EU to hand Apple multi-billion dollar Irish tax bill

The European Commission will rule against Ireland's tax dealings with Apple Inc on Tuesday, sources familiar with the decision told Reuters, likely resulting in a multi-billion dollar tax bill for the U.S.-based tech company.

Commissioner Margrethe Vestager will hold a news conference on an antitrust case at noon (1000 GMT) in Brussels, whose subject has not been given but which is expected to detail her verdict on why a deal that encouraged the iPhone maker to route vast profits through Ireland had breached EU state aid laws.

The ruling is likely to anger Washington, which has accused Brussels of campaigning against U.S. corporate successes and of distorting global efforts to curb corporate tax avoidance.

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Online retailer Amazon.com Inc and hamburger group McDonald's Corp face similar probes over taxes in Luxembourg, while coffee chain Starbucks Corp has been ordered to pay up to 30 million euros ($33 million) to the Dutch state.

For Apple, whose earnings of $18 billion last year were the biggest ever reported by a corporation, finding several billion dollars should not be an insurmountable problem, even if the bill ranks as the largest-ever such order. But both the company and Irish government say they will appeal such a ruling.

As of June, Apple reported it had cash, cash equivalents and marketable securities of $231.5 billion, of which 92.8 percent, or $214.9 billion, were held in foreign subsidiaries. It paid $2.67 billion in taxes during its latest quarter, leaving it with net income of $7.8 billion, an effective tax rate of 25.5 percent, according to company filings.

The European Commission in 2014 accused Ireland of dodging international tax rules by letting Apple shelter profits worth tens of billions of dollars from tax collectors in return for maintaining jobs. Apple and Ireland rejected the accusation.

The source said the Commission will recommend a figure in back taxes that it expects to be collected, but it will be up to Irish authorities to calculate exactly what is owed.

Any bill in excess of 1 billion euros would be far more than the 30 million euros each the Commission ordered Dutch authorities to recover from Starbucks and Luxembourg from Fiat Chrysler for tax deals. Both companies and countries have appealed those decisions.

A bill of 300 million euros this year for Swedish engineer Atlas Copco AB to pay Belgian tax is the current record.

"REVERSE ENGINEERING"

When it opened the Apple investigation in 2014, the Commission told the Irish government that tax rulings it agreed in 1991 and 2007 with the company amounted to state aid and might have broken EU laws.

The Commission said the rulings were "reverse engineered" to ensure Apple had a minimal Irish bill and that minutes of meetings between Apple representatives and Irish tax officials showed the company's tax treatment had been "motivated by employment considerations."

Apple employs 5,500, or about a quarter of its Europe-based staff, in the Irish city of Cork, where it is the largest private sector employer. It has said it paid Ireland's 12.5 percent rate on all the income that it generates in the country.

Ireland's low corporate tax rate has been a cornerstone of economic policy for 20 years, drawing investors from multinational companies whose staff account for almost one in 10 workers in Ireland.

Some opposition Irish lawmakers have urged Dublin to collect whatever tax the Commission orders it to. But the main opposition party Fianna Fail, whose support the minority administration relies on to pass laws, said it would support an appeal based on reassurances it had been given by the government.

The U.S. Treasury Department published a white paper last week that said the EU executive's tax investigations departed from international taxation norms and would have an outsized impact on U.S. companies. The Commission said it treated all companies equally.