The European Union are to accuse Apple of taking over 20 years of illegal tax aid from the Irish government, according to a report by the Financial Times.

The report cited that the European Commission has investigated Apple’s tax affairs in Ireland and found that the company had benefited from illegal state aid through sweetheart tax deals.

Ireland is favoured as a European base by several multinational corporations due to its highly competitive corporation tax rate of 12.5% – Apple currently employs 4,000 people at its European headquarters in Cork.

Several other EU member states have criticised Ireland’s corporation tax rate as being unfair, but Dublin has repeatedly defended the policy.

A 2013 investigation by the US Senate found that Apple pay even less than 12.5%, through an arrangement with the Irish government, where overseas sales are channeled through subsidiaries.

These arrangements work by a subsidiary in a higher tax country paying another subsidiary in a tax haven, which reduces the corporation’s profits, and hence the amount of tax paid.

The Organisation for Economic Cooperation and Development (OECD) have said this month that they will begin to crack down on “aggressive” tax avoidance schemes like this.

The 34 OECD nations have proposed measures that will force multinational corporations to report their profits country-by-country, increasing transparency.

The Irish government, although denying the arrangement with Apple, say that their tax loopholes could be closed amid pressure from the OECD.

Image by Philip Milne