Ireland warned over Apple tax deal
Ireland was warned more than three months ago that it may have broken European rules on state aid in two tax deals it struck with tech giant Apple.
In a preliminary finding over "back-room" deals dating back to 1991 and 2007, the European Commission told the Dublin Government it has doubts over their compatibility with internal market regulations.
Finance officials have since been ordered to open the country's tax books to reveal the financial accounts of two Apple subsidiaries at the centre of the complex arrangements.
The Commission's competition watchdog warned that "all unlawful aid may be recovered from the recipient" leaving the global tech brand facing a potential multibillion tax bill.
Irish Government officials have spent the last 48 hours defending arrangements agreed with Apple over the last 25 years.
Embassies worldwide have been pushing out denials of a breach of state aid rules or any suggestions of secret tax deals with one of the world's biggest companies.
The Department of Finance said the investigation in Brussels is ongoing and has yet to reach any final conclusions.
The publication of the letter, dated from June when the investigation was announced, is a formality taken after Commission chiefs notify a government that it is under inquiry.
It stated: "The Commission's preliminary view is that the tax ruling of 1990 (effectively agreed in 1991) and of 2007 in favour of the Apple group constitute state aid.
"The Commission has doubts about the compatibility of such state aid with the internal market."
The two subsidiaries at the centre of the controversy are Apple Sales International (ASI) and Apple Operations Europe (AOE) - neither of which are tax-resident in Ireland but are incorporated there.
Apple declined to explain today why these two companies have been established in this way but denied any wrongdoing.
"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 (Irish) government," a spokeswoman said.
"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."
Apple said comprehensive corporate tax reform is badly needed.
The elaborate system of subsidiaries and profit shifting has not escaped the American administration, with President Barack Obama earlier this year accusing multinationals of relocating to exploit unpatriotic tax loopholes and singling out Ireland for special criticism over firms "gaming the system".
The controversy also tainted a trade mission to California involving Taoiseach Enda Kenny earlier this year when, during a visit to San Francisco, governor of the state Jerry Brown said Apple was now an Irish company and California would be an independent country if it had Ireland's tax laws.
In the 21-page letter, the Irish Government has been told to provide the financial accounts of ASI and AOE for the period 2004-2013.
It must also detail the number of full-time staff in the subsidiaries over the same period.
Apple has had a base in Ireland since 1980 and says it now employs more than 4,000 people in the country, with a main centre in Cork.
According to the Commission letter, Apple had 170 billion US dollars (135 billion euro) of sales worldwide in 2013 and a net income of 37 billion dollars (29 billion euro).
The letter, from commissioner Joaquin Almunia, details minutes of a meeting between a tax advisor representing Apple and an official from the Irish Revenue in 1991.
In one instance the Apple representative mentions "by way of background" the 1,500 jobs it had created in Cork by 1990 and that it was reviewing global operations and wished to establish "a profit margin on its Irish operations".
The notes are said to show the Apple rep clearly believed his company was engaged in transfer pricing and that no other company on the Irish stock exchange came close.
Investigators in Brussels said they have been examining this issue - shifting profits between various engines of the Apple group, goods sold or services provided by one subsidiary to another in order to get the lowest tax rates.
The Commission said Irish tax authorities gave a "positive opinion" on this in 1991 and 2007.
Ireland's much-maligned corporation tax rate of 12.5% is not at issue.
The Commission wants to see information explaining a cost sharing agreement between Apple, ASI and AOE in all its variations since 1989 and the type of intellectual property covered by that.
The Commission confirmed it received information from the Irish Government in July.
Brussels competition chiefs are also investigating arrangements between coffee chain Starbucks and the Netherlands, and any deal between Luxembourg and car company Fiat.