EU prepares to bite Apple over tax avoidance

Apple is braced for hefty fines as the European Commission prepares to reveal its ruling in its tax avoidance investigation.

by Adam Gale
Last Updated: 12 Oct 2015

Find out the extent of tax avoidance in the UK and what can be done about it in MT's tax report.

Joaquin Almunia looks set to end his tenure as European competition Commissioner with a bang. After announcing earlier this month that there won’t be a settlement any time soon in the EU’s investigation into Google, he is today poised to accuse Apple of breaching EU tax rules, according to the FT.

In pursuit of its recently-acquired hobby of multinational-bashing, the EU began investigating Apple in June over allegedly unfair tax deals with Ireland, where the tech company is based in Europe. It also opened proceedings against Starbucks and Fiat.

The EU’s investigation concerns deals allegedly made with the Irish government in 1991 and 2007 to allow Apple tax breaks on preferential terms compared to other companies. If the FT’s mysterious ‘people involved in the case’ are correct and the EU does have evidence of backroom deals, Apple could find itself on the wrong end of a multibillion pound fine.

This isn’t Apple’s first run-in with tax authorities. In 2013, the US Senate found that three of Apple’s subsidiaries effectively avoided tax altogether by incorporating in Ireland (avoiding US corporate tax) while being managed from the US (avoiding Irish corporate tax). Clever, that...

This use of transfer pricing agreements, as these tax tricks are known, is not illegal, and both Apple and the Irish government have denied any wrongdoing. Once the EU announces its opening decision, Apple will have 30 days to reply. It may have to hurry if it wants to take a parting shot at Almunia, though, as the commissioner leaves office in October.

Tax-savvy firms don’t only have to worry about the EU. British Chancellor George Osbourne announced today at the Conservative Party conference that he too is getting tough on tax avoidance, a conveniently agreeable policy for everyone who isn’t themselves a tax avoider.

‘Some technology companies go to extraordinary lengths to pay little or no tax here,’ Osbourne said, not naming any names. ‘My message to those companies is clear: we will put a stop to it.’

Now, why does that sound familiar?

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