EU to decry Apple's Irish tax deal

The EU is not convinced Apple is paying a fair rate of tax on what it sells

The European Commission will set out its case on Tuesday against Apple's tax arrangements in Ireland.

The report is part of a broader EU investigation into tax policies in Ireland, Netherlands and Luxembourg.

The Commission is examining whether these countries have unfairly favoured multinational companies including Apple, Fiat and Starbucks.

The EU will make its case that Apple's tax arrangements with Dublin amount to illegal state aid.

On Tuesday, the Commission will also outline its reasons for launching an investigation into Fiat Finance and Trade, which is resident for tax purposes in Luxembourg.

The Commission will argue that backroom tax deals it believes were struck between Apple and the Irish government and Fiat and the Luxembourg government could constitute a breach of EU regulations on state aid.

'Not state aid'

"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, addressing in detail the concerns and some misunderstandings contained in the opening decision," Ireland's Department of Finance said.

Ireland's corporate tax rate is set at 12.5%, but Apple enjoys an effective rate of tax of 2%, due to the way it channels overseas sales through its subsidiaries.

Ireland's flexible approach to tax is designed to attract investment and jobs to the country. But other European countries say their treasuries lose out, as corporations funnel profits through Irish registered companies that are not resident for tax anywhere.

Apple has denied that the company agreed any special tax arrangements with Dublin.

"There's never been anything that would be construed as state aid," Apple's chief financial officer, Luca Maestri, told the Financial Times newspaper.

Apple says it pays all the tax it owes.

'No selective treatment'

Under EU law, state financing for individual companies is heavily restricted. However, previously, tax arrangements have not been considered.

In June, when the Commission announced it would be conducting in-depth investigations into Fiat's tax affairs in Luxembourg, Starbucks' in the Netherlands and Apple's in Ireland, Joaquin Almunia, vice-president for competition policy, said 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.

When the inquiry was first announced in June, Apple said: "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."

Payback?

Commission spokesman Antoine Columbani confirmed that the outline of the case against Ireland's tax policy towards Apple would be made public on Tuesday.

"The decision will set out the Commission's reasons for opening an in-depth investigation," he said.

Following publication in the Commission's Official Journal in a few weeks' time, interested parties will have one month to submit responses.

Once the Commission has reached a judgement the EU has the right to recover illegally granted state aid from the company in question. This could amount to billions of euros if Apple is found to have received benefits it was not entitled to.

The EU's move comes as the Organisation for Economic Co-operation and Development begins a broader crackdown on aggressive tax avoidance by multinational companies.