As a result of the European Commission (EC) investigation into the company’s tax policies that began in 2014, the tech giant could possibly be obligated to pay more than a whopping $8 billion in back taxes.
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Apple calculates its tax bill using low operating costs, a move that dramatically decreases what the company pays to the Irish government. The commission’s in-depth investigation opened in February 2015 showed that the scheme derogated from normal practice under Belgian company tax rules and the so-called “arm’s length principle”. These shady constructions that only benefit the extremely wealthy have no place in any modern society.
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.
The company is among a list of others, including Starbucks Corp., Amazon Corp., and McDonalds Corp., that are being investigated for its tax policies. Bloomberg reports that Apple plans to appeal any ruling not in its favor.
If the Company’s effective tax rates were to increase, particularly in the US or Ireland, or if the ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s financial condition, operating results and cash flows could be adversely affected.
While Apple might not be the only organization under scrutiny from European regulatory authorities, it is definitely the most high-profile case with the company earning a significant 20% of its revenue and income from Europe.
While Apple generated around 55 per cent of its revenue outside the U.S., its foreign tax rate was as low as 1.8 per cent, according to Bloomberg’s analysis.
Apple chief executive Tim Cook has denied that the company uses tricks to avoid paying taxes.
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Apple may owe $8bn in back taxes from its use of potentially illegal tax shelters in Ireland. In a recent 60-minutes interview on “Apple Insider”, the CEO has said that the allegation of tax evasion on the company is a “total political crap”.
