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EU Target Apple Over Irish Tax Deals That They Claim Violated EU Law

EU Target Apple Over Irish Tax Deals That They Claim Violated EU Law

The European Commission, the EU’s central antitrust authority, opened formal investigations in June into whether tax deals granted to Apple in Ireland which is where Apple Australia funnel revenues in an effort to avoid paying taxes in Australia amounted to illegal state support for the companies said the Wall Street Journal. 

The commission will publish its so-called opening decision in the Apple case tonight explaining why it reached the preliminary view that two tax deals agreed between the U.S. company and the Irish government-in 1991 and 2007-amounted to illegal state aid, a person familiar with the matter said.

Apple will have 30 days to respond to the EU’s decision, the person said.

A spokesman for the Irish government said it is “confident that there is no breach of state aid rules in this case.” Ireland “has already submitted a formal response to the commission earlier this month, addressing in detail the concerns and some misunderstandings,” he said.

The European investigation will focus on so-called transfer-pricing arrangements, under which companies can redistribute profit within a group by charging for goods or services sold by one subsidiary to another, typically located in different countries. Experts say companies can use transfer pricing to minimize their tax bills.

Companies that do this in Australia include the likes of Swiss Company Logitech, US Company SanDisk as well as Samsung, LG and Belkin. 

The WSJ said that while not illegal, such arrangements could violate EU rules if tax authorities allowed specific companies to charge prices internally that didn’t reflect market conditions.

In the three cases under investigation, the commission is concerned that national tax authorities allowed the companies concerned to underestimate their taxable profits, thereby granting them an unfair advantage over competitors, Mr. Almunia said in June.

The commission will base its decision in Apple’s case on guidelines on transfer pricing established in 2010 by the Organization for Economic Cooperation and Development, a club of rich countries, a person familiar with the matter said.

The move came after earlier efforts by the EU to crack down on tax avoidance and tax evasion made painfully slow progress and yielded little. Despite much hand-wringing by some politicians over Ireland’s low corporate tax rate, tax policy remains largely in the hands of national governments, which can veto EU decisions.