Apple could owe $8billion of back taxes in Europe amid claims company sheltered overseas profits in Irish tax havens
- European Commission is due to rule on Apple’s tax affairs in March
- But recent rulings suggest that report is likely to go against tech giant
- Probe investigating if firm negotiated low tax rate with Irish authorities
- If taxes are recalculated at higher rate, Apple could end up owing $8bn
Apple could be facing an $8billion bill in Europe as a result of an investigation into whether it used Irish tax havens to illegally shelter its overseas profits.
The company, the largest and richest in the world, is being investigated by the European Commission over profits it generated overseas dating from 2004 to 2012.
While the results of that probe are not expected until March, recent rulings over tax havens in Belgium strongly suggest that the report will go against Apple.
If that is the case, then the tech firm could owe as much as $8billion in back taxes, according to analysis by Matt Larson of Bloomberg Intelligence.
The commission is looking into whether Ireland helped Apple lower its tax liability by calculating what the company owes based on significantly reduced operating costs.
According to Bloomberg, Apple generates more than half of its money overseas, but has a foreign tax rate of just 1.8 per cent.
If the commission finds that Apple has violated EU rules, then it will likely recalculate that tax at 12.5 per cent, leaving a shortfall of around $8billion.
While investigators will actually claim that money off the Irish state, the country’s own financial woes mean it will almost certainly look for remuneration from Apple.
As a result, Apple listed tax scrutiny as a risk factor for investors in fiscal statement for 2015, issued in October last year.
The company has already said it will challenge any adverse ruling the European Commission makes, while Tim Cook has dismissed claims that Apple illegally avoids tax.
The European Commission is looking into whether Irish authorities helped Apple to lower its tax liabilities, allowing the company to shelter its profits there instead of paying higher charges elsewhere.
In an interview with Charlie Rose on 60 Minutes back in December, Mr Cook branded the accusations ‘political crap’.
He said: ‘There is no truth behind it. Apple pays every tax dollar we owe. We pay more taxes in this country [America] than anyone.’
Mr Cook added that he would ‘love to’ bring the money Apple makes abroad back to the U.S. but he can’t ‘because it would cost me 40 per cent. And I don’t think that’s a reasonable thing to do.
He added: ‘This is a tax code that was made for the industrial age, not the digital age. It’s backwards. It’s awful for America. It should have been fixed years ago. It’s past time to get it done.’
Apple is not the only U.S. firm being investigated for its tax dealings in Europe as Starbucks, Amazon and McDonald’s were also accused of using unfairly low rates to calculate money owed.
