The European Commission on Tuesday announced that it has reached the “preliminary view” that a corporate tax deal granted to Apple in Ireland constitutes illegal state aid. Meanwhile, Apple continues to stress that it does not receive selective tax treatment in Ireland and is subject to the same tax laws as countless other international companies doing business in the country.
The European Commission is still in the early stages of this investigation, but Apple could be forced to pay billions of euros in back taxes if it is found to have received illegal state support from Ireland. The Wall Street Journal reports that late Apple co-founder Steve Jobs negotiated the tax break with Dublin in the late 1980s, with the deal going into place in 1990 or 1991.
Apple receives a significant tax break in Europe, having negotiated a corporate tax rate as low as 2 percent with Irish authorities. The iPhone maker faced a fair amount of scrutiny last year for keeping much of its cash reserves overseas, rather than paying a much heftier 35-percent corporate tax in the United States. It has been defending its tax practices in Europe since at least June.
Business Insider obtained the following statement from Apple regarding the matter:
“Apple is proud of its long history in Ireland and the 4,000 people we employ in Cork. They serve our customers through manufacturing, tech support and other important functions. Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government. Apple has received no selective treatment from Irish officials over the years. We’re subject to the same tax laws as the countless other companies who do business in Ireland.
Since the iPhone launched in 2007, our tax payments in Ireland and around the world have increased tenfold. To continue that growth and the benefits it brings to the communities where we work and live, we believe comprehensive corporate tax reform is badly needed.”
It should be noted that Apple is unlikely to face a tax bill in the billions of dollars at any time soon, as this is only the beginning of a long and complicated process that could lead to the iPhone maker’s tax rate being recalculated. Apple, as you would expect, is also going to fight tooth and nail to defend its tax practices in Europe.
Ireland must formally respond to the European Commission before the investigation continues.[via WSJ]