Apple Warns Investors of Financial Penalties in European Tax Probe
For the first time, Apple has disclosed the potential consequences of the European Commission’s ongoing investigation into its tax deals with Ireland, warning investors that it could face “material” financial penalties from the tax probe, The Financial Times reports. The Cupertino giant issued the warning in its 10-Q filing to the Securities and Exchange Commission, a day after it reported first-quarter revenues of $58 billion and net income of $13.6 billion.
Under US securities rules, a material event is usually defined as 5 per cent of a company’s average pre-tax earnings for the past three years. For Apple, which reported the highest quarterly profit ever for a US company in January, that could exceed $2.5bn,according to FT calculations.
Brussels has the power to order Dublin to reclaim 10 years of tax advantages granted to Apple if it finds that deals struck in 1991 and 2007 were unlawful.
Apple and the Irish government have both been denying any wrong doing and have also declined to comment on the size of any fine, according to the publication. Some officials from Brussels have however suggested that any ruling could set “a new record for a state-aid investigation penalty by comfortably topping €1 billion ($1.11 billion)”.
Apple has written in the filing:
“If the European Commission were to conclude against Ireland, it could require Ireland to recover from the company past taxes covering a period of up to 10 years reflective of the disallowed state aid, and such amount could be material.”
Ireland on the other hand has defended its national tax policy and has said that it will appeal immediately to the European Court of Justice if the decision goes against it.