Brussels is poised to hand down an adverse ruling against Ireland after a three-year inquiry into claims the country granted an illegal tax arrangement to Apple, the world’s biggest tech company.
The long-awaited findings, likely to be released next week, follow an intensive effort by the US to persuade the European Commission to drop the inquiry.
Apple could be on the hook to pay billions of dollars in back taxes to Ireland in light of the finding that tax rulings conferred illegal state aid to Apple by granting it an advantage not made available to other companies.
The commission made no comment on Friday on the timing or substance of its decision.
There is some uncertainty as to whether a precise penalty will be defined in the ruling. Analysts at JPMorgan have said Apple’s potential liability, in a worst-case scenario, could be up to €19bn. In other assessments, however, the liability may come in at around $1bn.
An adverse ruling by competition commissioner Margrethe Vestager would be appealed in the European courts by Ireland and Apple, each of which have strenuously denied any wrongdoing in the tax arrangement.
Any move to issue negative findings without defining the penalty would also prompt Apple and Irish authorities to campaign to minimise the bill.
The Apple case is the biggest single investigation undertaken by the commission in a clampdown on aggressive tax avoidance in Europe by big global companies.
In previous rulings, Ms Vestager has directed the Netherlands to recover back taxes from Starbucks, and Luxembourg to recover back taxes from Fiat. Both rulings are under court appeal.
The commission issued preliminary findings against Ireland in 2014 before initiating an in-depth investigation into tax rulings Apple received from the Dublin authorities in 1991 and 2007. The company has faced criticism in the US Senate for paying a 2 per cent corporate tax rate in Ireland, far lower than the country’s headline 12.5 per cent rate.
Expectation of an adverse ruling gathered pace this week after the US Treasury issued a stinging attack on the commission’s investigation, saying the EU executive was becoming a “supranational tax authority” that threatened international agreements on tax reform.
Tim Cook, Apple chief executive, who pressed his company’s case in a private meeting with Ms Vestager in January, has always insisted the business fully complied with tax law. “I hope that we get a fair hearing,” he told the Washington Post earlier this month. “If we don’t, then we would obviously appeal it.”
The commission says there has been no bias against any US company in its investigation.
“Under EU state aid rules, national tax authorities cannot give tax benefits to selected companies that are not available to others. These state aid rules and the relevant legal principles have been in place for a long time,” the commission said on Wednesday.
Cathy Kearney, vice-president of European operations for Apple, told an EU panel in March that it pays “every cent of tax that is due” in Ireland but argued that tax laws have “not kept pace with the evolution of technology and commerce”.
“In Europe, our taxes reflect our operations in procurement, distribution and sales,” she said, noting that Apple employs 5,500 staff in Ireland. “We pay the greatest amount of our tax in the United States, where we employ 70,000 people and perform virtually all of our research and development.”
In recent days, expectation intensified in Brussels, Dublin and corporate circles that an unfavourable ruling was in prospect.
The intervention by the Obama administration this week marked a sharp escalation of tension between Washington and Brussels.
Jack Lew, US Treasury secretary, called on the commission in February to reconsider the inquiries. He has come under pressure from the Senate finance committee to consider imposing a double tax rate on European companies if the commission directs Apple to pay back taxes in Ireland.
Additional reporting by Tim Bradshaw in San Francisco
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