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Apple Facing Investigation into its Tax Affairs

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The European Commission is expected to announce an investigation into Apple's tax affair within Europe, within the next day or two.

Apple, along with a number of other countries, bases its main financial operations in Ireland, and routes most of its European transactions through that country in order to minimize the tax they pay.

However, that has come under fire from other European nations who see the move as overly aggressive. If, for example Apple is selling products in one European nation, then it should be considered a local sale, and not one that technically might have taken place in Ireland.

In one of the more notorious examples, an Irish holding company, Apple Sales International (ASI) provides services for Apple offices around the world and between 2004-8 recorded revenues of USD29 billion and net profit of USD7.1 billion.

However, the expected tax bill on those profits, which should have seen Apple paying USD890 million to the government, actually came to just USD36 million, which has never been fully explained by the Irish government or Apple.

The Irish government is also under pressure to tighten its own tax rules to reduce the scope for avoidance, and has indeed taken some steps to discourage the more aggressive tax minimization strategies that some companies had deployed.

Apple was at one point accused by US investigators of being essentially state-less as far as paying tax to any government was concerned.

Europe's Competition Commissioner Joaquin Almunia is expected to make the announcement of a formal investigation into Apple, and possibly other companies.

The Competition Commissioner has the theoretical ability to penalize companies up to 10 percent of their annual revenues if problems are identified.

On the web: RTE

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Tags: apple  european union  Ireland