EU launches tax avoidance investigations on Apple, Starbucks, Fiat

“The European Commission raised pressure on Ireland, the Netherlands and Luxembourg over their corporate tax practices, saying it was investigating deals the countries have cut with Apple, Starbucks and Fiat,” Tom Bergin reports for Reuters. “The EU is looking at whether the countries’ tax treatment of multinationals, which help to attract investment and jobs that might otherwise go to where the companies’ customers are based, represent unfair state aid.”

“Corporate tax avoidance has risen to the top of the international political agenda in recent years following reports of how companies like Apple and Google use convoluted structures to slash their tax bills,” Bergin reports. “Governments have promised to rewrite the rules that govern international tax, but experts said the European Commission would struggle to make any challenge to the deals Ireland, Luxembourg and the Netherlands had agreed under existing rules.”

“Apple said on Wednesday it has not received any selective tax treatment from the Irish authorities, while the Irish government said it was confident that it has not breached state aid rules and will defend its position vigorously,” Bergin reports. “The Commission said it was looking at whether the pricing for transactions between company subsidiaries – known as transfer pricing – that were approved by the Irish, Luxembourg and Dutch tax authorities and which allowed the companies to reduce their tax bills, were selective and thereby represented unfair incentives. But Sheila Killian, assistant Dean in the Accounting & Finance department of the University of Limerick, Ireland, said international tax rules gave companies wide flexibility in choosing transfer prices and so the legal hurdles the Commission faced were substantial. ‘It’s almost impossible to prove that the transfer pricing is any way favourable … but in launching a high-profile investigation, it puts a spotlight on those companies’ tax affairs, which acts as a deterrent to companies against engaging in aggressive tax planning,’ she said.”

Read more in the full article here.

“Apple’s office in Cork, Ireland, was the first one the company opened outside the U.S., and it now has 4,000 employees making it the biggest employer in Cork,” Leonid Bershidsky writes for Bloomberg View. “If economist Enrico Moretti is right about each tech job creating five additional ones in the service sector, the once-depressed city is getting plenty of reward from Apple.”

“No wonder the Irish authorities are not treating Apple as a tax-avoiding pest but a major partner. Prime Minister Enda Kenny toured the Cork facility in January with Apple chief executive Tim Cook,” Bershidsky writes. “EU bureaucrats are not guided by such logic, however. They are using the provision of the EU treaty which generally bans state aid to get into an area they aren’t supposed to regulate.”

“Technically, it is none of Brussels’ business how Ireland, the Netherlands or Luxembourg choose to tax corporations: The bloc’s member states have the right to veto its attempts to set tax rules,” Bershidsky writes. “State aid is another matter… Theoretically, if the European Commission rules that Ireland provided illegal aid to Apple, the Cupertino giant might be hit with retroactive taxes. In practice this never happens. Ireland — and the other two countries involved — will just look for a way to satisfy the bureaucrats without worsening their investment climates. It’s not that difficult: Brussels doesn’t really care how much tax Apple, Starbucks or Fiat will pay. All it wants is control.”

Read more in the full article here.

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15 Comments

  1. These stupid EU commission should go after tax dodging black hole like Greece, Israel and other dumps, they should leave companies like apple alone, and concentrate on problems in their own soil

      1. Because the European Broadcasting Union is nothing to do with the European Union, in much the same way as the European Union is nothing to do with UEFA (Union of European Football Associations) of which Israel and, more bizarrely, Kazakhstan are also members.

        Admittedly Israel is a member of UEFA because some Arab associations which comprise a large proportion of the AFC started to refuse to play against them.

        As for the EBU: even ABC, CBS, NBC, WGBH and PRS are associate members and it should be pointed out that a lot of video and broadcasting technology comes out of Israel including the cholesteric displays that – for all I know – are still installed in the New England Patriots museum (Patriot Place??).

  2. Apple’s tax haven in Ireland has been investigated before with no fault found. Apple contends that it pays all of the taxes it owes.

    Apple plays things straight.

    1. Apple Ireland aren’t a tax vehicle. As it says above they employ 4,000 people at their Cork HQ. Hardly the PO Box and skeleton staff arrangement of the sort some corporations run in Luxembourg.

  3. How many more investigations do these people want? It seems not 6 months go by without another pointless investigation… all at the taxpayer’s expense, of course.

    I guess it keep the lawyers, accountants and consultants behind these investigations in well paid employment.

  4. > tax dodgers

    My 2 EU cents:

    The EU gives the impression that one is talking about tax fraud, not paying the taxes you rightfully have to pay under the rules. That is not what this is about. We all try to minimise (dodge) the amount of tax we have to pay, and there are rules for that. Large companies do it just like we ourselves do, it’s just a matter of scale. It’s perfectly legal. If states want to collect more taxes, they should simply change the rules.

    But that is not how this works in politics. Ireland has a sweet deal with Apple (and no doubt other companies) and other EU memberstates by now want in on the action. They all know the deals are legal, so they have to create an excuse to “investigate” by an institution that is as democratic as a communist party. So they let someone say that Apple “dodges” taxes, declaring in fact that Apple is operating legally while at the same time creating with the public the impression that Apple commits tax fraud. Rinse, repeat, and after a while you have the political support for an “investigation” that will likely lead to a “tightening” of whatever rules and probably not to persecution in court. We’re being played all the way to the bank, or you might say, taken to the cleaners. Or the showers. It’s not rocket science.

  5. It may be legit for Apple to pay only 2% corporation tax on profits from UK sales but that does not make it right.

    The UK government has to either sort it out within the EU by changing the tax laws across EU countries which allow the minnows like Ireland to claw taxes from sales in UK by offering sweetheart deals or for UK to leave the EU

    It’s right for Apple to seek the best deal but it is not right for the UK government to let it happen and have UK individual taxpayers pay more because Apple pays nothing in UK

    1. Yes it is.

      In much the same way that News International, the UK arm of News Corporation, has NEVER paid a penny in UK corporate tax which effectively created a cash stream that allowed Rupert Murdoch to buy 20th Century Fox and set up both the free-to-air and subscription Fox TV services.

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