“Apple Inc. may be facing a hefty tax bill in Europe,” Adam Satariano reports for Bloomberg.
“The world’s largest company could owe more than $8 billion in back taxes as a result of a European Commission investigation into its tax policies, according to an analysis by Bloomberg Intelligence,” Satariano reports. “Apple, which has said it will appeal an adverse ruling, is being scrutinized by regulators who have accused the iPhone maker of using subsidiaries in Ireland to avoid paying taxes on revenue generated outside the U.S.”
“While Apple generates about 55 percent of its revenue outside the U.S., its foreign tax rate is about 1.8 percent, according to the analysis,” Satariano reports. “If the Commission decides to enforce a tougher accounting standard, Apple may owe taxes at a 12.5 percent rate, on $64.1 billion in profit generated from 2004 to 2012.”
“Apple Chief Executive Officer Tim Cook has denied that the company uses tricks to avoid paying taxes,” Satariano reports. “In a recent interview on CBS Corp.’s ’60 Minutes,’ he called the criticism the company has faced from U.S. lawmakers ‘political crap.'”
Read more in the full article here.
MacDailyNews Take: As we wrote last month when Apple decided to pay $348 million to settle a case claiming “tax fraud” in Italy:
This sets a precedent which could prompt a parade of countries to “investigate” Apple hoping for a large payment. Who’ll be be next piggy at the trough?
SEE ALSO:
Apple to pay $348 million to settle Italy tax fraud case – December 30, 2015
I am not saying Apple does owe it, but if Apple owes it, it owes it and should pay it.
As long as every other international company is held to the same standard. I don’t like it when government picks on one company and ignores other companies for doing the same thing.
Apple doesn’t owe it. Apple paid every cent in taxes that they legally owed. Apple is not stupid. They know that they are a target for every two-bit politicians with dollar signs in their eyes. How they can change the rules and go back in time beats me. It’s unethical and immoral. But then it is a government.
The question here is whether the individual countries offered Apple a tax deal on incomes from other countries that was itself an illegal offer. So yes, Apple paid what it was asked but the question to be answered was that ‘ break’ a form of subsidy that broke EU competition rules.
Are you mental Thelonious Mac?
As you could even know better than the judges.
Shut up fanboy.
What a courageous challenge. So proud of your position that you even hid behind an anonymous handle.
Shut up, cretin.
When governments anytwhere resort to deep pocket picking, it’s a dire and sorry state…
If governments had their way, they would take every cent that Apple makes and also take over and destroy the company. If we all paid a consumption tax, the rich would pay their fair share and so would the poor. Companies would pay nothing except for taxes on what materials, products and services they bought.
I don’t know about you but here in the UK we do pay a consumption tax, it’s called VAT (20%). As for your argument that companies should pay nothing except on purchases, well that’s theoretically possible however every company in the world would have to play by the same rules. It’s anti-competitive to have multinationals paying little or no tax and smaller domestic bound companies paying 20%. It just doesn’t work, you end up with all conquering monopolies which altimately leads to lack of innovation, you know like the bad old days during the 90s when giants like Microsoft were king.
Actually, I think Apple would agree with you. Everyone wants an even playing field.
What’s interesting here is that BECAUSE the US Treasury taxes global income, Apple pays twice, to foreign treasuries and to the US Treasury. However, the US Treasury doesn’t require payment until the foreign income is repatriated. And, since the US gov’t has offered tax holidays in the past, a lowered tax rate, in order to get multinationals to repatriate income, the net result is that US multis hold vast amounts of foreign income overseas, waiting.
US companies essentially don’t want to pay foreign taxes AND US income taxes on the same income. This results in US multis trying to minimize their foreign income as much as possible, so that the majority is just US income tax. They owe lots of tax, typically more than their foreign-based competition, that’s why companies like Pfizer are trying to move their company base off-shore to Ireland from the US.
Companies like Apple don’t avoid tax US taxes, they just defer it, in the hope that the US gov’t will see how the current system is untenable and will institute reform.
US tax reform was on the table earlier in the year, but now the US elections have tabled it for the moment. We’ll likely get another chance at reform once a new US President is elected.
So, the fact that US multis like Apple, Starbucks, etc pay little tax in Ireland on their foreign income doesn’t give them a competitive advantage over foreign multis, as they’re still on the hook for a 35% tax rate on that income in the US.
12.5% sounds a lot fairer than 1.8%, I hope Apple pays it’s fair share and that applies to Google, Amazon, Facebook and all the other internet giants. I pay 20% corporation tax on a tiny turnover in comparison, just because a company has the smartest accountants shouldn’t mean a free ride. Taxes are a fact of life whether you like them or not. Society cannot function without taxes period.
We dropped so many bombs on millions of Iraqis, Syrians,and Afghans and we need more money to drop some more. Hey Apple, let’s see what you got. Right, hand over 8billion. That should last for one more month of bombs. What? You wants hospitals and roads? Sorry $300million, that is a lot of money we need to hold a meeting for 3 or 4 years to decide if that is appropriate.
either you’ve lost the plot or you think the …. ‘and another thing’.. form of arguement is effective – which it isn’t.
Apple’s global net effective tax rate is over 26%. Apple is not getting a “free ride”.
The question is how that tax is apportioned. Apple’s foreign income is taxed at a very low rate in Ireland, about 2%. Apple also is required to pay the balance of the US 35% rate on that foreign income to the US Treasury. Apple “books” the US tax on about 2/3rds of that foreign income. The 1/3rd it does not book US tax on, is to be used as foreign working capital, and allowable by US tax law. Some companies like eBay declare all their foreign income as foreign working capital and don’t book any US tax on it.
