BREAKING NEWS: Apple Facing $14.5 Billion Dollar Tax Claim After EU Ruling
Apple Australia who have been trafficking hundreds of millions of dollars into Ireland instead of paying tax in Australia, and now facing a day of reckoning with both the Australian government and the EU set to go after them for back taxes, following a ruling that could invalidate Ireland as a tax haven.
Last night the European Union’s antitrust regulator demanded that Ireland recoup roughly US$14.5 billion in unpaid taxes from Apple move that could intensify a feud between the EU and the U.S. over the bloc’s tax probes into American companies.
Last year the Australian Federal government moved to tighten tax regulations so that they could go after companies like Apple Google and Microsoft who have been using Ireland to not pay tax in Australia despite these companies raking in billions in revenue from Australian consumers. With
last year Apple paid $85 million in Australian income tax last year, despite making almost $8 billion in local revenue, accounts filed with the corporate regulator show.
Its tax bill is slightly up from the year before when it paid $80.3 million, but a fraction of its overall $7.9 billion sales revenue (up from $6 billion in 2014).
Apple is one of many tech companies accused of shifting its Australian profits to places such as Ireland.
The company, which is still under audit by the Australian Taxation Office, recorded higher sales, marketing and distribution expenses of $435 million and administrative expenses of $30.7 million.
Nelson research shows that Apple spent less than $80 million on advertising in 2015.
Its profit after tax was $123 million, down from $171.5 million the year before.
The European Commission Tuesday said the tax arrangements Ireland offered Apple in 1991 and 2007 allowed the company to pay less than 1% or almost zero tax on its European profits for more than 10 years, between 2003 and 2014.
“The commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” said European antitrust commissioner Margrethe Vestager.
In response, Apple said the European Commission was trying “to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process.”
The US Treasury said the “commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU”.
Ireland’s Minister for Finance, Michael Noonan, reactedto the decision by the European Commission:
“I disagree profoundly with the Commission’s decision. Our tax system is founded on the strict application of the law, as enacted by the Oireachtas, without exception.
“The decision leaves me with no choice but to seek Cabinet approval to appeal the decision before the European Courts. This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign Member State competence of taxation.
“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment. Apple has been in Ireland since the 1980s and employs thousands of people in Cork. The company has continued to expand its operations in Ireland in recent times.”
The massive sum, 40 times bigger than the previous known demand by the European Commission to a company in such a case, could be reduced, the EU executive said in a statement, if other countries such as Australia, sought more tax themselves from the U.S. tech giant.
For Apple, whose earnings of $18 billion last year were the biggest ever reported by a corporation, finding several billion dollars should not be an insurmountable problem. The 13 billion euros represents about 6 percent of the firm’s cash pile.
As of June, Apple reported it had cash, cash equivalents and marketable securities of $231.5 billion, of which 92.8 percent, or $214.9 billion, were held in foreign subsidiaries. It paid $2.67 billion in taxes during its latest quarter at an effective tax rate of 25.5 percent, leaving it with net income of $7.8 billion according to company filings.
More to follow.