Apple is set to face a challenge in its dealings with Ireland, with the European Union's anti-trust regulator to rule soon that the company's tax deals with Dublin are in violation of the EU's rules, according to a report in the Wall Street Journal.
The company is to be accused of receiving illegal state aid from Ireland, according to another report (paywalled) in the Financial Times. A giood portion of the FT report has been reproduced here.
Apple, and other big technology companies like Google and Microsoft, have come under fire in numerous countries, including Australia, for allegedly evading tax by channelling most of their business through low-tax nations like Ireland and Singapore.
The European Commission is expected to make a statement giving an exact figure that it expects Apple to pay back to Ireland, the WSJ report said.
As iTWire reported in September last year, if the EC can force Ireland to comply with its tax findings, the decision could cost Apple €17 billion (A$27 billion) in Ireland alone, plus several billion more in countries around the world, including Australia.
Over the last 10 years, Apple has been paying an effective tax rate of just 2% in Ireland.
The agreement Apple has with Ireland allows it to use the country as its global distributor in exchange for paying this low tax rate. Countries like Australia have to buy products from the Irish subsidiary at artificially inflated prices and, as a result, the local outfit (the one in Australia) ends up making a very small profit and hence pays little or no tax in Australia.
The heads of Apple, Google and Australia were hauled up before a Senate committee in April last year to answer questions about their tax avoidance schemes.
The EC's anti-trust agency began investigating Apple's tax deals more than two years ago and said deals in 1991 and 2007 amounted to state aid, according to the WSJ report. The deals were allegedly done in order that more jobs would be created in Ireland.
A whitepaper issued by the US Treasury on 24 August was critical of the EU move, arguing that they targeted only American multinationals.
In it, US Treasury Secretary Jack Lew raised several objections to the EU's move, including a claim that the Commission's new approach was inconsistent with international norms and undermined the international tax system.
Apple has more than US$200 billion stashed away in foreign locations and will have to pay a tax rate of 33% on this amount if it takes the money back to the US.