The European Union is launching an investigation into computer giant Apple's tax arrangements in Ireland.
The probe comes as the EU looks at deals that several multinationals - including Apple, Starbucks and Fiat struck with European countries -o see whether they violate competition law.
EU antitrust commissioner Joaquin Almunia said it appears the arrangements are not proper, though the companies and countries involved – Ireland, the Netherlands and Luxembourg – must be given a chance to respond.
“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.
Apple has a deal with tax authorities in Ireland, Starbucks in the Netherlands and Fiat’s financing arm in Luxembourg as part of their strategy to minimise the taxes they pay.
Almunia said that while such agreements are permissible in theory, they would be improper if they give the companies an advantage over competitors.
The companies named have been frequent targets of criticism for paying low taxes in some of countries they operate in.
The countries have also been criticised – Ireland for its low tax rates, the Netherlands and Luxembourg as homes for shell companies, and all three for secrecy.
Almunia said the three investigations are part of a wider look into tax rules in various EU countries and “aggressive” tax planning by multinationals, which he said erodes countries’ tax bases. He named Belgium as another country whose tax rules his office is examining.
“Why three companies today? Because we are starting,” he said at a press conference in Brussels.
Authorities here were quick to respond, with the government issuing a statement that it is “confident that there is no state aid rule breach in this case and we will defend all aspects vigorously.”
Apple also denied that it had any special treatment with regard to its Irish taxation affairs.
"We have received no selective treatment from Irish officials," the company said in a statement.
"Apple is subject to the same tax laws as scores of other international companies doing business in Ireland."
Almunia said he is not criticising the countries’ overall tax regimes. He said the issue in question involves ’transfer pricing’ – where a company allows one part of its operations to charge another for goods or services in one country in order to shift profits where it wants.
For instance, Starbucks might charge its own subsidiaries a licence fee for using its logo. If it keeps its European licensing arm in the Netherlands and then funnels all the licensing fees there, it could have high profits there and low profits elsewhere.
The Commission said that sort of strategy is only allowable if the prices a company charges its subsidiaries conform to market rates.