Apple facing $8bn EU tax bill

European Union probe into the company's tax policies expected to result in shakedown

Computer giant Apple is facing an $8bn tax bill as a result of the European Union's probe into the company's tax affairs.

The EU accuses Apple of using subsidiaries in Ireland to avoid taxes on revenues generated outside of the US. Apple argues that this structuring of its tax affairs is legal and well within EU laws that allow companies a wide degree of freedom over which country they can choose to base themselves for tax reasons.

However, an investigation instigated by the EU's European Commission may present Apple with a hefty back tax-bill, which an analysis by Bloomberg Intelligence suggests could be as high as $8bn. The investigation was opened in 2014 and a decision could come as early March this year.

"The European Commission contends that Apple's corporate arrangement in Ireland allows it to calculate profits using more favourable accounting methods," according to Bloomberg's analysis.

It continues: "Apple calculates its tax bill using low operating costs, a move that dramatically decreases what the company pays to the Irish government. While Apple generates about 55 per cent of its revenue outside the US, its foreign tax rate is about 1.8 per cent, according to the analysis. If the European Commission decides to enforce a tougher accounting standard, Apple may owe taxes at a 12.5 per cent rate, on $64.1bn in profit generated from 2004 to 2012."

Twelve-and-a-half per cent is the prevailing standard corporation tax rate in Ireland. Apple is expected to appeal the ruling but, if successfully pushed through by the EU a similar approach will be taken against other high-profile (predominantly US) multinationals that, campaigners argue, pay too little in tax.

These will include Starbucks, Amazon.com and McDonald's.

Apple CEO Tim Cook, meanwhile, has dismissed claims that the company pays too little in corporate taxes as "political crap". He told US television news show 60 Minutes that the tax system globally is outdated and need to be updated to take account of the digital economy.