Apple Hit With Massive Tax Bill By EU Regulators

EU regulators have dropped a bomb on Apple this week with a demand that the company pay Ireland more than $14 billion in back taxes covering the period of 2003-2014. The company did not technically evade these payments, they had an agreement with the government of Ireland to avoid them as part of a deal to base the company in that country. EU rules forbid member states from providing such tax breaks to corporations.

Apple had a real sweet-heart deal with Ireland. The tech darling managed to pay miniscule annual tax rates which varied between 0.0005-1% for the period covered by the agreements. EU anti-trust official Margrethe Vestager noted that "The commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years."

This back tax penalty is the largest ever levied by the EU and it has ramifications for many big firms that have used tactics such as "inversion" and other loopholes to move to EU member states and avoid taxation. While the actual payment will probably be held up in court for years, it will surely put many big corporations on notice that their efforts to avoid paying the tax man may come back to bite them in the long-term.

Of course, the massive $14 billion back tax payment sounds substantive, but the reality is that Apple is highly profitable in Europe and in the most recent quarter alone their profits were almost $8 billion. But, the company plans to fight this tax bill and in the meantime will place the money demanded by the EU into an escrow account.

Apple Inc. (AAPL) is engaged in designing, manufacturing and marketing mobile communication and media devices, personal computers, and portable digital music players. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and Mac OS X operating systems, iCloud, and a range of accessory, service and support offerings. It sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers. Apple Inc. is headquartered in Cupertino, California.

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