Apple, Inc. is a hugely successful company, with some of the most popular products in the world. It’s no surprise that Apple does very well financially, including racking up more than $182 billion in revenue in 2014. So whether you drink the “Apple juice” or not, there’s no arguing that the company is great at what it does. There are many reasons behind Apple’s financial success, and it’s not all about its innovative products. Apple is also a very prudent company when it comes to business and taxes. The consumer electronics giant knows a thing or two about how to save on taxes, including taking advantage of the less-strenuous tax arrangements in many foreign countries. However, that doesn’t always sit well with tax authorities.
According to recent reports, European tax authorities are taking a closer look into Apple’s tax arrangements in Ireland and it could eventually spell trouble for the iPhone maker. European authorities are not directly going after Apple, but they are taking aim at the Irish government to see if officials have been giving Apple an unfair tax break. The European Union (EU) claims that in exchange for creating more jobs in the country, Apple is getting a huge tax break. Indeed, Apple did report in 2013 that over the last ten years it had paid an effective tax rate smaller than 2 percent in Ireland. This is just one part of an increased effort by the European Union to crack down on tax avoidance throughout Europe. Other big name companies drawing interest include Amazon and Starbucks.
So what could happen if the EU finds that Ireland was indeed giving Apple unfair tax breaks? If things go horribly bad for the Irish Government and Apple, then the company could be asked to pay back about $19 billion in overdue taxes. That’s because if the EU wins its case against Ireland the country would be forced to recoup the tax money it lost from Apple. At this point it does appear likely that European tax authorities will rule against Ireland. However, if the EU does end up penalizing the Irish Government don’t expect government officials to take the matter lightly. Government officials in Ireland have already made it known that they will fight the matter as long as they can if the EU does rule against them.
Some legal authorities in the country believe that the Irish Government would have a strong case for their defense if the EU does censure it. For starters, the EU failed to show in its preliminary findings that Apple received any benefits from its tax arrangements. Meanwhile, Apple claims that it has not broken any laws and that it has not used any so-called “tax gimmicks“ to avoid paying a fair tax in Ireland. Plus, even if the EU does rule against the Irish Government that does not mean Apple will automatically have to pay restitution; at least not the reported $19 billion. That’s because establishing exactly how much money the company really owed would be very complicated. Therefore, not only could the case take years to come to a conclusion in court, but also the penalty amount could itself take months or years to be determined. So, while things could change if the EU gets its way, for the time being at least, it looks like Apple can continue to save on taxes in Ireland and the country can continue to benefit from having Apple contributing to its economy.
This post was published on October 14, 2015