The European Commission will set out its case this week against Apple’s controversial tax arrangements in Ireland. The report is part of a wider EU investigation into tax policies in Ireland, Netherlands and Luxembourg. The Commission is scrutinizing whether these countries have unfairly favoured multinational companies including Apple, Italian car manufacturer Fiat and coffee chain Starbucks.

The EU will make its case that Apple’s tax arrangements with Dublin amount to illegal state aid. The Commission will also layout its reasons for launching an investigation into Fiat Finance and Trade, which is resident for tax purposes in Luxembourg.

The Commission will argue that backroom tax deals were struck between Apple and the Irish government and Fiat and the Luxembourg government, potentially leading to a breach of EU regulations on state aid.

Ireland’s corporation tax rate is set at 12.5%, but Apple benefits from an effective rate of tax of 2%, due to its overseas sales through its subsidiaries.

Ireland’s flexible approach to tax is designed to attract investment and jobs to the country. But other European countries say their treasuries lose out, as corporations pour more and more profits through Irish registered companies that are not resident for tax anywhere else.
Apple has strongly refuted that the company agreed any special tax arrangements with Dublin.

“There’s never been anything that would be construed as state aid,” Apple’s chief financial officer, Luca Maestri, told the Financial Times newspaper.
Apple says it pays all the tax it owes.