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Illegal Tax Deals – European Commission to Accuse Ireland of Illegal State Aid to Apple (Updated)

Illegal Tax Deals – European Commission to Accuse Ireland of Illegal State Aid to Apple (Updated)

The Financial Times reports the European Commission will accuse Ireland of providing illegal state aid to Apple via “illegal tax deals” for more than two decades.

The Financial Times:

Apple will be accused of prospering from illegal tax deals with the Irish government for more than two decades when Brussels this week unveils details of a probe that could leave the iPhone maker with a record fine of as much as several billions of euros.

The European Commission will charge that Apple has benefited from a tax rate of less than 2 percent, benefiting from illicit state aid after striking backroom deals with Ireland’s authorities, according to people involved in the case.

Apple, operating in Ireland since 1980, says that its agreements with Ireland did not break any laws. “There’s never been any special deal, there’s never been anything that would be construed as state aid,” Luca Maestri, Apple’s chief financial officer, told the Financial Times.

“We were simply trying to understand what was the right amount of taxes that we would have to pay in Ireland,” Mr Maestri said of the agreements, describing Apple’s approach as “very responsible, transparent and prudent”.

EU investigators say Apple negotiated special tax treatment in Ireland that other companies do not enjoy. The commission decided to open an in-depth investigation of arrangements between Apple and the Irish authorities dating back to 1991 as part of a wider crackdown on what Joaquín Almunia, the EU’s competition commissioner, terms “aggressive” multinational tax avoidance.

Similar deals between Starbucks and the Dutch government, and Fiat Finance and Trade, the financial arm of the automotive group, with Luxembourg are also being investigated.

The EU’s case against Apple hinges on two agreements between Apple and the Irish tax authorities, which the commission will argue amounted to special treatment.

Apple had operated tax-free in Ireland since 1980. The company then sought a 1991 meeting with Irish authorities for a change in the law, said Mr. Maestri. The resulting agreement ran until 2007 at which time Ireland approached Apple to revise the tax agreements.

MacTrast will keep our eyes on this story and keep you informed as it develops.

(UPDATE 09/29/2014) – Tim Worstall, writing for Forbes.com, claims the Financial Times report is overblown, saying the European Commission is not about to fine Apple; or accuse the company of anything.

As the press officer for the relevant Commissioner, Joaquin Almunia, has just told me what they are going to publish this week (and it’s sometime, sometime as yet undecided, this week) is the full document explaining what they are looking into and why. It absolutely is not a finding of fact nor a finding of error on anyone’s part at all. It’s just a follow up from the June announcement of the investigation, outlining what the investigation is about and why.

Worstall’s article makes for good reading for those looking for another perspective on the upcoming announcement.