The European Union accused Ireland of providing illegal state aid to Apple for more than 20 years with special tax arrangements, helping the iPhone maker shield billions of dollars in international revenues from being taxed.
In a letter written in June, European Competition Commissioner Joaquin Almunia told Ireland that the tax agreements between Apple and the country’s government in 1991 and 2007 appeared, in his “preliminary view,” to amount to state aid. The alleged tax arrangements violate EU laws and could be recovered from the company, according to the EU antitrust regulators, Reuters reported.
“The Commission is of the opinion that through those rulings the Irish authorities confer an advantage on Apple,” Almunia wrote in the letter, which was dated June 11. “That advantage is obtained every year and on-going, when the annual tax liability is agreed upon by the tax authorities in view of that ruling.”
According to the letter, tax rulings granted to Apple by Ireland between 1991 and 2007 “do not comply with the arm's length principle” of the Organization for Economic Cooperation and Development, or OECD.
If the investigators determine that Apple was involved in illegal tax deals, the company could reportedly be fined billions of euros, and face an effective increase in the tax rate. According to a report from Sky News, the commission can fine the company up to 10 percent of its turnover while Ireland can be fined up to $1.2 billion.
The EU watchdog began investigating in June whether Apple and other companies were receiving illegal tax breaks from EU states. Apple, which has had a base in Ireland since 1980, has reportedly built up an overseas cash pile of $137.7 billion.
Meanwhile, Apple has denied all the allegations, reportedly claiming that it has received no selective treatment from the Irish government over the years.
“We're subject to the same tax laws as the countless other companies who do business in Ireland,” the company said in a statement, obtained by Sky News. “To continue that growth and the benefits it brings to the communities where we work and live, we believe comprehensive corporate tax reform is badly needed.”
Apple and Ireland will receive about a month to respond to the letter once it is formally published in the EU's official journal, which is expected to happen over the next few weeks.