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Apple could owe more than $8B in back taxes if European Commission ruling goes against it – Bloomberg

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With a recent European Commission ruling making it look more likely than ever that Apple’s tax arrangements in Ireland will be declared illegal, Bloomberg has been doing the sums on how much the company may owe in back tax. The total? More than $8 billion.

Apple funnels all its European revenue through Ireland, where a special agreement with the Irish government means that it pays just 2.5% tax instead of the normal 12.5%. A long-running European Commission investigation into the legality of this arrangement was recently extended and expanded its scope.

Assuming the agreement is ruled to be illegal, it would be the Irish government – and not Apple – who broke the law, but Apple would still have to pay the difference between the tax it actually paid and the full amount that would have been due without the deal. The company warned shareholders last year that it may have to pay ‘material’ back taxes, but the figure calculated by Bloomberg is much larger than earlier estimates …

The total liability could even be greater than $8B. In addition to the extra tax payable in Ireland, Apple may also face back-tax bills from each individual EC country where sales were recorded – at rates typically far higher than applicable in Ireland even without the deal.

This has already happened in Italy, where Apple recently agreed to pay €318M ($347M) claimed by the Italian tax office for just two years. If each European country with Apple Stores billed Apple for taxes due for all sales made in the country for the full period, it’s not hard to see how the total bill could be rather impressive.

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Comments

  1. Apaches911 - 8 years ago

    No waiting for the comments from the red necks saying “stop selling apple products in Europe!”

    Rolls eyes

    • 89p13 - 8 years ago

      Hopefully, your “pre-stupid-post” strike will prevent those comments! ;)

    • chrisl84 - 8 years ago

      From the rednecks? Pretty sure that’s uppity elitists who think they know how businesses are ran that make those kinds of comments…but whatever classy stereotyping makes you feel better.

      • Apaches911 - 8 years ago

        I was FAR too more concerned about getting in the first post to cut off the comments than I was about the detail of the comment! ;o)

      • Those “uppity elitists” are typically techie boyz.

    • Sam Lesser - 8 years ago

      No meaningful comments too yet from you “yellow neck” Liberals.

  2. iSRS - 8 years ago

    This type of thing can ONLY happen where there is no competition. And the governments of the world have zero competition. Think about it. Apple did precisely nothing wrong, broke no law, and, I would argue, made business decisions base on the way the laws and agreements were. Now, years, later, a commission says, “Hey, you know what. Ireland shouldn’t have done that” and Apple has to pony up BILLIONS of dollars for doing precisely ZERO wrong.

    That is absurd. The agreements/laws are wrong? Change them and Apple follows those laws. But this, “Hey, we were wrong. Sorry about that. Here is your bill, plus interest”

    No matter what side you fall on (Apple didn’t do anything wrong or “Apple can afford it, what’s the big deal? Pay it” side, you should be appalled at this clear abuse of power that only governments can get away with.

    • sparklehedgehog - 8 years ago

      So Apple didn’t negotiate with governments to get a better deal than the national tax rate by using their financial clout as incentive? Of course they did! They played governments off against each other till one of them did the deal they wanted then located there based on that. Yes it means the government are as guilty as them but why should a company be above the law just because they turn over more money per year?

      I’m an Apple fan but i hate that a company can feel it can manipulate laws, governments and effectively buy systems in their favour because they’re successful. It’s morally wrong.

      • iSRS - 8 years ago

        They negotiated this several years ago. All countries do it. End of discussion. Again, I go back to the business transaction side of it. If you and I agreed to financial terms for a service, then 4 years later those terms were deemed to be illegal, you would be ok with me coming to you and saying “sorry, they said it was illegal. Now you owe me all this money, plus penalty.”

        No you wouldn’t. Take emotions out of this. This is not an emotional issue. My point is that Apple and Ireland had an agreement. Business decisions were made based on that agreement. How you got to that agreement means nothing. Now, years later, a third party is saying, “no, you can’t do that” and, this is the issue I have, now you owe us what would have been owed if this agreement was allowed.

        So it goes to the standard/default? That means that ANY company that has an agreement less than the standard/default amount has to do the same.

        You disagree with this? How?

        I am not saying they must keep the agreement that is now “illegal” – I am fine with that. Adjust it GOING FORWARD. This still doesn’t take into account business decisions that were made because of said agreement, but it is the most fair.

        But saying “you did nothing wrong, you owe us this now” for years of income is wrong.

        You can have an emotional reason to feel differently, but from a non emotional stand point, I am not wrong.

      • o0smoothies0o - 8 years ago

        I think you realize this based on things you said, but the richest are always able to manipulate the laws, therefore, it isn’t against the law, because they lobbied for the law to be exactly the way they wanted it.

        Here’s the problem with all of these problems: humans. It’s human nature to self-preserve, to be greedy, to be arrogant, to judge, to strive for power because power gets you what you want, helps you survive.

