Carl Levin, a powerful member of the US Senate, said yesterday that the tax rate levied on the computer giant was based on what it was prepared to accept.

The comments came after the European Commission (EC) accused Ireland of striking a tax arrangement with Apple that was based on keeping jobs but gave the company an advantage that amounted to state aid and went against international guidelines.

The EC published a damning 21-page technical document setting out the case for its formal investigation into the State’s tax arrangements with the iPhone maker.

The inquiry relates to the Irish branches of two Apple entities – Apple Sales International (ASI) and Apple Operations Europe.

It focuses on two so-called tax rulings offered to the company by Ireland in 1991 and 2007, clarifying how the company’s corporate tax rate would be calculated.

“The Commission is of the opinion that through those rulings the Irish authorities confer an advantage on Apple,” the EU’s Competition Commissioner, Joaquin Almunia, wrote.

“That advantage is obtained every year and ongoing, when the annual tax liability is agreed upon by the tax authorities in view of that ruling.”

Senator Levin (inset), chairman of the US Senate Permanent Subcommittee on Investigations, has in the past branded Ireland a tax haven and has alleged that Ireland had a special deal with Apple that resulted in the computer giant paying as little as 2pc tax on profits.

“The facts are abundantly clear: Apple developed its crown jewels – lucrative intellectual property – in the United States, used a tax loophole to shift the profits generated by that valuable property offshore to avoid paying US taxes, then boosted its profits through a sweetheart deal with the Irish Government,” he said yesterday.

“Apple’s Irish tax rate has no rational basis; it was determined by what Apple was ‘prepared to accept’ – with the threat that it would cut jobs in Ireland if it didn’t get its way.”

The EC argues that Ireland’s tax dealings with Apple, through the two rulings, broke the so-called arm’s length principle espoused by the Organisation for Economic Cooperation and Development (OECD), created to deal with transfer pricing, which involves shifting of profits to low-tax jurisdictions to legally avoid taxes. Brussels said that the 1991 ruling appeared to be “reverse engineered” to ensure a specific taxable income for Apple, which now employs more than 4,000 people here.

It also said that elements of the ruling were “motivated by employment considerations”.


The Commission published extracts of notes between the Revenue Commissioners and an Apple representative in 1990/91, during which the Apple representative mentioned “by way of background information” that Apple was the largest employer in the Cork area. The representative also said that it was reviewing its worldwide operations.

The Commission pointed out that while the sales income of Apple Sales International jumped 415pc between 2009 and 2012 to $63.9bn – most likely due to the popularity of the iPhone, which went on sale in 2007 – operating costs increased only 10-20pc.

“If the sales volumes increased, the operating costs of either the Irish branch of ASI or the operating costs that ASI incurs should have increased significantly as well,” the Commission said.

In the conversation between Apple and Revenue, the note also states that the Apple representative accepted there was no scientific basis for one of its profit figures mentioned.

The Commission also pointed out that the 1991 ruling did not contain an expiry date and remained in force until 2007.

This, the Commission argues, calls into question the “appropriateness of the method agreed between Irish Revenue and Apple”.

A spokesman for Finance Minister Michael Noonan said that the Government has submitted its formal response and could take the fight to the EU courts if necessary.

Apple said it receives no selective treatment from Ireland.

Irish Independent