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In a recent 60 Minutes interview, Apple CEO Tim Cook dismissed critics of their so-called “tax avoidance” strategies as “total political crap.” Although a 2012 investigation by the Senate Permanent Subcommittee found that Apple used a “complex web of offshore entities… to avoid paying billions of dollars in US income taxes”, Cook proclaimed that the company “pays every tax dollar [they] owe.”
An investigation by the European Commission that began in 2014 may beg to differ, however. According to an analysis by Matt Larson of Bloomberg Intelligence, the company may be on the hook for up to $8 billion in back taxes depending on the Commission’s ruling.
Apple claims much of its overseas profits in Ireland, a country that has gained a bit of a reputation as a tax safe haven for large corporations. The commission is investigating whether or not Ireland “helped Apple lower its tax liability by calculating what the company owes based on significantly reduced operating costs,” according to Daily Mail UK. Bloombeg claims that Apple has managed to pay a measly 1.8% tax rate on foreign profits using these methods. The commission may decide to enforce a tougher tax standard on the company, raising the rate to 12.5% on the $64.1 billion in foreign profits Apple pulled in from 2004 to 2012.
Apple isn’t the only American company whose tax practices are under scrutiny from the Commission. Starbucks, Amazon, and McDonald’s have also recently been under investigation. The commission recently found that Starbucks owed roughly $22 million as a result of their tax practices in the Netherlands, and according to TheGuardian, “a ruling from Belgium this week determined that 35 companies across the EU owe the equivalent of $760m in back taxes.” Many theorize that the recent ruling in Belgium indicates that Apple may face an adverse ruling, as well.
The Commission’s decision could come as soon as March. Although neither the European Commission or Apple has provided an official comment, Bloomberg claims that Apple has said that it will appeal any ruling that doesn’t go their way.