Markets

Apple May Pay Up To €13 Billion Tax Plus Interest – EU

Published

8 years ago

August 30, 2016

The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.

Following an in-depth state aid investigation launched in June 2014, the European Commission has concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991. The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a “head office”. The Commission’s assessment showed that these “head offices” existed only on paper and could not have generated such profits. These profits allocated to the “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force. As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International.

This selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules. The Commission can order recovery of illegal state aid for a ten-year period preceding the Commission’s first request for information in 2013. Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest.

In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold. This structure is however outside the remit of EU state aid control. If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland.

However, Irish authorities have vowed to fight the finding, and the U.S. government has disputed the EU’s position.

“Ireland’s position remains that the full amount of tax was paid in this case and no state aid was provided,” the Irish government said in a statement. “Ireland does not do deals with taxpayers.”

Apple and other major U.S. firms including Google and Microsoft hold stockpiles of what’s known as indefinitely reinvested foreign earnings, or revenue not subject to U.S. corporate income tax, outside the U.S. The 10 firms with the largest holdings collectively have $724 billion in this revenue outside the U.S., a USA TODAY report found.

The EU has been investigating possible tax avoidance by multinational firms since June 2014. Under current EU rules, member countries cannot give aid that grants companies or sectors an unfair advantage.

A ruling by the European Commission in October that a tax arrangement between Starbucks and the Netherlands was illegal is currently on appeal to the EU General Court, as is a similar ruling against Fiat in Luxembourg. An EU investigation into tax agreements between Amazon and Luxembourg is still awaiting a final decision.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Crude Oil

Oil Prices Surge as Hurricane Threat Looms Over U.S. Gulf Coast

Published

3 days ago

September 9, 2024

Investors King

Oil jumped in Asian trading on Monday as a potential hurricane system approached the U.S. Gulf Coast, and as markets recovered from a selloff following weaker-than-expected U.S. jobs data on Friday.

West Texas Intermediate crude oil rose 72 cents, or 1.06%, to $68.39 a barrel while Brent crude oil was up 71 cents, or 1%, at $71.77 a barrel.

Prices had gained as much as $1 during early Asian trading before pulling back.

Analysts said the bounce was in part a reaction to a potential hurricane in the U.S. Gulf Coast.

A weather system in the southwestern Gulf of Mexico is forecast to become a hurricane before it reaches the northwestern U.S. Gulf Coast, the U.S. National Hurricane Center said on Sunday.

The U.S. Gulf Coast accounts for some 60% of U.S. refining capacity.

“Sentiment recovered somewhat from last week’s selloff,” said independent market analyst Tina Teng.

At the Friday close, Brent had dropped 10% on the week to the lowest level since December 2021, while WTI fell 8% to its lowest close since June 2023 on weak jobs data in the U.S.

A highly anticipated U.S. government jobs report showed nonfarm payrolls increased less than market watchers had expected in August, rising by 142,000, and the July figure was downwardly revised to an increase of 89,000, which was the smallest gain since an outright decline in December 2020.

A decline in the jobless rate points to the Federal Reserve cutting interest rates by just 25 basis points this month rather than a half-point rate cut, analysts said.

Lower interest rates typically increase oil demand by spurring economic growth and making oil cheaper for holders of non-dollar currencies.

But weak demand continued to cap price gains.

The weakness in China is driven by economic slowdown and inventory destocking, Jeff Currie, chief strategy officer of energy pathways at U.S. investment giant Carlyle Group, told the APPEC energy conference in Singapore on Monday.

Refining margins in Asia have slipped to their lowest seasonal levels since 2020 on weak demand from the two largest economies.

Fuel oil exports to the U.S. Gulf Coast fell to the lowest level since January 2019 last month on weaker refining margins.

Crude Oil

Oil Prices Rebound on OPEC+ Output Delay Talks and U.S. Inventory Drop

Published

7 days ago

September 5, 2024

Samed Olukoya

Oil prices made a modest recovery on Thursday on the expectations that OPEC+ may delay planned production increases and the drop in U.S. crude inventories.

Brent crude oil, against which Nigerian oil is priced, rose by 66 cents, or 0.9% to $73.36 per barrel while U.S. West Texas Intermediate (WTI) crude appreciated by 64 cents or 0.9% to $69.84 per barrel.

The rebound in oil prices was a result of the American Petroleum Institute (API) report that revealed that the U.S. crude oil inventories had fallen by a surprising 7.431 million barrels last week, against analysts 1 million barrel decline projection.

The decline signals better than projected demand for the commodity in the United States of America and offers some relief for traders on global demand.

John Evans, an analyst at PVM Oil Associates, attributed the rebound in crude oil prices to the API report.

He said, “There is a pause of breath and light reprieve for oil prices.”

Also, discussions within the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are fueling speculation about a potential delay in planned output increases.

The group was initially expected to increase production by 180,000 a day in October 2024.

However, concerns over softening demand in China and potential developments in Libya’s oil production have prompted the group to reconsider its strategy.

Despite the recent rebound, analysts caution that lingering uncertainties around global oil demand may continue to weigh on prices in the near term.

Energy

Power Generation Surges to 5,313 MW, But Distribution Issues Persist

Published

1 week ago

September 4, 2024

Samed Olukoya

Nigeria’s power generation continues to get better under the leadership of President Bola Ahmed Tinubu.

According to the latest statement released by Bolaji Tunji, the media aide to the Minister of Power, Adebayo Adelabu, power generation surged to a three-year high of 5,313 megawatts (MW).

“The national grid on Monday hit a record high of 5,313MW, a record high in the last three years,” the statement disclosed.

Reacting to this, the Minister of Power, Adebayo Adelabu, called on power distribution companies to take more energy to prevent grid collapse as the grid’s frequency drops when power is produced and not picked by the Discos.

He added that efforts would be made to encourage industries to purchase bulk energy.

However, a top official of one of the Discos was quoted as saying that the power companies were finding it difficult to pick the extra energy produced by generation companies because they were not happy with the tariff on other bands apart from Band A.

“As it is now, we are operating at a loss. Yes, they supply more power but this problem could be solved with improved tariff for the other bands and more meter penetration to recover the cost,” the Disco official, who pleaded not to be named due to lack of authorisation to speak on the matter, said.

On Saturday, the ministry said power generation that peaked at 5,170MW was ramped down by 1,400MW due to Discos’ energy rejection.