know whether these countries have unfairly favoured multinational companies, such as Apple and Starbucks, with special tax arrangements. The EC, which enforces EU law, is seeking to tighten legislation around exploitative tax avoidance schemes employed by multinational companies.

The report from the investigation is expected to be issued tomorrow, and it is expected that Ireland will come under fire for allowing Apple to obtain billions of euros in illegal state aid over the last number of years, and across successive governments.

Antoine Colombani, a commission spokesman told The Guardian, “the commission will 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. We continue to investigate this case. We do not have any findings to communicate at this point.”

“Ireland is confident that there is no breach of state aid rules in this case and has already issued a formal response to the commission earlier this month.”

For quite a number of years Ireland has attracted MNCs due to its low corporation tax, which is currently set at 12.5%, but Apple’s effective tax rate of 2% in Ireland is sure to come under intense scrutiny. This rate is made possible by way of channelling overseas sales through Irish-owned subsidiaries. This accounting strategy of transfer pricing is nicknamed the “double Irish”.

Ireland insist their cooperation with Apple has been in line with the law. The Irish Department of Finance publicly responded to the investigation by saying, “Ireland is confident that there is no breach of state aid rules in this case and has already issued a formal response to the commission earlier this month.”

Joaquin Almunia, vice-president for EU competition policy, said that state aid rules should be applied to taxation. "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 responded back in June when the tax probe began: "We have received no selective treatment from Irish officials.

"Apple is subject to the same tax laws as scores of other international companies doing business in Ireland."