EU probe of Irish tax break could cost Apple $19 billion
Ireland will probably face censure from European authorities within months in relation to its tax dealings with Apple, according to a person with knowledge of the matter.
A finding against Ireland will spark a legal battle that may last years, as the government is ready to fight the decision in the European Union Court of Justice, according to the person, who asked not to be named because the case is ongoing.
In preliminary findings last year, European antitrust authorities said Apple’s tax arrangements were improperly designed to give the iPhone maker a financial boost in exchange for jobs in the country. Apple said in 2013 it had paid an effective tax rate of less than 2 percent in Ireland over the previous 10 years.
The EU inquiry comes amid a global crackdown on corporate tax affairs, with the European Commission estimating that tax avoidance and evasion in the region cost about $1.11 trillion a year.
In a worst-case scenario, Apple could face a $19 billion bill if the government in Dublin ultimately loses and is forced to recoup tax from the company, according to JPMorgan Chase analyst Rod Hall.
“The commission’s initial findings appear to be quite robust,” said Marco Hickey, head of EU, competition and regulated markets at Irish law firm LK Shields, which is not involved in the case. “Based on that, it would seem that they’re more minded than not to make a negative final decision against Ireland.”
Apple has said in the past it doesn’t use “tax gimmicks.” An Apple spokeswoman wasn’t able to comment on any possible commission finding. The European commission declined to comment, while Ireland’s finance ministry said no final decision has been taken.
“The European Commission has not indicated a time line for a decision,” it said in an emailed response to questions. “Our position remains that there was no breach of state aid rules in this case.”
After the commission laid out its preliminary findings in June 2014, it asked the Irish government for comments and more information about its dealings with Apple.
The Irish government would have a strong legal case to fight an adverse finding, according to Michael Ryan, head of Dublin-based law firm McCann Fitzgerald’s tax unit. The firm isn’t involved in the case.
