$19 billion: the ‘worst-case’ bill Apple could face in long-running European tax investigation

JP Morgan, an investment banker for Apple, has said that the worst-case outcome of a long-running European Commission investigation into the legality of Apple’s European tax arrangements could be a back-tax bill of $19B. It had previously been estimated that the bill might amount to $8B.

The estimate was made as the US Treasury Department warned the European Commission about taking action against US companies over tax avoidance allegations, reports the BBC …

In a report published on Wednesday, the US regulator said action by Brussels would make it into a “supra-national tax authority” overriding the tax codes of its member states. It also said Brussels was using a different set of criteria to judge cases involving US companies, adding that potential penalties were “deeply troubling”.

The US argues that demanding back-tax payments would be unfair as it would not be a ‘foreseeable’ expense, that it would undermine international consensus and that it would set an ‘undesirable precedent.’

However, precedent is already very much against Apple: similar arrangements in Belgium, Luxembourg and the Netherlands involving Starbucks and Fiat have already been declared illegal, and when Italy accused Apple of tax avoidance and demanded an additional €318M ($347M), the company quietly paid up.

Apple warned shareholders last year that it may face a back-tax bill for a ‘material’ amount if the decision goes against it.

If the European Commission were to conclude against Ireland, the European Commission could require Ireland to recover from the Company past taxes covering a period of up to 10 years reflective of the disallowed state aid. While such amount could be material, as of March 28, 2015 the Company is unable to estimate the impact.

I previously wrote an opinion piece outlining the reasons I believe Apple is near-certain to lose the case.

Photo: Upper West Side store by LNN