EU scrutiny of Irish tax deals could have 'material' impact on Apple, company says

Posted:
in AAPL Investors edited May 2015
Apple has begun to prepare investors for the possibility that the European Commission's ongoing investigation into Ireland's corporate tax arrangements, which the commission argues amount to illegal state aid, could force the company to suffer a significant financial loss.


Source: European Commission


"If the European Commission were to conclude against Ireland, it could require Ireland to recover from the company past taxes covering a period of up to 10 years reflective of the disallowed state aid, and such amount could be material," Apple wrote in its latest quarterly report. The warning was first noted by the Financial Times.

The investigation stems from accusations that Ireland --?alongside Luxembourg and the Netherlands --?offered sweetheart tax arrangements to large companies in exchange for setting up operations there. A preliminary report issued by the commission last year found that Ireland's 1991 and 2007 tax accords with Apple represented illegal state aid, designed to skirt market forces.

Apple is thought to have saved as much as $9 billion per year as a result of these agreements, meaning that any penalty which includes retroactive tax recovery could run into the tens of billions of dollars.

Ireland has vowed to fight any EU ruling against its tax policies, and Apple has repeatedly defended its arrangement.

"Apple is proud of its long history in Ireland and the 4,000 people we employ in Cork," the company said in a statement last year. "They serve our customers through manufacturing, tech support and other important functions. Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government."

"Apple has received no selective treatment from Irish officials over the years. We're subject to the same tax laws as the countless other companies who do business in Ireland."
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Comments

  • Reply 1 of 52
    red oakred oak Posts: 634member

    Sam, where does the '$9B' projection come from?  And, where is the backup to "tens of billions of dollars" come from?  

     

    Is that your assumption or is confirmed from any other sources?  

  • Reply 2 of 52
    512ke512ke Posts: 781member



    I think the moral of this story is, do not invest in Europe, do not put money in Europe, keep your capital elsewhere in the world.

     

    Because in Europe, the commission comes along and nails you for ten years of back taxes.

     

    Dude, if you allow it, then allow it. If you want to change the rules going forward, change the rules. 

     

    But if you retroactively tax companies, they are not gonna keep their dough on your shores.

     

    Tax away, but say goodbye to the lucre in the future.

     

    That's my opinion anyway...

  • Reply 3 of 52
    red oakred oak Posts: 634member
    Quote:

    Originally Posted by sog35 View Post

     

     

     

    $9B per year is total BS.


    Totally.   I think these numbers are completely pulled out of the air.  Unless someone shows me some analysis or proof  

  • Reply 4 of 52
    rogifanrogifan Posts: 10,669member
    So perhaps this is why the stock is down again today?
  • Reply 5 of 52

    This report from this past September indicated that Apple could owe about $8 billion in total, not per year.

     

    http://www.ibtimes.com/apple-inc-could-owe-8-billion-back-taxes-eu-1697030

  • Reply 6 of 52
    $9bn x 10 years = $90bn. Go get 'em commissioner. Add interest for every day Apple contest it. That should obliterate Apple's cash mountain and help out hard pressed European governments. Brilliant.
  • Reply 7 of 52
    SpamSandwichSpamSandwich Posts: 30,732member
    Quote:

    Originally Posted by Rogifan View Post



    So perhaps this is why the stock is down again today?



    Nah. The sky is blue, therefore "sell, sell, sell"...

  • Reply 8 of 52
    Quote:

    Originally Posted by Red Oak View Post

     

    Is that your assumption or is confirmed from any other sources?  


     

    Quote:

    Originally Posted by sog35 View Post

     

    $9B per year is total BS.


     

    I'm not an expert or anything but I do know how to use Google, which leads to the $9 billion figure coming from a U.S. Senate report: http://www.bloomberg.com/news/articles/2013-05-20/apple-s-offshore-entities-avoid-taxes-senate-probe-finds

  • Reply 9 of 52
    eldernormeldernorm Posts: 232member
    This is just bull crap from european countries that want all the money and none of the responsibility. If this was illegal, then we should tax Ireland out of existence.... and give all the money to europe, along with the other two countries..

    Or better yet. Put much of the money into loaning it to hard pressed countries in europe. Then if the axe falls, just demand all loaned money back... now... And require collateral such as the Eiffel tower, Number 10 downing street, the vatican, etc.

    Funny enough, I believe each country gets its value added tax up front. This is just money for leaving your profit in my bank money.
  • Reply 10 of 52
    apple ][apple ][ Posts: 8,360member

    Screw these Euro Crooks. 

     

    How about they earn some money themselves, instead of attempting to steal money from others who are successful?

  • Reply 11 of 52
    Quote:

    Originally Posted by Nightsky View Post



    $9bn x 10 years = $90bn. Go get 'em commissioner. Add interest for every day Apple contest it. That should obliterate Apple's cash mountain and help out hard pressed European governments. Brilliant.



    ...

  • Reply 12 of 52
    bradipaobradipao Posts: 145member
    red oak wrote: »
    Sam, where does the '$9B' projection come from?

    In europe taxation on local companies is quite heavy, if you sum up all kind of taxes you are easily above 50% (in italy about 55%).
    So, I think it depends on which tax rate they used as reference.
  • Reply 13 of 52
    SpamSandwichSpamSandwich Posts: 30,732member
    Quote:

    Originally Posted by Nightsky View Post



    $9bn x 10 years = $90bn. Go get 'em commissioner. Add interest for every day Apple contest it. That should obliterate Apple's cash mountain and help out hard pressed European governments. Brilliant.



    You forgot the "/s".

