EU probes Apple's Irish tax arrangements
The European Commission is expected to announce it will open an investigation into Apple's Irish tax arrangements.
In May 2013, the global technology giant came under fire from the US senate, which accused it of "large scale tax avoidance".
Apple chief executive Tim Cook appeared before a senate committee to defend his company’s tax practices, including a 2% CT rate deal it struck with the Irish government for two of its subsidiaries.
Apple has been in Ireland since the 1980s and maintains several subsidiaries there, including financial services, distribution and manufacturing wings. Ireland strongly rejected US senate claims that it gave special treatment to Apple, with the Department of Finance saying Ireland's tax system is "transparent".
State broadcaster RTE reported yesterday that EU competition commissioner Joaquin Almunia is set to announce the probe. After the US senate report on Apple last year, the commission began collecting information about multinationals' tax arrangements in different countries.
Prime Minister Enda Kenny told RTE Ireland "had co-operated with the OECD" and that he hopes its report will provide an international solution.
The senate's report accused Apple of avoiding tax on US$74bn of overseas profits held offshore in the last four years, accounting for 61% of its earnings.
Appearing before the senate, Cook claimed in pre-written testimony that Apple is one of the US’s biggest taxpayers, contributing US$6bn to the American treasury in taxes last year at a tax rate of 30.5%.
He added that Apple did not use “tax gimmicks” such as holding its intellectual property offshore or using complex transfer pricing structures.
Money made outside the US was “taxed in the local market”, he said, before being transferred to Apple Operations International, registered in Ireland but controlled in the US.
Because of this, AOI is considered tax resident in either the US or Ireland.
The senate maintains however that Apple is one of the biggest US tax avoiders, dodging an estimated US$44bn of tax in the last four years.
Apple has a cash stockpile of US$145bn, but the report said that US$102bn of this is currently held offshore.
Following the EU announcement, Baker Tilly senior tax partner George Bull commented: “With tax competition widespread among sovereign nations, and with the Netherlands and Luxembourg also to be investigated by the EU, today’s announcement marks a new challenge to the role of sovereign nations in tax planning by multinational corporations.
“If the EU is successful, then companies which have saved tax by complying fully with their agreements with specific countries are unlikely to have to pay extra tax retrospectively, but we can expect to see them paying more taxes in the future.”