Home » Tax Bill
Category Archives: Tax Bill
Apple Inc. is well regarded across the world is being one of the most successful companies in the world. The company has released dozens of innovated products over the past few decades that have revolutionized the world. Along with their technology and innovation success, the company has been equally as successful financially. However, according to a recent news report (http://mobile.reuters.com/article/idUSKCN114211?il=0), Apple is now facing some significant foreign taxes.
Over the past few years the United States and various countries in Europe have been investigating the amount of federal taxes that Apple has paid in Ireland. The investigation determined that in Ireland Apple has been taking around a 2% national tax rate. This is compared to the typical tax rate in Ireland of around 15% for corporations. It has been suggested that Ireland has provided apple with favorable tax rates to encourage the company to continue to do business and grow in Ireland.
While this reduced tax rate has been beneficial for Apple and likely continued apples expansion in Ireland, it has created an unfair advantage. Due to the unfair advantage that Apple has received, the European Union and United States are strongly recommending that Apple repay to Ireland the amount of taxes that they saved. At this point, it is estimated that the total liability that Apple will owe could easily total over 15 billion United States dollars.
While the $15 billion tax bill is very significant, Apple appears that they will be able to absorb the financial hit. Apple currently it’s considered one of the wealthiest companies in the world. On their most recent audit balance sheet Apple reported that they have over $230 billion in the bank. Before trading opened the day that the tax bill was announced Apple shares were trading down about 3%. However, it does not appear that investors will be seriously based by this issue. By the end of the day Apple shares had increased a bit and were down less than 1%. Most investors seemed unconcerned that the tax benefit was received in other places beyond Ireland.
The European Commission has issued a report indicating that Apple, the American manufacturer who produces iPhones, iPads, and Mac computers, received illegal tax savings from Ireland and is being find fourteen billion Euros.
Ireland is a long established tax haven for multi national companies who become domicile there for the low tax rates in the country, similar to the Cayman Islands and Luxembourg. Apple has long been criticized in the United States for not repatriating their earnings to the U.S. And paying taxes on it. Instead, the company has even went as far as borrowing money in the U.S. In order to pay a dividend and to buy back shares despite having billions of dollars available in international markets earning a Minsk return and rate of interest.
The European Union commission that issued the fine indicated that they would consider lowering the fine if Apple pays taxes to other tax authorities including, perhaps, the United States. Their basis for the case is preferential tax treatment that they claim the company received from Ireland.
Apple’s CEO Tim Cook responded with a letter indicating that the company would contest the ruling and that the move would steer businessss away from being headquartered in Europe. Cook mentioned the long history that Apple has in Ireland in the town of Cork and how this was not merely a recent tax inversion. Cook also restated the past comment that he made indicating That Apple supports global tax reform and that the issue remains a complex one citing that company’s tend to pay taxes where value is created, in their case which would primarily be the U.S. Where products are designed. Further, Cook indicated that there were no illegal tax benefits provided to the company from Ireland and that the company did not appeal for such preferential treatment from the country.
President Barack Obama indicated, in private, concerns that the U.S. Taxpayers who the U.S. Believes is eventually entitled to tax revenue for the income once repatriated, could receive the short end of the stick due to the EU ruling and promises to support American businesses like Apple in the case, which is sure to receive its share of attention as it works through an lengthy, contentious, and complicated appeal process.