  • Reply 14 of 52
    gatorguygatorguy Posts: 20,029member
    sog35 wrote: »
    Totally ridiculous numbers.  The last 10 years Apple has averaged less than $15B in PROFIT.  How the HELL do they own $9 billion in tax for each year.
    Most of the information came from Apple themselves. Here's the link to the EU initial statement regarding Apple and illegal state aid, which includes detail on how the $9B per year figure is arrived at. Start with page 6 if you are an impatient reader.
    http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf
  • Reply 15 of 52
    jfc1138jfc1138 Posts: 3,090member
    Quote:
    Originally Posted by Gatorguy View Post





    Most of the information came from Apple themselves. Here's the link to the EU initial statement regarding Apple and illegal state aid, which includes detail on how the $9B per year figure is arrived at. Start with page 6 if you are an impatient reader.

    http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf



    Where in that do they calculate a 9 billion dollar number? Even a keyword search doesn't pull that out. Is it on a specific page?

  • Reply 16 of 52
    gatorguygatorguy Posts: 20,029member
    nategrove wrote: »
    This report from this past September indicated that Apple could owe about $8 billion in total, not per year.

    http://www.ibtimes.com/apple-inc-could-owe-8-billion-back-taxes-eu-1697030
    I think the AI author got confused. The $9B figure would likely come from the combined 2009-2012 figures and not per year. The PDF I linked also shows that. For 2013/14 the figure could be much higher than $9B (Apple has collected a ton o'money the past two years!) while the years previous to 2009 would be much lower since Apple saw nowhere near the revenues they do today.

    It should be clearer come June/July.
  • Reply 17 of 52
    MarvinMarvin Posts: 14,200moderator
    nightsky wrote: »
    $9bn x 10 years = $90bn. Go get 'em commissioner. Add interest for every day Apple contest it. That should obliterate Apple's cash mountain and help out hard pressed European governments. Brilliant.

    It would only be $9b in total for a given period. Apple themselves declared they'd avoided tax around this amount. It's still far less than they pay in the US. Smaller countries in places like Europe will always be able to offer more favorable tax rates than places like the US because relatively, the support they need to offer is lower for a smaller population.

    It would have some impact on Apple's cash pile but the cash pile is over $200b. Even if the amount crept up to $20b, it still leaves a huge pile behind. The biggest impact would likely be on future earnings as they won't be able to avoid that tax any more. On the plus side it means it offsets the US repatriation rate more so if they pay 12.5% and the US drops the repatriation to 20% from 35%, Apple would get the single digit rate they wanted. If these earnings had been declared in the US, they'd have had to pay way more than this - well over 20%. That would have run into tens of billions.

    Apple makes about $40b net profit per year and that's what corporation tax is paid on. If the earnings flowing through Ireland were 70%, then it would be $40b x 0.7 x 12.5% = $3.5b per year maximum and they haven't been making that for 10 years, nor was their tax rate 0%.
  • Reply 18 of 52
    radarthekatradarthekat Posts: 2,970moderator
    Quote:

    Originally Posted by Marvin View Post





    It would only be $9b in total for a given period. Apple themselves declared they'd avoided tax around this amount. It's still far less than they pay in the US. Smaller countries in places like Europe will always be able to offer more favorable tax rates than places like the US because relatively, the support they need to offer is lower for a smaller population.



    It would have some impact on Apple's cash pile but the cash pile is over $200b. Even if the amount crept up to $20b, it still leaves a huge pile behind. The biggest impact would likely be on future earnings as they won't be able to avoid that tax any more. On the plus side it means it offsets the US repatriation rate more so if they pay 12.5% and the US drops the repatriation to 20% from 35%, Apple would get the single digit rate they wanted. If these earnings had been declared in the US, they'd have had to pay way more than this - well over 20%. That would have run into tens of billions.



    Apple makes about $40b net profit per year and that's what corporation tax is paid on. If the earnings flowing through Ireland were 70%, then it would be $40b x 0.7 x 12.5% = $3.5b per year maximum and they haven't been making that for 10 years, nor was their tax rate 0%.



    Took only 24 comments before the salient information came out; that anything they pay to a foreign government directly reduces the amount they will then have to pay the U.S. government, so in the end this is merely Apple, and many other companies, deferring taxes in a manner different from, but with the same effect as, the deferred retirement plans so many of us have participated in throughout our careers.  If the EU whacks Apple with a tax, that means Apple will pay that portion of the entire amount of taxes they will eventually pay, just a bit early on that portion paid to the EU.  The rest they'll pay when they eventually repatriate, but the total will be the same regardless, as the U.S. has the higher tax rate and adjusts for overseas taxes paid.

  • Reply 19 of 52
    cnocbuicnocbui Posts: 3,613member

    Hold on to your hats, because this might be just the start.  Australia is currently undertaking a review of corporate tax avoidance/minimisation.  Apple sold AU$27 Billion worth of goods in Australia since 2002, yet they paid only AU$193 million in tax to the Australian government - or 0.7 % of turnover.

     

    They minimised the tax by supposedly 'purchasing' all those goods from Ireland - which must count as a miracle worthy of several beatificatons because Apple don't manufacture so much as the twisties used to bundle cables in this country.  The Australian government has quite a history of retrospective tax collection where they deem companies and individuals to have gone above and beyond in their efforts to minimise tax.  I know someone who was stung for millions in retrospective back taxes.

  • Reply 20 of 52
    Quote:

    Originally Posted by 512ke View Post

     

    But if you retroactively tax companies, they are not gonna keep their dough on your shores.

     


     

    They already don't keep the money in Europe. It's sitting in banks in NYC. 

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