EU to investigate Apple's tax affairs

Apple logo Ireland has been accused of giving special tax treatment to Apple

Related Stories

The European Commission is to open a formal investigation into Apple, Starbucks and Fiat in relation to tax arrangements with three EU countries.

The firms' respective arrangements with Ireland, the Netherlands and Luxembourg will be investigated.

Announcing the move, tax commissioner Algirdas Semeta said that "fair tax competition is essential".

Last year, a US Senate investigation accused Ireland of giving special tax treatment to Apple.

The European Commission will look at whether the companies' tax affairs breach EU rules on state aid.

Competition Commissioner Joaquin Almunia said: "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes."

Countries in Europe cannot allow certain firms to pay less tax than they should, Mr Almunia added.

Sanctions

The investigations will focus on "transfer pricing", or whether the countries allowed the multinational firms to charge one part of the company over the odds for goods or services from another part of the company as a way of shifting profits.

Under Commission rules, companies must charge their subsidiaries market rates.

Sanctions for a breach of tax rules could include an attempt to claw money back from Apple, Starbucks and Fiat.

Apple said that it had not had "any special tax deal with the Irish government".

"We have received no selective treatment from Irish officials," the company said. "Apple is subject to the same tax laws as scores of other international companies doing business in Ireland."

The Irish finance ministry said Apple "did not receive selective treatment and there was no 'special tax rate deal'".

"Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously," the Department of Finance said.

Last year's US Senate committee investigation revealed that Apple had been able to funnel profits into Irish subsidiaries or "ghost companies" that had no declared tax residency anywhere in the world, cutting billions from its tax bill.

The Senate committee hearing revealed that Apple designated its Irish entities as unlimited companies, which meant it did not have to publish annual accounts.

The Irish arrangement allowed Apple to pay just 1.9% tax on its $37bn in overseas profits in 2012, despite the fact the average tax rate in the OECD countries that make up its main markets was 24% last year.

In a 40-page memorandum, the Senate committee said: "Ireland has essentially functioned as a tax haven for Apple."

Starbucks' tax row

Coffee giant Starbucks has been embroiled in a tax controversy for a number of years.

In 2012, the multinational admitted that it had a special tax deal with the Dutch government which allowed it to transfer money to its Dutch sister company in royalty payments.

Starbucks said on Wednesday that its Dutch tax arrangements conformed with financial law.

"We comply with all relevant tax rules, laws and OECD guidelines and we're studying the Commission's announcement related to the state aid investigation in the Netherlands," a Starbucks spokesperson said.

The Dutch finance ministry said it was confident that its tax system was "robust".

"We are confident that the investigation by the EC will in the end result in the conclusion there is no state aid involved," a spokesman told the BBC.

Fiat 'compliant in Luxembourg'

The European Commission is also investigating the tax arrangements of Fiat's financial firm, Fiat Finance and Trade.

Fiat said that while its financial arm is headquartered in Luxembourg, the investigation is into the government concerned.

"We are compliant with all Luxembourg regulations," the company added.

Luxembourg has already riled the European Commission over the firm.

The Commission said on Wednesday that it was launching infringement proceedings against Luxembourg for giving only partial answers to requests for information about Fiat Finance and Trade tax rulings.

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    DRIVERLESS CARS 06:44:
    Nissan car

    It's going to be a bank-heavy day today let's face it, but just to provide a break from all that, the government will be announcing changes in the law that will pave the way for driverless cars to take to Britain's roads next year. The government wants the UK to become a leader in developing the technology. In December, the Treasury said it would create a £10m prize to fund a town or city to become a testing ground for the cars.

     
  2.  
    MUSLIM ACCOUNTS 06:36:

    HSBC has told three Muslim organisations it will close their bank accounts. These are the Finsbury Park Mosque in North London, a think-tank on Islamic issues called the Cordoba Foundation based in West London, and a Muslim charity in Bolton called the Ummah Welfare Trust, which works in 20 countries giving aid. HSBC says the decisions were "absolutely not based on race and religion".

     
  3.  
    BANKER BONUSES 06:30: Radio 5 live

    More from Ms Mangwana on Wake Up to Money. She says the proposed seven year rule may be more about changing culture in banking and the way in which bankers view their bonuses. But she also points out bonuses are generally paid in tranches that vest over a number of years, already (commonly anything between three and five years). "That's the current formula and there are [already] mechanisms to reclaim those bonuses," she says.

     
  4.  
    TWITTER SHARES 06:21:
    Twitter

    In case this happened too late for you, Twitter shares rocketed 30% on stronger-than-expected financial results. Revenue more than doubled in the second quarter. Shares rose to $50 in after hours trading. Still down on its high of $74.73, hit in December.

     
  5.  
    BANKER BONUSES 06:10: Radio 5 live

    Samantha Mangwana, employment lawyer at Slater Gordon told Wake Up to Money seven years is a long time to hold a bonus and regulators may well find it difficult to reclaim money. It is highly likely bankers will have gone and spent the money already, she says, and have nothing that the Bank of England can reclaim.

     
  6.  
    BANKER BONUSES 06:07: BBC World News
    Tom Stephenson

    Those new rules on bankers' bonuses are expected to recommend a claw-back period of seven years. Tom Stephenson from Fidelity Worldwide on BBC World News says they could have been tougher: "One of the suggestions was that bankers could be jailed for a significant fall in profits - that's quite something isn't it. Even so, being able to claw back bonuses for seven years is pretty draconian."

     
  7.  
    06:02: Matthew West Business Reporter

    Good morning folks. It's looking like a busy day today. We also have trading updates from ITV and house builder Taylor Wimpey. As always you can get in touch via email at bizlivepage@bbc.co.uk and on twitter @bbcbusiness

     
  8.  
    06:00: Rebecca Marston Business reporter, BBC News

    Welcome again to the Live page. We're going to be banking heavy. There's Barclays results - in about an hour - and later this morning the Bank of England will release new restrictions on bankers' bonuses, said to be the toughest in the world. We'll see.

     

Features

From BBC Capital

Programmes

  • A digger operated via an Oculus Rift and a controllerClick Watch

    Why controlling a heavy digger with a virtual reality helmet might improve safety

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.