EU Commission Announces Apple Tax Break Investigations

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In line with previous “worrisome” reports, the European Union’s competition commissioner, Joaquin Almunia, opened a formal investigation of Apple’s Irish tax deal today. The commissioner will also investigate Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg (via the New York Times).

“In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” Mr. Almunia said in a statement. “Under the E.U.’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.

As we previously reported, Apple came under fire over its tax practices last year, but an SEC investigation corroborated the company’s statement of paying its taxes and not seeking the “Holy Grail of tax avoidance.” However, the tax break Apple received in Ireland remained in the focus of the EU commission, and now they are launching an investigation examining ‘”transfer pricing arrangements validated” in Ireland, the Netherlands, and Luxembourg.

The EU commission will investigate whether Apple received “selective treatment” and if “there was a special tax rate deal. ” The Irish government reacted by defending its current position: “The company in question did not receive selective treatment and there was no ‘special tax rate deal,’” the Irish government said in a statement on Wednesday, apparently referring to Apple.

“Our technical experts do not believe that there is any state aid,” the Irish statement said. “We will now turn to providing our detailed, technical legal rebuttal of the Commission’s position and if necessary will defend our position in the European Courts.”

Apple sent the following statement to Bloomberg:

“Apple pays every euro of every tax that we owe,” the company said in an e-mailed statement. “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 investigation is part of the EU’s global crackdown on tax loopholes allowing companies like Apple to lower their taxes on operations outside the US, as they function as virtually stateless entities.

Apple has successfully defended its tax strategy before Congress, and it is known as the second-largest employer in Cork, Ireland.