European Union competition chief Margrethe Vestager has warned reporters not to expect a quick decision from the investigation into whether or not Apple’s tax arrangements in Europe are legal, reports Bloomberg.
“Don’t hold your breath,” she told reporters in Brussels on Monday about the timing of decisions targeting Apple and online shopping giant Amazon.com Inc, whose tax affairs in Luxembourg are also under intense scrutiny. “I’m just warning you.”
Apple uses Ireland as its European headquarters, funneling most revenue through the country, where it has a special arrangement with the Irish government to pay corporation tax of just 2.5%. The EU believes this arrangement may be illegal for two reasons …
First, this is just one fifth of the normal rate of corporation tax in Ireland of 12.5%. This may mean the agreement would constitute illegal state aid on the part of the Irish government. Although it would be the government, not Apple, that broke the law, Apple would have to pay the difference in tax – which would be substantial.
Second, and potentially increasing Apple’s back-tax bill even more dramatically, several European countries are arguing that Apple should pay more tax in the countries where sales are made, rather than in Ireland. The tax rate in some of those countries exceeds 30%. Court rulings have so far gone against Apple in three different European countries.
It had originally been expected that a decision would be made last year, but the European Commission extended and expanded the investigation back in December.
If the decision goes against Apple, the company will have to pay back taxes for up to ten years. Apple warned shareholders about this last year, but did not specify the amount that could be at stake. The amount has since been estimated at more than $8B.