EC to outline case against Ireland over Apple’s tax arrangements

Final decision months away and Government confident state aid rules were not breached

Apple will be accused of prospering from illegal tax deals with the Irish government for more than two decades when Brussels this week unveils details of a probe that could leave the iPhone maker with a record fine of as much as several billions of euros. Photograph: Simon Dawson/Bloomberg

Apple will be accused of prospering from illegal tax deals with the Irish government for more than two decades when Brussels this week unveils details of a probe that could leave the iPhone maker with a record fine of as much as several billions of euros. Photograph: Simon Dawson/Bloomberg

 

The European Commission will tomorrow publish a letter sent to the Government in June outlining the terms of its investigation into Apple’s tax arrangement with the Ireland.

A final decision on Ireland’s tax dealings with Apple is still months away, the commission confirmed this morning.

A few weeks later this will then be published in the EU’s Official Journal, at which point a 30 day consultation period will then open, which will feed into the ongoing investigation.

This morning in the Financial Times reported stating that the investigation was likely to find that Apple benefitted from billions of euro in illegal state aid from the Irish government.

The commission is also due to publish the letter sent to Luxembourg concerning tax arrangements with Fiat tomorrow, though a similar letter to the Dutch government over Starbucks will not be published.

EU sources said that no decision has yet been made into the Irish Government’s tax dealings with Apple, but there is growing expectation that the Commission will find against the government and the computer giant.

In an interview with the Financial Times, Apple’s chief financial officer denied that its deal with Ireland could be construed as state aid.

Minister for Finance Michael Noonan is widely expected to announce decisive changes to Ireland’s corporate tax regime at next month’s budget, amid increasing pressure from Brussels, the US and the OECD.

In a statement this morning the Department of Finance said the publication of the letter was “simply the next normal procedural step in the State aid investigation process.

“At this stage, the Commission has not formally decided that there is State aid, only that it is formally examining this case.”

It added that a final decision on the matter is expected to take “a considerable period of time.”

The Government has previously said it would “vigorously defend” itself in the case, possibly bringing the issue to the European Court of Justice, a move that would raise the spectre of a protracted legal battle with Brussels.

The European Commission opened the investigation in June into two individual tax rulings offered by Irish Revenue to two Irish subsidiaries - Apple Sales International and Apple Operations Europe.

At the time of the announcement of the investigation EU Competition Commissioner Joaquin Almunia said the Commission had “serious doubts” about the compatibility of the tax deal with EU treaty rules on state aid.

The investigation looks at transfer-pricing arrangements entered into by Apple.

Apple’s chief executive Tim Cook told a Senate Committee hearing last year that Apple had negotiated a special tax rate of less than 2 per cent with Ireland. The state’s corporate tax rate is 12. 5 per cent.

A senate sub-committee report last year said that Ireland had “essentially functioned as a tax haven for Apple.”

The European Commission’s investigation centres on two tax deals offered to Apple by the Irish authorities in 1991 and 2007.

Luxembourg and the Netherlands are also being investigated for tax rulings offered to Fiat and Starbucks.

Additional reporting: Financial Times