Gaspard Sebag and Jesse Drucker Brussels
APPLE may have to pay millions of euros in taxes in Ireland dating back to 2003 after the EU said the iPhone maker benefited from improper deals that were “motivated by employment considerations.”
The methods to determine Apple’s costs “appear to have been reverse engineered” to arrive at a taxable income that “does not have an economic basis”, the European Commission said in a letter to Irish officials dated June 11 and posted on the EU website yesterday.
“It looks like Ireland is caught,” said Alex Cobham, a researcher at the Center for Global Development, who studies tax avoidance. “They’ve done a deal to fix some minimal tax payment for themselves, while turning a deliberate blind eye to the fact that this legitimises the non- taxation of large amounts of Apple’s profits.”
The EU inquiry comes amid a global crackdown on tax avoidance as governments struggle to increase revenue and reduce deficits. The commission has said tax avoidance and evasion in the EU cost about e1 trillion (R14 trillion) a year. In addition to Ireland, the EU tax probe also includes Luxembourg and the Netherlands.
The commission said in the letter that tax rulings granted by the government to Apple in 1991 and 2007 “do not comply with the arm’s length principle” of the Organisation for Economic Co-operation and Development. Any potential recovery would not extend to aid granted before June 12, 2003, the EU said.
Josh Rosenstock, an Apple spokesman, said the company received no selective treatment from the Irish government.
“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.”
The EU addressed revenue increases in its letter to Ireland, saying that Irish sales increased fivefold from 2009 through 2012 while the costs reflected in the company’s taxable income rose less than 20 percent.
An Irish finance ministry spokeswoman said the government had no comment on yesterday’s EU release, and referred to a statement issued on Monday, which said the state issued a formal response to the commission earlier this month.
The response addressed “in detail the concerns and some misunderstandings”, the ministry said on Monday, without giving detail. Apple “did not receive selective treatment and was taxed fully in accordance with the law”.
The commission considered that “employment considerations” motivated the reduction of the margin on certain costs.
The EU’s investigations focus on so-called transfer-pricing arrangements on taxing commercial transactions between company units. – Bloomberg