Thursday 30 June 2016

European tax probe could cost Apple $8bn

Adam Satariano

Published 16/01/2016 | 02:30

Chief executive Tim Cook says Apple pays its fair share of taxes. Photo: Bloomberg
Chief executive Tim Cook says Apple pays its fair share of taxes. Photo: Bloomberg

Apple could face a bill for as much as $8bn (€7.3bn) in back taxes as a result of a European Commission probe into its tax affairs, according to analyst at Bloomberg.

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Apple, which has said it will appeal any adverse ruling by the European Competition Commission, is being scrutinised by regulators who have accused the iPhone-maker of using subsidiaries in Ireland to avoid paying taxes on revenue generated outside the US.

The probe dates back to 2014 and a long delayed decision is expected later this year.

The European Commission contends that Apple's corporate arrangement in Ireland allows it to calculate profits using favourable accounting methods, which, according to the investigators' preliminary findings, could mean the Irish State has given the business an unfair advantage.

The Commission has no role in setting or monitoring tax policy in member states, but it can intervene to prevent companies getting individual state aid.

Apple calculates its tax bill using low operating costs, a move that dramatically decreases what the company pays to the Irish government.

While Apple generates about 55pc of its revenue outside the United States, its foreign tax rate is as low as 1.8pc, according to the analysis.

If the Commission finds against Ireland's tax administration, and is able to enforce a tougher accounting standard, Apple could be charged back taxes at Ireland's 12.5pc rate, on $64.1bn in profit generated from 2004 to 2012.

That would add up to $8bn, and would fall due to the State here. However, the Minister for Finance, Michael Noonan, has insisted the Government will challenge any ruling from that says taxes have not been levied fairly.

Apple is the highest-profile case of US companies facing scrutiny from officials in Europe. Starbucks, Amazon and McDonalds have also had their tax affairs questioned.

In October, Apple said scrutiny of its taxes is a risk factor to investors.

Were the tax rates to change, Apple's "financial condition, operating results and cash flows could be adversely affected," the company said in its financial statement.

Apple chief executive Tim Cook has denied that the company uses tricks to avoid paying taxes. (Bloomberg)

Irish Independent

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