EU Commission Investigation Finds Apple’s Irish Tax Deal Illegal

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The Irish government gave Apple and Fiat SpA illegal state support, the first stage (the “preliminary view”) of the EU commission investigation has found. The second stage of the investigation could end with the companies having to pay unpaid taxes, reports the Wall Street Journal.

In a letter to the Irish government published today, the EU Commission said that Apple and the Irish government had struck a tax deal between 1991 and 2007 that favoured Apple. “Through those rulings, the Irish authorities confer an advantage on Apple” that is “granted in a selective manner,” the commission wrote.

According to a filing with the Securities and Exchange Commission, Apple set aside roughly $12 billion for US federal and state income taxes in fiscal 2013 with sales of $62.7 billion in America, while for the same period it had sales of $88 billion but set aside just $1.1 billion for foreign taxes.

From the figures outlined in the letter sent by the EU Commission, Apple could be asked to pay up to $200 million in back taxes, according to a tax consultant interviewed by the WSJ.

As previously reported, Apple denies any wrongdoing, as does the Irish government. Commenting on the freshly released letter, Apple has sent a statement to Business Insider defending its position:

Apple is proud of its long history in Ireland and the 4,000 people we employ in Cork. They serve our customers through manufacturing, tech support and other important functions. Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government. Apple has received no selective treatment from Irish officials over the years. We’re subject to the same tax laws as the countless other companies who do business in Ireland.

Since the iPhone launched in 2007, our tax payments in Ireland and around the world have increased tenfold. To continue that growth and the benefits it brings to the communities where we work and live, we believe comprehensive corporate tax reform is badly needed.”

The commission has specific doubts about the methods chosen to calculate the prices used in the transfers of items from one subsidiary to another, notes the WSJ. Also, the regulator noted the unusually long period of the tax agreement between Apple and the Irish government.

This is just the beginning of a lengthy process. Apple is fighting for corporate tax reform, while the EU is after collecting taxes, as it cannot afford any “tax giveaways”. In other words, we will likely see more headlines shortly.

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