EU opens probes into tax rulings on Apple, Starbucks and Fiat unit

Thursday 12 June 2014 11.42
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Three in-depth investigations into tax decisions affecting Apple, Starbucks and Fiat Finance and Trade
Three in-depth investigations into tax decisions affecting Apple, Starbucks and Fiat Finance and Trade
Joaquín Almunia says 'it is particularly important that large multinationals pay their fair share of taxes'
Joaquín Almunia says 'it is particularly important that large multinationals pay their fair share of taxes'

The European Commission has opened three in-depth investigations into tax decisions affecting Apple, Starbucks and Fiat Finance and Trade in Ireland, the Netherlands and Luxembourg respectively. 

The probes focus on whether decisions by tax authorities in the three EU member states about corporate tax to be paid by the three companies comply with EU state aid rules. 

The EU said its investigation follows reports some companies have received significant tax reductions through tax rulings by national tax authorities. 

Corporate tax avoidance has risen to the top of the international political agenda in recent years amid reports of how companies like Apple and Google use convoluted structures to slash their tax bills.

In response, the Department of Finance said it is confident that Ireland has not breached state aid rules in its tax dealings with Apple and will defend its position vigorously.

"Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously," the Department said in a statement.

But it said it understands that the European Commission has a responsibility to investigate potential breaches of state aid rules, and so will continue to do everything it can to ensure that they have the full information they require. 

"The Irish corporate tax system is not at issue, the enquiry relates to the application of the rules in one particular case," it said.

"The company in question did not receive selective treatment and there was no ‘special tax rate deal’. Indeed, the company has publicly clarified that there was no special deal," the Department added.

Apple said today it has not received any selective tax treatment from the Irish authorities. 

"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," the company said in a statement.

Apple said its taxes in Ireland had increased tenfold since the iPhone was launched in 2007.    

"In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," EU Competition Commissioner Joaquin Almunia said in Brussels today as he launched the probes.

The European Union said it would focus its probe on transfer pricing payments, an accounting technique where units of a multinational pay 'royalties' to another unit of their business.

Almunia said these arrangements could amount to illegal state aid that discriminated against other member states.

"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," Almunia said.

Starbucks told a UK parliamentary investigation in 2012 that it received a tax deal in the Netherlands which allowed it to enjoy a "very low" tax rate, while a US Senate probe last year revealed that Apple had sheltered tens of billions of dollars in profits from tax by using Irish companies that had no tax residence anywhere. 

Apple in the US entered into deals with the Irish subsidiaries whereby the Irish units received the rights to certain intellectual property that were subsequently licensed to other group companies, helping ensure almost no tax was reported in countries such as Britain or France.

Apple's Irish arrangement helped it achieve an effective tax rate of just 3.7% on its non-US income last year, its annual report shows - a fraction of the prevailing rates in its main overseas markets.

The Group of 20 leading nations has launched a drive to develop new rules to tackle abusive transfer pricing and other forms of corporate profit shifting.