Apple suffers blow as regulators demand information on tax affairs

Apple suffered a significant blow today as European regulators demanded the iPhone giant provide information about whether it has been benefiting from illegal state aid thanks to its low-tax corporate structure in Ireland.

The European Commission said it believed Ireland’s decisions on tax “in favour of the Apple group constitute state aid”.

The move explains the decision to conduct a full-blown European investigation that could demand Apple pay huge penalties if Brussels rules that this state aid should be repaid.

European Commission regulators have been scrutinising Apple’s controversial offshore tax affairs amid claims that the company has benefited from unduly favourable low corporation tax from the Dublin authorities.

The Irish Government slashed corporation tax to 12.5% in the 1990s to attract multinationals.

But critics argue that some of these firms use their Irish operations as little more than a “shell” to funnel large amounts of revenue from other countries — while paying little tax.

Apple’s effective tax rate in Ireland is said to be as low as 2%.

The EC’s move is part of a wider investigation into whether Ireland, Luxembourg and the Netherlands unfairly favour multinationals including Fiat and Starbucks.

Apple maintains that it pays all taxes it is required to pay and said it has “never” received state aid from Ireland. The Irish Government has said: “Ireland is confident that there is no breach of state aid rules in this case.”

Apple added in a statement: “Apple is proud of its long history in Ireland and the 4,000 people we employ in Cork. They serve our customers through manufacturing, tech support and other important functions. Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government.”

Apple claims its tax payments in Ireland and around the world have increased tenfold since 2007.