apple-tax-ec

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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