By Tom Fairless
BRUSSELS--European Union regulators are preparing to open a
formal investigation into corporate-tax regimes in Ireland,
Luxembourg and the Netherlands on Wednesday, according to a person
familiar with the matter, amid concerns that multinational
companies such as Apple Inc. enjoy sweeter tax deals than are
permitted under EU law.
The probe by the European Commission, the EU's executive arm,
follows criticism in Europe of low tax rates paid by global
corporations such as Amazon.com Inc., Google Inc. and Starbucks
Corp. at a time of widespread austerity on the continent.
It is part of a broader crackdown on tax evasion and tax
avoidance agreed to by EU leaders in the wake of the region's
financial crisis, aimed at boosting national budgets and soothing
voter anger over cuts to welfare programs.
The commission will announce a formal investigation into tax
deals granted to multinationals at a news conference on Wednesday,
the person familiar with the matter said Tuesday. The probe is
likely to consider whether generous corporate-tax regimes in
Ireland, Luxembourg and the Netherlands amount to illegal state
aid.
If the commission's investigation establishes that companies
received state aid, it could require that they pay it back. But in
practice, such demands are uncommon.
The commission said in September it had started gathering
information about tax deals offered to multinationals in Ireland,
the Netherlands and Luxembourg. "We are collecting information on
the subject," EU spokesman Antoine Colombani said at the time. He
said more countries also could come under scrutiny.
An EU spokesman didn't respond to repeated requests for comment
on Tuesday night.
Irish broadcaster RTE earlier reported the Apple Irish-tax
investigation.
U.S. Senate investigators last year found that Apple paid little
or no corporate tax on at least $74 billion in revenue over the
previous four years, largely by exploiting a loophole in Ireland's
tax code.
Apple has denied that its tax arrangements are designed to avoid
taxes, and said it pays all taxes due and creates hundreds of
thousands of jobs. It wasn't clear which companies' tax
arrangements might be examined in the probe.
The EU's tax commissioner, Algirdas Semeta, has warned that the
region "can no longer afford freeloaders who reap huge profits in
the EU without contributing to the public purse."
The Irish Finance Ministry declined to comment late Tuesday. The
Dutch and Luxembourg governments couldn't immediately be
reached.
The U.S. investigation found no evidence that Apple did anything
illegal. And the Irish government last year denied it helps shelter
some of the world's largest corporations from paying taxes, saying
its long-standing low corporate-tax regime is transparent and
doesn't make it a tax haven.
It insists that much of the criticism is unfair and has denied
it had negotiated "any fancy" treatments with Apple or any other
company. It says that it doesn't, and regardless can't under
current international rules, tax the many billions of dollars that
companies like Apple funnel through Ireland-based companies to
other overseas subsidiaries.
Google, Amazon and Starbucks have been questioned by the U.K.
Parliament's Public Affairs Committee to explain their tax
arrangements.
Starbucks said in April it would move its European corporate
headquarters to London from the Netherlands and pay more taxes in
the U.K.
Through its competitive tax rate, Ireland has attracted large
amounts of investments and jobs from U.S. and other international
companies. Ireland is still struggling to recover from the property
and banking crash that struck in 2008, and those international
investments made over many years have helped soften the economic
effects of the crisis.
U.S. companies have used the country as a base for production
aimed at European and international markets for many decades. The
American Chamber of Commerce in Ireland has estimated that
U.S.-owned companies in Ireland produced goods and services worth
over $55 billion and says that U.S. companies are so prevalent that
Ireland is strategically important to "corporate America."
However, in a sign of Irish concerns about potential
reputational damage following the U.S. Senate revelations, the
government last year decided to close a loophole between Irish and
U.S. tax codes used that effectively meant that a small number of
companies, including Apple, could shift revenue into Ireland and
out to other centers that rendered the revenue "stateless" or free
of tax anywhere in the world. Ireland's government has said that
such aggressive tax planning is unacceptable.
It has also welcomed and says it has little to fear from any
multilateral changes that may arise after the Group of Eight major
economies last summer committed itself to examine and reform global
taxation systems and curtail the use by giant companies of tax
havens.
Controversy surrounding Ireland's taxation of foreign companies
isn't new.
In 2011, Irish Prime Minister Enda Kenny clashed with former
French President Nicolas Sarkozy, who wanted Dublin to raise the
country's corporation tax rate in return for the country getting
more favorable bailout terms. The Irish government has insisted
that effective tax rates applied in France were lower than those
levied in Ireland.
Eamon Quinn in Dublin contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com
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