European Union Accuses Ireland of Giving Apple Illegal State Aid with Tax Deals

The European Commission today announced the results of its formal investigation into Apple's tax arrangements in Ireland, accusing the company of receiving illegal state aid from the country, reports The Wall Street Journal.

In its findings, the regulatory body stated that deals between Apple and Ireland struck in 1991 and 2007 helped Irish authorities "confer a selective advantage upon Apple" that resulted in a lowering of its tax liability. The Commission also added that Apple's increase in sales for its business in Ireland appear to be inconsistent when related to comparable operating costs that would come with growth. Furthermore, the Commission notes that there was a reported increase in "sales income" by 415%, but states that most of the profit-generating work was done elsewhere.

Accordingly, the Commission's of the opinion that through those rulings the Irish authorities confer an advantage on Apple. That advantage is obtained every year and on-going, when the annual tax liability is agreed upon by the tax authorities in view of that ruling.

Apple's tax policies have been questioned on numerous occasions throughout the past few years, as the company is said to utilize multiple subsidiary companies located in the Irish city of Cork to move money around without significant tax penalties. This in due in part to an exemption in the region's law, which allows companies that are managed abroad but located in Ireland to be exempt from taxes. CEO Tim Cook defended the company's tax practices in 2013, calling for a tax reform and simplified corporate tax policies along with lower rates for repatriation.

Apple and the Irish government will now have one month to respond to the findings published in the Commission's reports, as the case will likely take up to 18 months to reach a conclusion. In addition to its findings regarding Apple and Ireland, the European Commission also announced that it is investigating state aid cases involving coffee company Starbucks and car maker Fiat and their arrangements with the Netherlands and Luxembourg, respectively.

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