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| EC to investigate tax affairs of Apple, Starbucks and Fiat | EC to investigate tax affairs of Apple, Starbucks and Fiat |
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| European regulators have launched formal inquiries into the tax affairs of Apple, Starbucks and Fiat, probing alleged sweetheart deals negotiated between the corporations and national governments in Ireland, the Netherlands and Luxembourg. | European regulators have launched formal inquiries into the tax affairs of Apple, Starbucks and Fiat, probing alleged sweetheart deals negotiated between the corporations and national governments in Ireland, the Netherlands and Luxembourg. |
| Calling for multinationals to "pay their fair share of taxes", the European commission's top competition regulator, Joaquín Almunia, said he was concerned that special treatment may have been granted to the two American firms and the Italian automotive group Fiat which breached state aid rules. | Calling for multinationals to "pay their fair share of taxes", the European commission's top competition regulator, Joaquín Almunia, said he was concerned that special treatment may have been granted to the two American firms and the Italian automotive group Fiat which breached state aid rules. |
| Business leaders across Europe have complained that some corporations, particularly those operating online or from US headquarters, compete unfairly by exploiting loopholes. Europe's state aid laws ban tax breaks if they risk distorting competition, and business leaders in Britain and on the continent have complained that the negligible tax paid by some rivals puts them at a disadvantage. | Business leaders across Europe have complained that some corporations, particularly those operating online or from US headquarters, compete unfairly by exploiting loopholes. Europe's state aid laws ban tax breaks if they risk distorting competition, and business leaders in Britain and on the continent have complained that the negligible tax paid by some rivals puts them at a disadvantage. |
| "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," Almunia said. "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." | "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," Almunia said. "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." |
| Regulators may expand their investigations to other nations and corporations. Almunia told a press conference on Wednesday: "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." | Regulators may expand their investigations to other nations and corporations. Almunia told a press conference on Wednesday: "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." |
| Three inquries into suspected selective arrangements have been launched. The first concerns iPhone maker Apple's deal with the Irish government. Last year Apple was found by the US Senate to have an international corporate tax rate of 2% thanks to a loophole which allowed the company to establish its international headquarters in Ireland but register its tax residency elsewhere. Senators concluded some of Apple's Irish companies were not tax residents anywhere, with John McCain describing the company's arrangements as "unacceptable ... complicated and pernicious". | |
| Dutch arrangements with Starbucks will also be investigated. The coffee chain has minimised corporation tax in the countries where it generates the majority of its revenues, like the UK, Germany and France, by setting up agressive transfer pricing arrangements in the Netherlands, where its European headquarters are located. | |
| Its local operating companies in Britain and elsewhere make payments back to the Netherlands for roasting services, and royalty fees for the right to use the brand and business processes. The cost of these payments has allowed local operating companies at Starbucks to claim they make a loss, which means they do not have to pay tax. "We will co-operate with the commission's state aid investigation of the Netherlands. We comply with all relevant tax rules, laws, and OECD guidelines in the 64 countries in which we operate," Starbucks said. The Dutch finance minister Eric Wiebes said on Wednesday: ""I am confident that the ultimate conclusion is that there is no question of state aid and that the agreements with Starbucks Manufacturing EMEA BV comply with the OECD guidelines on transfer prices." | |
| The third probe focuses on the ruling by Luxembourg in calculating the tax owed by Fiat Finance and Trade, which was set up to provide services to the automotive group, funding its subsidiaries and investing surplus cash. It has branches in the UK and Spain and is headquartered in Luxembourg. Fiat declined to comment on the investigation. | |
| Almunia said Ireland and the Netherlands had co-operated with his initial inquiries after his officials began looking into the issue last summer, but that Luxembourg had been reluctant to hand over information. The commission is now applying to the country's courts of justice to obtain the confidential documents it requires. The Irish government said it was confident that it has not breached state aid rules will defend its position vigorously. | Almunia said Ireland and the Netherlands had co-operated with his initial inquiries after his officials began looking into the issue last summer, but that Luxembourg had been reluctant to hand over information. The commission is now applying to the country's courts of justice to obtain the confidential documents it requires. The Irish government said it was confident that it has not breached state aid rules will defend its position vigorously. |
| The commission's competition boss revealed he was also looking into so called "patent box" arrangements in nine European countries. These allow firms to pay less tax on the profits from patented inventions and innovations, and was introduced in the UK in April 2013. | The commission's competition boss revealed he was also looking into so called "patent box" arrangements in nine European countries. These allow firms to pay less tax on the profits from patented inventions and innovations, and was introduced in the UK in April 2013. |
| The commission is responding to media reports that some companies have received significant savings by way of "tax rulings" issued on a case by case basis by national tax collectors. These often take the form of comfort letters explaining how a company will be taxed. These letters are used in particular to confer approval on transfer pricing arrangements. Almunia is concerned governments may have allowed companies to charge above market rate for services provided by one subsidiary to another, thus allowing them to shift profits to low tax jurisdictions. | |
| Algirdas Šemeta, commissioner for taxation, said: "Fair tax competition is essential for the integrity of the Single Market, for the fiscal sustainability of our member states, and for a level-playing field between our businesses. Our social and economic model relies on it, so we must do all we can to defend it." | Algirdas Šemeta, commissioner for taxation, said: "Fair tax competition is essential for the integrity of the Single Market, for the fiscal sustainability of our member states, and for a level-playing field between our businesses. Our social and economic model relies on it, so we must do all we can to defend it." |
| In a statement, Apple said it was "proud" to have been doing business in Cork, Ireland since 1980. "We have grown our workforce to more than 4,000 employees, who serve our customers through manufacturing, tech support and other critical functions. These employees play an important part in Apple's success and continued growth in Ireland. | In a statement, Apple said it was "proud" to have been doing business in Cork, Ireland since 1980. "We have grown our workforce to more than 4,000 employees, who serve our customers through manufacturing, tech support and other critical functions. These employees play an important part in Apple's success and continued growth in Ireland. |
| "Success and growth come from the hard work of our Irish employees not from any special tax deal with the Irish government. We have received no selective treatment from Irish officials. Apple is 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." | "Success and growth come from the hard work of our Irish employees not from any special tax deal with the Irish government. We have received no selective treatment from Irish officials. Apple is 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." |