Update: EU starts in-depth probe into Apple's tax affairs

Apple said it pays every euro of every tax it owes

The European Commission has opened an in-depth investigation into Apple's corporate tax affairs on suspicion that the company did not pay its fair share of income taxes.

"It cannot be accepted that large companies do not pay their fair share in taxes," Joaquín Almunia, Commission Vice President in charge of competition policy, said Wednesday. Under the EU's state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the EU member state were applied in a fair and non-discriminatory way, he said.

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The Commission will examine whether the Irish tax authority required Apple to pay sufficient income tax under EU rules.

The Commission started similar investigations into the taxes paid by two non-tech companies in two other EU member states widely viewed, like Ireland, as being low-tax jurisdictions: Starbucks in the Netherlands, and Fiat Finance and Trade in Luxembourg. Opening an investigation gives interested third parties and member states the opportunity to submit comments and does not prejudge any outcome, the Commission said.

The investigation was started following several media reports alleging that companies received significant tax reductions from national tax authorities. These decisions may be seen as state aid under EU rules if they are used to provide selective advantages to a specific company or group of companies. Preliminary analysis has shown that this might have been the case for Apple in Ireland, the Commission said.

Apple denied any wrongdoing.

After years of declining to comment on most matters affecting it, Apple quickly responded to an enquiry with an extensive and pertinent comment, and photos of its CEO visiting the company's offices in Cork, Ireland, to illustrate the country's importance to its operations.

"We have received no selective treatment from Irish officials," Apple said in an emailed statement, adding that it has been subject to the same tax laws as scores of other international companies doing business in Ireland. "Apple pays every euro of every tax that we owe. Since the iPhone launched in 2007, our taxes in Ireland have increased tenfold," it added.

The probe started Wednesday is part of a wider investigation, Almunia said, adding that new investigations into tax regimes in other states may be opened. Requests for information were sent to nine member states, he said.

Campaigners against corporate tax avoidance welcomed the Commission's announcement.

The challenge to member states' tax policies on state aid is long overdue, said Markus Meinzer, senior analyst at the Tax Justice Network, an organization that aims to reform the harmful impacts of tax avoidance in tax havens.

Companies with a global presence "can often avoid the payment of taxes in countries where a lot of their consumers reside," because they commercialize their services via the Internet, Meinzer said.

Investigations into the tax affairs of Google, Oracle, Amazon and SAP would also be welcome, he said.

However, it would be better to focus on countries that have secret and tailored tax concessions for each company instead of conducting case studies that focus on particular companies, he said.

The main problem is that there is not enough information available about the extent of taxes paid by companies, according to Meinzer. There is some progress in the banking sector where tax reporting on a country-by-country basis will be obligatory soon. "I think we urgently need the same transparence for all companies," he said.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, open-source and online payment issues for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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