Today European Union regulators released a report that explained why they believe that the tax deals given to Fiat SpA in Luxembourg and Apple in Ireland amounted to illegal state support. The next stage could result in the companies having to pay huge amounts of tax money to the relevant governments.
The European Commission, the bloc’s central antitrust committee, said its preliminary view was that the tax deals made between Apple and Ireland in 1991 and 2007 favor Apple over other companies, and should be considered state aid. In a letter to the Irish government that was published today, the commission wrote, “Through those rulings the Irish authorities confer an advantage on Apple” that is “granted in a selective manner.” Apple paid less than €20 million (US$25 million) from 2010 through 2012 through the two Irish subsidiaries upon which the commission has placed its focus. Apple set aside about $12 billion for taxes in the United States in the fiscal year of 2013, with sales of $62.7 billion. For foreign income taxes over the same period, Apple set aside just $1.1 billion, with sales of about $88 billion outside the Americas. Apple also had retail sales of just over $20 billion during the same time. Apple might be asked to pay up to $200 million in back taxes according to the figures in the letter. Alternatively, Apple could also agree to pay less to settle, or nothing at all if Ireland offers a decent defense.
Experts have said that the announcement of the commission’s findings should set alarm bells ringing among a group of funds, multinationals, and companies with operations in Europe.
