European Union antitrust regulators opened an investigation Wednesday into whether Apple’s tax breaks in Ireland are legal. The probe will also investigate similar tax deals Starbucks and Fiat received in the Netherlands and Luxembourg, respectively.
In an effort to lure tech jobs, Ireland has over the years maintained low corporate tax rates and its tax code contains significant loopholes for foreign companies, drawing ire from the U.S. and other European countries. Through its Irish tax deal, Cupertino-based Apple paid an effective tax rate of just 3.7 percent on its non-U.S. income last year, according to its annual report.
EU competition commissioner Joaquín Almunia said such deals may constitute unfair state subsidies. “In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” he said in a statement. “Under the EU’s state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way.”
In recent years, Apple has slashed its tax bills by stashing billions in its overseas subsidiaries. CEO Tim Cook came under fire from a Senate subcommittee earlier this year after a report found Apple paid virtually no taxes on $102 billion it had in overseas tax shelters. “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” Sen. John McCain, R-Ariz., said in a statement in May.
Apple and the Irish government both denied Wednesday that there was favorable treatment, and in May, Cook defended the company’s tax record. “Apple complies fully with both the laws and spirit of the laws,” Cook said at the time. “And Apple pays all its required taxes, both in this country and abroad.”
At top: European Union’s antitrust commissioner Joaquin Almunia announces Wednesday an investigation into tax deals that Apple, Starbucks and Fiat struck with several European countries to see whether they violate competition law. (AP Photo/Yves Logghe)