Irish state broadcaster RTE reports that the European Commission had decided to launch a formal investigation into Apple (AAPL)’s tax arrangements in Ireland. An announcement is expected by EU’s Competition Commissioner to follow:
“The European Commission is to open a formal investigation into Apple’s tax arrangements with Ireland. An announcement is expected to be made by [CC] Joaquin Almunia tomorrow”, RTE said.
A U.S. Senate committee probe last year placed Apple under the spotlight after revealing the iPhone maker had cut billions from its tax bill by shifting profits from Irish subsidiaries in order to pay less corporate taxes. The investigation also found that Cupertino paid just 2% tax on $74 billion in income made outside the United States. Senator Carl Levin, chairman of the subcommittee leading the investigation and a veteran tax sleuth, said at the time the Apple structure represented “the Holy Grail of tax avoidance”.
Apple, for its part, has repeatedly denied the claims, stating that the company does not get involved in tax gimmicks or loopholes in Ireland. Government officials in Ireland have done the same, rejecting accusations of a special 2% tax deal with Apple. That said, it is worth noting that while Apple is not the only company that has set up operations in Ireland for its favorable tax laws, the tech giant is among the pioneers in creating a tax structure known as the “Double Irish With a Dutch Sandwich.” This accounting technique allows corporations to legally reduce taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean.
Apple shares are up around 50 cents today, trading at $94 and change as of 2:58PM EDT.