September 29, 2014 / 9:24 AM / in 3 years

EU watchdog to give detail on Apple and Fiat tax investigations

The Apple logo is pictured inside the newly opened Omotesando Apple store at a shopping district in Tokyo June 26, 2014. Picture taken June 26. REUTERS/Yuya Shino

BRUSSELS (Reuters) - European Union regulators will provide more details on Tuesday of their reasons for launching in-depth inquiries into tax arrangements reached by Ireland with Apple and by Luxembourg with a Fiat subsidiary.

The European Commission has launched a similar investigation into the Dutch government’s tax treatment of Starbucks, but details of that will be published later, Antoine Colombani, spokesman for European Union Competition Commissioner Joaquin Almunia, told reporters.

The EU’s competition watchdog announced in June that it was looking at whether a number of countries’ benign tax regimes for multinational companies, which help to attract investment and jobs, represent unfair state aid.

“In this case, we have doubts that through tax rulings a company may have been granted selective treatment, preferential treatment, compared with what another company under the same rules, the general rules of the Irish tax system, would have received,” Colombani said, referring to iPhone maker Apple.

The details to be published on Tuesday will explain why the Commission has doubts, Colombani added.

A U.S. Senate investigation into Apple’s tax affairs in 2013 found that the world’s largest by market capitalization had used Irish-registered businesses that were not tax resident in any country, thereby sheltering tens of billions of dollars in profit from tax.

Theoretically, if the Commission ruled that the tax treatment constituted state aid, Apple could be forced to repay billions of dollars in tax savings. No fines are levied in state aid cases.

Some tax lawyers said they doubted whether the Commission could enforce such a ruling and that it is more likely that Ireland would be forced to change its light-touch approach to taxing multinationals, which other European countries say robs them of tax revenues.

TAX HOLIDAYS

Apple has operated almost tax-free in Ireland since 1980, as a result of tax holidays and deals given by the government, executives have said. (reut.rs/1ywycHb).

Apple has denied receiving any selective tax treatment from the Irish authorities and the Irish government reiterated on Monday that it is confident it had not breached rules on state aid. It said it had issued a formal response to the Commission this month to address concerns and misunderstandings.

The Commission has said it is looking at transfer pricing, the setting of prices for intra-group transactions. It aims to determine whether transactions approved by the Irish, Luxembourg and Dutch tax authorities, which allowed Apple, Fiat and Starbucks to reduce their tax bills, were selective and thereby amounted to unfair incentives.

Asked to comment on Monday, Apple reiterated its June statement saying it had not received any selective treatment from Irish officials and that it is subject to the same tax laws as scores of other international companies doing business in Ireland.

Fiat declined to comment on Monday and Starbucks did not respond immediately to an emailed request for comment.

Details of the Irish and Luxembourg cases involving Apple and Fiat Finance and Trade Ltd will be published on the Commission’s website on Tuesday, but no date has been set for publication of details of the Starbucks case, Colombani said.

A formal notice on the launch of the Irish and Luxembourg investigations will be published in the EU’s Official Journal a few weeks later and interested parties will have a month from then to send comments, which the Commission will analyze.

The Commission will not make any findings at this stage and Colombani could not say how long the investigation would last.

The watchdog made clear that its investigation would not be affected by the imminent change of personnel at the EU executive, with Denmark’s Margrethe Vestager due to take over from Almunia when his term ends on Oct. 31.

“Just because I leave office doesn’t mean that the investigation will die,” Almunia told reporters in Spain.

Additional reporting by Tom Bergin in London, Tracy Rucinski in Madrid and Padraic Halpin in Dublin; Editing by David Goodman

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