US Edition Apple will on Tuesday face the closest scrutiny of its controversial tax affairs yet when the European Commission publishes details of an in-depth investigation of the American company’s dealings with the Irish government.
The ongoing probe is focused on whether tax rulings in Ireland, home to Apple’s European headquarters, amounted to unlawful state aid that gave the iPhone maker an unfair advantage over rivals.
If investigators find wrongdoing, Apple could be forced to pay back taxes on billions of pounds of European sales.
Antoine Colombani, spokesman for the European Commission’s competition authority, said: “The decision explains our doubts, our concerns, namely why we consider on preliminary basis that there are doubts as to the compliance of these tax rulings with EU state aid rules.
“We continue to investigate. We are in the middle of this investigation.
“We have doubts that through tax rulings a company may have had a selective treatment, preferential treatment compared to the general rules of the Irish tax system.”
Brussels notified Ireland that it would investigate tax rulings relating to Apple’s transfer pricing arrangements between various subsidiaries in June. The two sides have been negotiating since on what details can be published on Tuesday without compromising business secrets.
Within weeks, third parties including Apple rivals and critics will be gioven 30 days to submit evidence to the investigation before formal findings are made.
The European Commission’s action followed sharp criticism of Apple in US Senate hearings over tax avoidance by American multinationals. Senators highlighted one Irish subsidiary, Apple Sales International, which they said in 2011 paid only $10m in tax on profits of $22bn.
Carl Levin, the Democrat chairman of the permanent sub-committee on investigations, accused Apple of seeking “the Holy Grail of tax avoidance”.
Luca Maestri, Apple’s finance chief, came out fighting on Sunday ahead of the European Commission’s announcement.
In an interview with the FT he said: “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.
“If the question is, was there ever a ‘quid pro quo’ that we were trying to strike with the Irish government – that was never the case.”
The Irish government last made a tax ruling on Apple in 2007, the year the iPhone made its debut and turbo-charged the company's growth.
The country’s finance ministry said it was “confident that there is no breach of state aid rules in this case”. It said it had formally responded to investigators earlier this month to address “misunderstandings”.