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August 30, 2016

Apple tax probe could see company hit with $1bn tax bill

News: Update - make that €13bn. Irish Government says it 'profoundly disagrees' with ruling as EC says it treated Apple favourably and is owed 13 billion euros

By James Nunns

Update: Apple could face a 13bn euro tax bill, far gretaer than the $1bn bill it was predicted to face as the European Commission report into its tax relationship with the Republic of Ireland was far harsher than expected.

The ruling, which was delivered on Tuesday, comes after a three-year investigation into Apple’s tax arrangement in the Republic of Ireland.

Estimates place the amount that the company will have to repay in the billions and both Apple and the Irish government are expected to appeal against any ruling.

In 2014 the European Commission began investigating a tax arrangement between Ireland and Apple, making the accusation that the deal effectively equalled “state aid”, which under EU law is not allowed.

The EU authorities state that rulings made by the Irish government in 1991 and 2007 allowed Apple to minimise its tax bill in the country.

This allowed Apple to legally channel international sales through Ireland in order to take advantage of the tax deal.

Margrethe Vestager, EU competition commissioner, who is leading the probe into Apple’s tax affairs, is expected to give an estimate as to how much Apple will have to pay back, however, the exact amount will be decided by Irish authorities.

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The figure of $1.12bn, cited by Reuters, would equate to around 2% of the annual $50bn that Apple makes in profit, so while it is no small figure it should have little impact on the company.

This is not the first time that the European Commission has taken a proactive approach to dealing with the taxes of companies and countries. Last year it told the Netherlands to recover £25.6m from Starbucks, while Luxembourg was ordered to recover a similar amount from Fiat.

In the US this approach has caused some unrest in the US Treasury Department which said the European Commission was in danger of becoming a “supra-national tax authority” that overrides the tax codes of its member states.

Update:

The European Commission has ruled that Ireland should recover up to £11bn from Apple in back taxes after concluding that the company's tax benefits are illegal.

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