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Apple Benefited From Illegal Tax Agreements, European Union Says

The European Union says Apple cut illegal tax deals in Ireland.

Anthony Quintano for Re/code

The European Union believes Apple benefitted from illegal tax deals with the Irish government and will soon release a report outlining how it and other companies sought unlawful tax agreements throughout the region.

Preliminary findings of the E.U.’s investigation into Apple’s tax affairs in that country are expected to be made public Tuesday. The technology giant received illicit state aid after negotiating sweetheart deals with Irish authorities, sources familiar with the report say.

The company will have 30 days to respond to these findings once they’re published, the start of a process that can stretch for a year or more. The Financial Times first reported the results of the preliminary investigation.

The E.U. probe is part of a larger investigation into what it sees as improper tax agreements with regional governments. Similar deals between Starbucks and the Dutch government and Fiat’s finance arm and Luxembourg are also under scrutiny.

While the consequences to Apple are still unclear, the E.U. could ask for 10 years in back taxes.

Apple has repeatedly maintained that it did nothing wrong and has paid all the taxes it owes. The Cupertino-based company has operated in Ireland since 1980, when it opened a plant in that country. At the time, there was no tax on manufacturing.

Irish authorities contacted Apple in 1991, when the country instituted a manufacturing tax. In consultation with government officials, the company began paying taxes based on what the company would have paid to have its products manufactured in that country, according to a person familiar with the matter.

Similar discussions took place in 2007, when Ireland instituted a tax on intellectual property.

Apple’s tax practices became the focus of scrutiny in the United States after a 2013 Senate report found the company took advantage of Irish and U.S. tax codes to pay nominal corporate taxes on tens of billions of dollars in overseas income.

The company’s own financial filings show it paid a rate of two percent on earnings outside the U.S.

In May of last year, Chief Executive Tim Cook appeared before a Senate subcommittee in which he defended Apple’s decision to keep overseas revenue offshore to avoid paying U.S. corporate taxes. He used the hearing to call for tax reform.

The E.U. announced earlier this year that it would launch a formal investigation into Apple’s Irish tax practices as part of a wider crackdown on tax avoidance by multinational corporations.

This article originally appeared on Recode.net.

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