Europe’s anti-trust and consumer investigation agency the European Commission is allegedly opening up an inquiry into Apple’s tax practices in Ireland. The review reportedly magnifies existing efforts looking at business arrangements of muilti-national companies in the country, and will focus on if Apple was given special tax treatment to set up shop. US Senators, led by John McCain, believe that Apple got an exceptionally lower tax rate in the country for its European headquarters, which helps it reduce its US tax burden. McCain had claimed that Apple negotiated a deal with the Irish government back in 1980 to lower the tax bill of the Ireland-based holding company that manages most of Apple’s foreign operations to two percent.
Apple and other large U.S. companies have been parking profits overseas for years as a way of reducing their overall tax bill. Apple has been especially aggressive lately, more than quadrupling the amount of its offshore holding over the past three years. Ireland has been a favorite parking spot for Apple. A U.S. Senate committee investigation last year found that Apple had cut billions from its tax bill by booking profits under the names of subsidiary companies in the Irish city of Cork. The European Commission appears to be ready to take Apple to task on its Irish tax arrangements. The commission is set to launch a formal investigation, according to Irish state broadcaster RTE. RTE did not name its source. The EU announced last year that it was interested in looking into the foreign tax arrangements of some of its member countries, and one of them was Ireland. When Apple books profits in Ireland, it pays a tax rate of 12.5 percent. Booked in the United States, Apple would have to pay a 35 percent rate. An EU study last year found that Apple reported $30 billion in profits in Europe, with “no tax home” for the money. European countries have been reluctant to act against the practice, because they want to attract U.S. companies to set up operations in there.
