Apple facing huge bill for back taxes in EU probe

Apple’s deal with Ireland to lower its overseas tax bill was sweet — so sweet it amounts to little more than a handout from the government, according to European antitrust officials.

The European Commission claims the tax treatment granted to Apple is so favorable that it “constitutes state aid,” according to its preliminary tax-probe findings released Tuesday.

As far back as 1991, Ireland’s tax agreements with Apple were not based on “the arm’s length price of a specific transaction,” the EC wrote in a letter posted on its web site.

The letter, titled “Alleged aid to Apple,” could lead to the tech giant forking over billions in back taxes.

Apple and Ireland have one month to respond to the report.

The European Union first announced the tax probe in June as part of a crackdown on multinational corporations exploiting tax loopholes.

The EC, the antitrust division for the 28-member block that makes up the European Union, is also looking at tax schemes by Fiat in Luxembourg and Starbucks in the Netherlands.

“The main question in the present case is whether the rulings confer a selective advantage upon Apple in so far as it results in a lowering of its tax liability in Ireland,” the EC wrote.

And the answer, at least based on the harshly critical tone of the letter, appears to be yes.

“The Commission’s preliminary view is that the tax [regime] … in favour of the Apple group constitute state aid,” the letter said.

The EC makes certain exceptions for state aid, including projects of “common European interest,” or “to remedy a serious disturbance in the economy,” but Ireland’s dealings with Ireland didn’t fall under them, the letter said.

Instead, Ireland seemed to be giving aid to a company that was larger than any other in the country, even though it was based in the US, the letter said. Apple recorded $171 billion in sales in 2013.

To level the playing field, the EU forbids governments from helping individual companies.

Apple insists it did not get special treatment from the notoriously tax-friendly nation.

“We’re subject to the same tax laws as the countless other companies who do business in Ireland,” the company said in a statement. “Apple has received no selective treatment from Irish officials over the years.”

But the documents purportedly show that Ireland negotiated a tax deal directly with Apple.

Ireland made clear to Apple that it just wanted to ensure Irish tax profits of between $30 million and $40 million, the EC said.