Apple warns of potential ‘material’ financial damage from European tax probe

“Apple has warned investors that it could face ‘material’ financial penalties from the European Commission’s investigation into its tax deals with Ireland — the first time it has disclosed the potential consequences of the probe,” Tim Bradshaw and Christian Oliver report for The Financial Times. “The warning came in Apple’s regular 10-Q filing.”

“Under US securities rules, a material event is usually defined as 5 per cent of a company’s average pre-tax earnings for the past three years,” Bradshaw and Oliver report. “For Apple, which reported the highest quarterly profit ever for a US company in January, that could exceed $2.5bn, according to FT calculations.”

“Apple said in the filing: ‘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,'” Bradshaw and Oliver report. “Apple did not have any further comment on its filings, but in an interview last year Apple finance chief Luca Maestri told the FT: ‘It’s very important that people understand that there was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland.'”

Read more in the full article here.

MacDailyNews Take: Apple has repeatedly and confidently stated that they didn’t do anything that was against the law. Therefore, unless the EC tries to change the law retroactively, if that’s even possible, or tries to collect taxes retroactively in some other fashion, Apple is in the clear. By U.S. law, companies have to warn investors of potential material events in the 10-Q.

Related articles:
Ireland’s Prime Minister: Apple has nothing to fear from end of ‘Double Irish’ tax avoidance strategy – November 4, 2014
Apple says it may lose Irish tax break – October 31, 2014
Ireland to end tax lures that drew U.S. firms – October 14, 2014
EU tax probe spotlights Ireland’s allure for multinationals – October 13, 2014
EU watchdog to give reasons for inquiry into Ireland’s tax treatment of Apple – September 29, 2014
European Commission accuses Apple of prospering from illegal Irish tax deals – September 28, 2014
EU threatens expanded probe into Ireland’s tax practices regarding Apple, Googles, other companies – June 20, 2014
EU’s investigation of Apple’s taxes isn’t going to cause the company any problems – June 13, 2014
EU launches tax avoidance investigations on Apple, Starbucks, Fiat – June 11, 2014
Not in Taxes anymore: On site at Apple’s famous Irish ‘headquarters’ – November 2, 2013
Regan: U.S. tax code spurs loveless foreign corporate ‘marriages’ – May 13, 2014
Ireland to close Apple’s tax loophole, but leave bigger one open – October 15, 2013
G20 think tank OECD proposes blueprint for global crackdown on tax avoidance – July 19, 2013
Thomas Sowell on Apple, corporate taxes, and ‘the road to serfdom’ – May 28, 2013
Taxing Apple just taxes you – May 24, 2013
Don’t tax Apple, tax its shareholders – May 24, 2013
If Apple paid more tax, we might pay less or something – May 22, 2013
Apple CEO Tim Cook pounds another nail into the Keynesian coffin – May 22, 2013
Apple CEO Cook makes no apology for company’s tax strategy – May 22, 2013

24 Comments

  1. Like any other group of people given unwarranted control over the affairs of private individuals and corporations, the EU can do whatever they want. Legality isn’t an issue for these maggots. They decide what is an isn’t legal, retroactively. I know it is popular to hate lawyers here, there are so many unscrupulous ones, but this is why Apple needs the best of the best working for them. Apple spells money to those who do not have it and have done nothing to earn it and they will be coming for it.

    1. This isn’t about retroactive taxation. It’s possible that Ireland’s tax regime for corporations amounted to illegal state aid under EU law, which, as someone below noted, has primacy. So, if Apple has received illegal state aid from Ireland in the form of illegal tax exemptions, these taxes should still be levied. Nothing out of the ordinary here.

      1. And that’s why politicians want to take our SSI, and CALPERS… They see money and want it badly, for political and personal gain. If you let them take what they want, we will have nothing, working our whole lives for empty promises and nothing in return. But no they don’t take it themselves, they set up a system so their buddies take it, and they themselves get some sort of kick back.

      2. Ahhh, Planetary, if only we could get rid of the government. Society would be so much better if run by the citizens, all of whom are noble and profoundly altruistic.

        It’s easy to make negative remarks about the crap folks. Any infant can do that. What do you propose instead?

  2. We all know Ireland has been running an international tax scam. And tax shelters have been ruled bogus (unlawful) before.

    If Ireland broke EU regulations with their tax policy, Iceland and the companies that benefitted need to pay. It’s that simple. Apple can afford it.

    1. hmm. i think that if ireland broke the e.u. regulations, then ireland needs to pay. apple adhered to irish law, not their fault. and btw i am mostly of irish extraction.

      1. It took the EU long enough to do anything about it. It is no secret that Ireland has been a tax haven for a long time. Check out the pharmaceutical companies that _just happen_ to route a lot of valuable bulk chemicals, and even produce valuable finished goods, through Ireland where they get a huge (tax-advantaged) markup before trans-shipping to end markets. Keeps a lot of profits out of hihger-priced selling markets. Like I said, its been going on for a really long time in Ireland. Apple was not a special case. Anyone with valuable “IP” routed “the goods” through Ireland for a huge markup in a low-tax country.

        1. The tax situation in Ireland recently became much more important to the EU because of the EU’s increasing budget and monetary problems. Desperate circumstances breed desperate measures, such as repatriation tax holidays and other patches to a broken system for a one-time windfall.

    2. also, just because apple can afford something doesn’t mean they should pay for it. apple can afford to buy dell, but i don’t think it is right to make them buy it.

  3. Let’s go truly retro. Let’s say they retroactively they decide that they want to take their funds from 1996/7… And retroactively bankrupt the company, justifying full takeover of 100% of Apple, today.

    /s

  4. Ireland has been running this tax regime with US computer companies since before Gateway set up there.

    If the Irish are forced to claim the taxes that should have been due – they should be given to the EU countries pro-rata with the sales / profits that they have not paid on earnings across the EU. We should not have Ireland ‘gaining’ from this situation which was perpertrated to avoid tax in other EU member states.

    1. The market price is what it is; EU consumers pay what the market will bear. It is not selling prices, but markups & taxes on profits (local or otherwise) that get “managed” as a result of routing goods through tax-advantaged places.

  5. If it’s anything like the IRS, then backdating their own regs and laws is very possible and done all the time. I’ve seen cases where the IRS has retroactively (10 years later) decided that previously approved tax deferred investments were no longer valid. They then swooped in with a bill for past tax and 10 year’s worth of penalties and interests.

    1. It’s not rectroactively making laws, it’s about whether the Irish were allowed under EU law ( which has primacy ) to make the deals it has done with Apple.
      If the EU comes to that decision the ‘reduced’ payments will be void and ‘full’ payments will be due.

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