The European Commission (EC) announced that it will investigate the tax affairs of Apple, Starbucks and Fiat, focusing on deals that the multinationals have negotiated with the governments of Ireland, the Netherlands and Luxembourg.
The EC’s competition regulator, Joaquín Almunia, said he was concerned that special treatment may have been granted to the two US firms and the Italian car manufacturer Fiat that breached European Union (EU) state aid rules.
“In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” stated Almunia.
“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 member state were applied in a fair and non-discriminatory way.”
The EC investigation will focus on whether the pricing for transactions between company subsidiaries – known as transfer pricing – that were approved by the Irish, Luxembourg and Dutch tax authorities and which allowed the companies to reduce their tax bills, were selective and thereby represented unfair incentives.
Almunia told reporters at a press conference that regulators could extend their investigations to other nations and corporations. “It is well known we contacted Belgium and the UK, in particular the UK in the case of Gibraltar, and maybe we will open a new investigation,” he added.
He added that Ireland and the Netherlands had co-operated with his initial inquiries after his officials began investigating the issue a year ago, but that Luxembourg had been reluctant to hand over information. The EC is now applying to the country’s courts of justice to obtain the confidential documents it requires. Ireland’s government responded that it was confident the country had not breached state aid rules and would defend its position vigorously.
The investigation is also likely to review so-called ‘patent box’ arrangements in nine European countries, which allow firms to pay less tax on the profits from patented inventions and innovations.
European business leaders have complained that some corporations, particularly those operating online or from US headquarters, compete unfairly by exploiting tax loopholes. Europe’s state aid laws ban tax breaks if they risk distorting competition, and smaller companies believe that the negligible tax paid by some larger rivals puts them at a competitive disadvantage.
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