The European Commission found out in its latest crackdown on tax avoidance that the deal which was granted to Apple Inc. by Ireland tax authorities failed to comply to international guidelines, which could result in the company paying considerable sums in back taxes.
Yesterday, the European Union released documents that explain why it has decided to open a formal tax investigation against the company in June 2014. The EU regulator said that the agreement constituted “state aid”, which violates the European Unions rules for prohibiting countries from providing anti-competitive advantages to companies. Apple is not the only company found guilty of such actions – according to the European Commission, Fiat did the same in Luxembourg, and a review of Starbucks Corp.s similar practices of collaboration with the Dutch government will also follow.
As reported by Bloomberg, Alex Cobham, a research fellow at the Center for Global Development, commented: “It’s a shot across the bow for many European tax authorities who have to look at what kind of sweetheart agreements they may have in place that would be hard to justify.”
The Chief Financial Officer of Apple – Mr. Luca Maestri said for the Financial Times that the deal between the company and Irelands tax authorities was not illegal and that the tech giant pays all the tax it owes. According to Irish officials, Ireland did nothing illegal, which however doesnt match with Apple paying only 2% corporate tax, compared to the countrys legally set 12.5%.
Apple has managed to lower its tax rate more than sixfold thanks to cunning routing of sales overseas through subsidiaries. The European Commissions announces are expected to raise alarms for many multinational companies operating in Europe, especially for those, such as Fiat, which arrange their financing operations through Luxembourg.
“Taxpayers across Europe will be reviewing their affairs carefully in the light of this development to make sure they are robust to challenge,” said Neal Todd, a partner with Berwin Leighton Paisner LLP in London, for the Wall Street Journal.
Apple Inc. closed 0.64% higher at $100.75 per share on the NASDAQ yesterday, marking a one-year change of +47.93%. The company is valued at $603.28 billion. Shares were down 0.12% to 79.90 euros in Frankfurt by 9:20 GMT on Wednesday. According to CNN Money, the 44 analysts offering 12-month price forecasts for Apple Inc. have a median target of $110.00, with a high estimate of $135.00 and a low estimate of 460.00. The median estimate represents a +9.18% increase from the last price of $100.75.
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