The European Commission has opened a formal investigation into whether Apple is receiving special treatment by paying tax in Ireland, in a probe that will also cover Starbucks’ operations in Holland and Fiat’s in Luxembourg.
The investigations will focus on so-called “transfer pricing”, in which the countries allow multinational firms to charge one part of the business over the odds for goods or services from another part of the company as a way of diverting profits.
Under EC rules, companies must charge their subsidiaries market rates. But Apple’s annual report showed how its Irish structures helped it achieve an effective tax rate of just 3.7% on its non-US income last year. Announcing the move, EC tax commissioner Algirdas Semeta said that “fair tax competition is essential”.
Competition Commissioner Joaquin Almunia added: “In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes.”
Apple refuted suggestions that it was getting any special treatment. In a statement it 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.”
The Department of Finance in Dublin said: “Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously.”
Ireland’s low corporation tax rates have seen large companies flock to have their HQs in the country, with the likes of Apple, Amazon, Google, Facebook, eBay, PayPal, LinkedIn, Twitter, Salesforce.com, Intel and Oracle setting up shop.
However, this could yet backfire if the EU decides to press ahead with the “one-stop-shop” approach to data protection. This would see the Irish Data Protection Commissioner’s workload explode.
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