Apple has gone public with concerns about the investigation of its tax arrangements with Irish authorities, warning shareholders that it might face a demand for 10 years of back payments of tax should the EC rule against the Irish tax position.
The worry comes from Apple's quarterly report filing with the SEC, in which it warns of impending tax demands in a specific section about income taxes:
"On June 11, 2014, the European Commission issued an opening decision initiating a formal investigation against Ireland for alleged state aid to the Company. The opening decision concerns the allocation of profits for taxation purposes of the Irish branches of two subsidiaries of the Company. The Company believes the European Commission’s assertions are without merit. If the European Commission were to conclude against Ireland, the European Commission could require Ireland to recover from the Company past taxes covering a period of up to 10 years reflective of the disallowed state aid. While such amount could be material, as of March 28, 2015 the Company is unable to estimate the impact."
The problem arises from Apple's paying of around 2 per cent corporation tax in Ireland, compared to the average 12.5 per cent -- a fact the EC says amounts to a bizarre form of "state aid" from the Irish for the vastly wealth US tech giant.
In US financial regulatory speak, a "material" impact usually refers to a drop of around 5 per cent of the company's pre-tax earnings, which the FT estimates could amount to a $2.5bn (£1.6bn) fine. [SEC via Cnet]