In the US, Apple’s net effective tax rate is about 31%. When you run the math, 31% on US income and 2% on foreign income you get a global net effective tax rate of about 12%. If that’s the case, then how can Apple’s net effective tax rate be 26%? That’s because they pre-book US tax on about 2/3rds of its foreign income.
The net effect of any tax bill from europe means that they’ll pay less in the US, as they’ll get a credit on US taxes. There’ll likely be no material affect whatsoever, all because Apple has been conservative in its accounting and booked US tax on a majority of its foreign income.
Taxes on business don’t sound fair at all. A tax on business is simply a hidden tax on consumers, because those taxes are built into the prices of the products we buy, artificially inflating the prices of those products.
But the politicians know that if we could truly see the amount of taxes we’re paying, both visible and hidden, they’d all be out of a job.
Some experts believe that only individuals should pay taxes, with Corporate “profits” to be taxed only when passed along to their owners through dividends, or when owners sell their investment in shares. Otherwise, Corporate profits are taxed twice — once at the corporate level, and again when those profits are passed along as dividends business owners or when owners sell their appreciated shares.
Eliminating Corporate taxation makes a lot of sense. But it requires a fair, sane, and effective income tax policy at the individual level. Unfortunately, our tax policy is anything but fair, sane, and effective. The rich get too many breaks; there are too many (legal) ways for them to avoid taxation.
If you believe that taxes on corporations are just passed onto consumers, then that’s all the more reason to eliminate personal income tax and instead levy taxes on corporations. They are the ones with the legions of accountants and tax attorneys, not the individuals.
Thanks to all the corporate lobbyists, none of them pay nominal rates today. But most individuals do.
I always thought that where you make the sale is where you earn the income. When you tax that income it’s called income tax.
If however a company has debits then they can deduct the debits from their profits. On the other hand if company creates a situation where they may for example “loan” money at a higher rate of interest (via a subsidiary) then this could be construed as profit shifting.
Another way that profits can be shifted is whereby a company is by paying taxes in a more favourable jurisdiction (country). But again if the profits were created in another country and taxes are paid in a more favourable jurisdiction then this could be construed as profit shifting.
The basic tenet behind this is where the profits (sale) is made and then a tax needs to be paid in that country.
It is up to the government to legislate to make changes in taxation. If they don’t then that is their problem. The judiciary’s job is to determine the legality if challenged.
To be honest, the ability to have tax safe havens is bullshit. Companies should pay the taxes in each country on the revenue they earn in that country. Then they can return the money back to the parent country without any penalty. Then Ireland will quickly change their taxation policy since they will not be taxing companies for the income in the whole EU.
$8b is on the light side, try $12b – $15b after fines and penalties have been added. Also, criminal prosecutions continue against at least two high-level Italian Apple employees who no doubt will implicate their US superiors who had ordered and approved their extensive tax evasion schemes.
The implication could go all the way to Maestri and Cook before the investigations are over. It would be a sight to see the dual do the perp walk in Europe, especially Cook after his fake outrage on 60 Minutes about tax laws and the treatment Apple unfairly receives. Lo and behold, Apple was caught red handed in probably the most extensive and largest tax fraud in Italy only a few days later. What a fraud the guy really is.
You’re confusing two separate issues, orion, as is MDN’s take. The Italian case specifically alleged that Apple and several of its executives deliberately and fraudulently under-reported earnings to the Italian tax authorities, as required by Italian law. The bigger case is whether Apple’s (and others’) deals with individual countries (Ireland in particular) broke EU law. Apple reported to the Irish authorities everything it was required to under Irish law. No one is alleging that Apple under-reported what it was required by Irish law to report to the Irish tax authorities, which was the nexus of the Italian case.
I was commenting on both cases. The “$12b – $15b” figure is about the “Euro” case and the rest, “Italian” case (since MDN mentioned it). I also believe the Italian case makes it likely for the Commission to find against Apple/Ireland because it suggests a pattern of tax fraud on the part of Apple.
If AAPL pays foreign taxes, they can be used as tax credit against US taxes. I believe Apple accrues for future uS tax obligations, so little net effect other than removing $ 8 B in cash.
One company in Australia that had legitimate reasons for minimising their tax (via a drop in profits i.e. net income) was Peabody Energy. The company is a coal miner and due a large drop in profits the company was legitimately able do reduce the tax owed. There was no profit shifting and there was no attempt to pay back loans (at inflated interest rates). In other words because of straight out market conditions via a drop in coal prices, falling demand from China and greater competition from renewables and US shale oil all led to this outcome.
Apple on the other hand has been reporting greater demand for its products as well as bringing onto the market lines that seem to be generating healthy profits. In addition the company’s Mac line seems to be penetrating the market at a healthy rate so I can’t see a legitimate argument to refute these charges.
As usual, I find the new, youth oriented Bloomberg Business to be UNprofessional. The source article has a person who amounts to a Valley Girl bumblingly interviewing Jesse Drucker, one of the old school actual professionals, while the lower third says “Julius Baer To Settle Tax Probe” when they’re actually talking about Apple. WTF. Awful interview.
And of course that interview, stuck at the very top of the article, is only tangential to the actual subject of the article. WTF. Awful page layout.
The probe dates back to 2014 and a decision could come as soon as March.
So the entire point of the article is WHAT exactly? It’s worthless conjecture. We already KNEW about this probe. We already KNEW the potential outcome.
Meanwhile, we are told NOTHING NEW about the specific tougher accounting standard as opposed to Apple’s current accounting standard.
∑ = WTF
Meet back in March, maybe, for an actual outcome.
Someone has to pay for them opening the doors, housing, benefits & food stamps etc, etc to all those refugees & who better than a company with lots of cash.
If all big / multinational businesses paid tax at the same rate that small businesses and individuals do then we’d all be better off and be able to spend more money on their products. So they should just pay up and stop trying to cheat the system.