It looks like Apple is about to get raked over the coals again.
The issue is the tax break the government of Ireland gave Steve Jobs in 1980 to get him to bring some of Apple’s business to the port city of Cork. The deal enabled Apple create an Irish subsidiary that is, for tax purposes, a resident of no country on earth. Tens of billions of dollars flow through that subsidiary, money from everywhere in the world outside the Americas.
In Senate subcommittee hearings last year, Sen. Carl Levin called it “the Holy Grail of tax avoidance.” The New York Times, in a series that won a Pulitzer Prize, called it “double Irish with a Dutch sandwich” and reported that hundreds of companies now do the same thing.
On Wednesday, the European Commission announced that’s going to have a go, tossing Ireland’s treatment of Apple Inc (AAPL) into a broad investigation that includes the Netherlands’ treatment of Starbucks (SBUX) and Luxembourg’s treatment of Italian automaker Fiat SpA.
I don’t know anything about Starbucks’ taxes and even less about Fiat’s. But I remember well the subcommittee hearings in which a room full of U.S. Senators — knowing that Apple’s products are popular with their constituents — spent as much time praising their iPhones as they did grilling Tim Cook.
The committee reported that Apple used the loophole to avoid paying corporate tax on over $74 billion of revenue over a four-year period. But it also concluded that the company hadn’t acted illegally.
This time it’s a bit different. It’s France and Germany that are pressing the matter. They want a piece of Apple’s profits, and they don’t pay a price politically for going after Apple.
In fact, their real target is Ireland, which like Luxembourg and the Netherlands, has for years used low corporate tax rates as a sweetener to get U.S. Companies to set up European headquarters within their borders.
But like the U.S. Senators who couldn’t lay a glove on Tim Cook because Apple was operating within tax laws they themselves wrote, the EC may have trouble getting anything to stick.
The Irish Finance Ministry issued a statement that said it was “confident that there is no state aid rule breach in this case and we will defend all aspects vigorously.”
“We have received no selective treatment from Irish officials,” Apple said. “Apple pays every euro of every tax that we owe.”