Apple Under Investigation Over 'Illegal' Tax Agreement That Allegedly Saved It Billions

Tim Cook angry sadREUTERS/Rick WilkingApple CEO Tim Cook.

Apple could learn as soon as today whether it may be required to pay “billions” of dollars in back taxes because it sheltered its revenues in Ireland, according to the Financial Times and the Wall Street Journal. Apple has previously been accused of avoiding up to $US9 billion a year in taxes because of the way it arranges its cash in international jurisdictions.

Apple denies it has done anything wrong.

Apple has been repeatedly accused of using Ireland’s tax laws to get out of paying corporate income tax. The FT reports that Apple pays only a 2% tax rate in Ireland due to allegedly “illegal” agreements there that have lasted two decades.

The company is being investigated by the European Commission, which recently has targeted American companies like Apple, Amazon and Starbucks for using lax European regimes as tax shelters. The FT reports Apple allegedly struck a deal with the Irish government in which it got a lower tax rate in exchange for bringing 4,000 jobs to the country.

The WSJ says regulators will look at whether Apple received a “comfort letter” from the Irish government after the company allegedly pressured Ireland to give it a deal on taxes. “These would be illegal if they gave selective advantages to some companies,” the WSJ says.

Apple CFO Luca Maestri was robust in his denial of the allegations. he told the FT:

“There’s never been any special deal, there’s never been anything that would be construed as state aid,” Luca Maestri, Apple’s chief financial officer, told the Financial Times.

In an exclusive interview with the FT ahead of the report’s publication, Mr Maestri called the investigation “very unfortunate”.

He denied that the world’s most valuable company had agreed any “quid pro quo” to bring more jobs to Ireland in exchange for preferential tax treatment of its local subsidiaries.

“We know that we didn’t do anything that was against the law and we are very confident that through the investigation it will be shown that there was no selective treatment in our favour at any point in time,” Mr Maestri said.

And also:

“It’s very important that people understand that there was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland.”

From Apple’s point of view, the investigation is unfair because it seeks to retroactively undo years of tax payments that predate a law that only changed in 2010, and has not yet been adopted in Ireland.

Apple currently has $US223 billion in assets on its balance sheet, the vast majority of which is in cash and marketable securities of various types. Apple has previously asked US authorities for a “tax holiday” that would let it repatriate more than $US150 billion in holdings back to the US.

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