$19 billion? $8 billion? A few hundred million? Estimates are all over the map regarding the European Commission’s imminent decision on whether Apple received illegal, unnotified state aid (subsidies) from Ireland. As I mentioned two years ago, two factors go into the Commission’s claim: Ireland’s creation of a corporate entity that is taxable nowhere, and the possibility that the company negotiated a tax rate far below the country’s already-low 12.5% corporate income tax rate.
As you may remember from earlier posts, if the Commission rules against Apple, the sanction it will impose will be the repayment of the illegal subsidies, with interest. Some estimates of Apple’s tax savings are astronomical (the New York Times reported an estimate Apple saved $7.7 billion in 2011 alone), which creates the possibility of an extremely high repayment order. On the other hand, recent cases have seen relatively low repayments, such as the mere €30 million the Commission ordered Starbucks to repay the Netherlands last year. Still, it is perfectly possible that the Commission used smaller cases as a way to establish the legal precedent regarding fiscal aid before dropping the bomb on Apple.
It’s worth noting, as reported by Bloomberg, that the largest state aid repayment order ever made was approximately €1.4 billion charged to Électricité de France, followed by two orders in the €1 billion range. When this decision is announced, we may see a new record by a large margin. Or maybe we won’t. Either way, the Commission will be giving us a clear sign regarding how seriously it intends to treat fiscal aid abuses.
Update: For a little perspective on fines, Chillin’ Competition (via email) points out that the European Commission has just imposed an anti-trust fine on four truck manufacturers of over €2.9 billion , a new record.
Cross-posted from Middle Class Political Economist.