EU probes tax havens for Apple, Starbucks

Amsterdam - The European Union's antitrust regulator has launched an investigation into tax deals that Apple, Starbucks and Fiat struck with some European countries, the start of a wider push to keep multinationals from taking advantage of loopholes.

EU antitrust commissioner Joaquin Almunia said Wednesday a preliminary probe by his office has found the tax deals the companies have with Ireland, the Netherlands and Luxembourg could amount to illegal state aid.

"We have reason to believe at this stage that indeed in these specific cases the national authorities have (failed) to tax part of these multinationals' profits," Almunia said at a Brussels press conference.

"When public budgets are tight and citizens are asked to make efforts to deal with the consequences of the (financial) crisis, it cannot be accepted that large multinationals do not pay their fair share of taxes," he said.

Apple has a deal with tax authorities in Ireland, Starbucks has one in the Netherlands and Fiat's financing arm has one in Luxembourg as part of their strategy to minimize the taxes they pay.

Almunia said the current investigations are part of a wider look into tax rules in various EU countries and "aggressive" tax planning by multinationals, which he said erodes countries' tax bases.

He said that the investigations announced Wednesday look into the practice of "transfer pricing" - where one part of a company charges another for goods or services in order to shift profits where it wants.

Transfer pricing is allowed in theory - the problem is when a company inflates the prices of those deals to shift even more profits to a country where it has a better tax deal.

For instance, if Starbucks were to sell its coffee beans to subsidiaries around Europe at a higher than market price, that would increase profits in the Netherlands and decrease them elsewhere. If it receives a tax break in the Netherlands, it would have an unfair competitive advantage.

Apple denied it had received any special treatment from the government of Ireland, where its European operations are based.

"Apple pays every euro of every tax that we owe," said spokesman Alan Hely.

Richard Ainsworth, head of Boston University's graduate tax program, compared the situation to one where U.S. states that charge sales tax might feel New Hampshire is unfairly luring businesses with its no sales tax policy.

"This is an EU issue more than an Apple issue," he said.

Almunia said nine other countries are under investigation. Asked whether Google might be on the list, he said "this is the beginning, not the end of our work."


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