The Government has said it will pass any test on tax laws after European chiefs launched investigations into tax breaks allowing Apple to save hundreds of millions.
In response to the state aid inquiry by Brussels, finance chiefs in Dublin have stressed that the global brand did not get a special deal or selective treatment before setting up in Ireland.
The Apple case is one of three being examined by the European Commission – the others are the tax arrangements of coffee giant Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg.
The Commission said it has concerns that tax calculations by finance chiefs amounted to a sweetheart deal by underestimating taxable profit on its products like iPhones and iPads, creating an unfair advantage and lower tax bills.
A spokesman for the Department of Finance in Dublin dismissed any suggestions of wrongdoing, saying: “Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously.”
Apple is one of the biggest employers in Ireland with about 4,000 people working at its facility in Cork in customer service and support.
Last year at a US Senate sub-committee hearing the country was singled out for tax arrangements which attract multinationals.
Influential senators John McCain and Carl Levin claimed Ireland was a tax haven after it emerged Apple paid taxes of 2% on its foreign earnings in 2012.
Only last week the controversy reared its head again this time embarrassingly when Taoiseach Enda Kenny was on an enterprise trip to California.
Jerry Brown, governor of the west coast state where Apple was born and is headquartered, made a few jibes about “creative accounting” bringing Apple to Ireland and also claimed his homeland would be independent if the tech giant had not established a base in Cork.
The European inquiry focuses on a very technical tax issue linked to advice given by the Irish state to Apple and on possible breaches of state aid between 2004 and 2014.
Ireland’s much criticised 12.5% corporation tax rate is not being examined.
The European Commission explained that the issue relates to tax rulings - comfort letters from finance chiefs in Dublin to Apple which give clarity on how corporation tax will be calculated or how special tax regimes will apply.
Specifically, Ireland is being examined over how it calculates the taxable profit allocated to the Irish branches of Apple Sales International and Apple Operations Europe, subsidiaries of the global brand.
Brussels warned these letters may involve state aid if they give a company a special advantage but that the tax rates are not the issue.
It is understood Apple paid an effective tax rate of just 3.7% on its non-US income last year by using subsidiaries and its Irish base.
Commission vice-president in charge of competition policy Joaquin Almunia said: “In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes. Under the EU’s state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way.”
Algirdas Semeta, Commissioner for Taxation, said: “Fair tax competition is essential for the integrity of the Single Market, for the fiscal sustainability of our member states, and for a level-playing field between our businesses. Our social and economic model relies on it, so we must do all we can to defend it.”
Mr Kenny and the Dutch PM Mark Rutte held talks in Dublin last night.
In its statement the Department of Finance in Dublin said it was confident of defending its position.
It accepted that the state’s tax inspectors give non-binding opinions to companies seeking advice on the correct tax regimes, a facility it says is open to all taxpayers, including companies, both large and small.
Ireland announced last October plans to close a “stateless” tax loophole which allows companies to incorporate in the country but be tax resident elsewhere.
A spokesman for Apple said the company pays all the tax it owes.
“Success and growth come from the hard work of our Irish employees, not from any special tax deal with the Irish Government,” he said.
“We have received no selective treatment from Irish officials. Apple is subject to the same tax laws as scores of other international companies doing business in Ireland.
“Apple pays every euro of every tax that we owe. Since the iPhone launched in 2007, our taxes in Ireland have increased tenfold.”