Boston, MA 06/12/2014 (wallstreetpr) – On Wednesday, the European regulators opened a formal probe against the U.S. giants, Apple Inc.(NASDAQ:AAPL), Starbucks Corporation(NASDAQ:SBUX) and Fiat S.p.A. (ADR)(OTCMKTS:FIATY), to investigate potential tax avoidance by these companies. In a CNBC interview, Constantin Gurdgiev, professor of finance at Trinity College Dublin, shares his thoughts about the Apple’s tax structure and the potential outcome of the probe.
Tax Paid Too Low
Gurdgiev said, “In the year 2013, Apple has paid effective taxes of just 3.6% on its profits outside of the United States, which accounts for 60% of its global revenues. The surprising fact is that in 2012, the iPhone maker paid even less tax rate at 1.9%. During the year 2009-2012, it is estimated that Apple channeled close to $104 billion in revenues from the Irish operations. The region also has a significant number of people working at Apple, totalling to nearly 4000 employees, which implies that Apple derived close to $2.6 million revenue per employee. Thus, comparatively, the tax rate paid by Apple is sharply lower than the revenue it generated.” Gurdgiev highlighted that last year, a Senate committee held in the U.S. found out that Apple is benefited by what is called the Holy Grail system of tax avoidance in Ireland. In response, the Irish officials have constantly and vigorously defended themselves of giving any state aid or tax relief to Apple or any other company. The Irish government confirms to cooperate with the EU investigations and has also provided the requisite information to the regulator, unlike Luxembourg, which has failed to supply the requisite information pertaining to Fiat.
Probe Can Go Deeper
While the companies and Government officials have denied any tax avoidance in the first place, Gurdgiev said that since the European Commission cannot technically probe each nation’s individual stock arrangement, it can certainly investigate unfair corporate deals, which can benefit some companies or group of companies. The European commission has further indicated that this is just the beginning and that it could go deeper to extend its investigations to other companies. Gurgiev said the ramifications for the Irish economy of the European Commission’s findings could be significant.