        The fact that lobbies are allowed in government is a direct slap in the face of democracy. It’s essentially the most powerful, richest, most loudly heard, affecting the laws by helping legislators get elected, or giving them massive amounts of money. The fact is, it will never work, it will never be good, as long as humans run it. Humans are extremely flawed, and that is simply the unequivocal truth. Too bad there isn’t a god or maybe humans would be better. There is hope though, and that’s the fact that humans can understand their inherent flaws, and thus, in the future we may be able to genetically engineer far superior humans, unless artificial intelligence takes it upon itself first.

      • dcj001 - 8 years ago

        iSRS said:

        “They negotiated this several years ago.”

        This “deal” was established much longer ago than several years ago.

    • Philip Silvia Crawford - 8 years ago

      Two things going on here. The first is that countries (Italy for one) are saying that Apple illegally shifted profits to Ireland. Apple has settled with Italy. Not sure why, but maybe they thought that they should. Apple may well have “done something wrong” here.
      The second is the illegal subsidies that the EU may (case not concluded yet) decide that Apple received from Ireland to base their European business there. On this, I don’t think anyone is saying that Apple has done anything wrong, they are saying that “in error” the wrong amount of tax was levied and hence paid, and Apple now need to pony up the difference. I imagine that Ireland and Apple will refine their agreement so that it doesn’t look like it is unique to Apple but still keeps their tax rate below the standard Irish rate and honor will be satisfied. This is part of a bigger clampdown on Ireland and other low tax economies in the EU by the higher tax economies like France and Germany who resent a few crumbs going to the smaller countries which they feel should go to them, along with the larger crumbs they already get from their own companies like BMW, Renault etc.

      • iSRS - 8 years ago

        Thank you for the great response. Clear, concise. Helps me understand it a bit better.

        “This is part of a bigger clampdown on Ireland and other low tax economies in the EU by the higher tax economies like France and Germany who resent a few crumbs going to the smaller countries which they feel should go to them”

        I admit my American ignorance when it comes to this part. How can France and Germany tell Ireland what they can and can’t do?

      • Ian Irvine (@Aurial) - 8 years ago

        Because we’re all part of Europe, and many decisions are made centrally.

        There was a documentary on this sort of arrangement on the BBC a few years ago. It mentioned Apple, and a few other companies, and explained how the whole system works. The gist is that Apple (or whoever) has operations in several countries, but one has very low rates of corporation tax compared to the others. So what happens is that Apple Ireland (for example) will make a ‘loan’ to, say, Apple Germany. All of the companies profits in Germany will then be sent of to Apple Ireland as repayment for this loan, and therefore taxes won’t be due because Apple Germany aren’t making profit on the business., despite the fact they’re really making millions and this loan isn’t really a loan in the first place. Therefore they avoid paying the higher rate of tax in Germany, and declare these profits in Ireland instead.

      • iSRS - 8 years ago

        Ian, thanks for the excellent explanation.

        I’m not arguing that the way this work doesn’t need to be stopped/changed.

        I am arguing that if no law was broken, there shouldn’t be any back tax payments.

        Put a stop to it and going forward, Apple must comply.

        The whole “now you owe us $8 billion for doing everything perfectly legal” is my issue. And screams “we are a government and if you don’t like it tough $#*+”

  3. 89p13 - 8 years ago

    I wonder which other companies will be on the hook for huge back-tax-bills if this turns against Ireland / Big Business?

  4. RP - 8 years ago

    “…Hide all our money oversees. Do something shady in Ireland. F-the US.
    It’s mine! It’s mine! It’s all mine!”

    What could go wrong.?

  5. bowersrob - 8 years ago

    Consumers will end up paying this in the end. Companies charge based on what it will take to make a certain level of profit. If prices were 10% lower as a result of this, then consumers likely paid 10% less than they would have, and will pay 10% more in the future.

    In the end, 12.5% is significantly better than other parts of the world, no reason to close shop.

  6. webzpinner - 8 years ago

    Gotta fund socialism somehow… Take from capitalists.

    • Apaches911 - 8 years ago

      and there it is!

      • And there “what” is? Oh, prevailing American ignorance about things work? Yes, then that’s correct. You people (yes! I wrote “you people!”) have had 7 years to figure out what the word “socialism” means, but you all still continue flinging it around when it’s something you don’t comprehend, but still pretend to be experts at.

    • You forgot to stamp your little feet.

  7. shareef777 - 8 years ago

    All these Apple apologists. Laws were broken, last I checked ignorance wasn’t a self defense! If they’re charged, they’re charged what they OWED. If there’s a significant penalty then I’d argue against that, but having to pay what you LEGALLY owed shouldn’t be a shock to anyone. If I get an income tax bill for years past that I wasn’t made aware of, I’d pay it and leave the country in protest. Same for them. Pay what you owe and get out.

    • eswinson - 8 years ago

      You pay every bill you receive? I have disputed tax bills on several occasions that I believed were based on the wrong application of tax law and prevailed.

      • shareef777 - 8 years ago

        Yes, and after you disputed it, I’m assuming you paid what you OWED. What you owed based on what the LAW said, not what you and your accountant decided was ‘good enough’. If Ireland wasn’t legally allowed to give the rates they were given then Apple is liable for the rest. You can blame your accountant all you want, but the government will always collect.

Author

Avatar for Ben Lovejoy Ben Lovejoy

Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!


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