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.
Commissioner Margrethe Vestager, in charge of competition policy, said: "Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 % on its European profits in 2003 down to 0.005 % in 2014."
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to the "head offices" were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force.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.
(Source: European Commission)
Alphabet, the holding company for Google, has passed Apple as the most valuable company in the world for the first time since February 2010. With an increase of approximately 8% after the company reported its fourth-quarter earnings, Alphabet‘s value is now approximately $568 billion, compared to Apple’s worth of $535 billion.
Alphabet, a software company with a few hardware bets, has seen a continuous rise in the stock market in the past twelve months. Apple, a hardware company with a few extra software bets, has been underperforming. Since July 2015, Google’s shares have risen 44% while Apple’s sank 16%.
Alphabet CFO Ruth Porat said in a statement, “Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we’ve been investing for many years”.
According to specialists, Apple’s major problem is relying mainly on the iPhone. Despite the fact that it is the best-selling smartphone globally, sales in the fiscal first quarter increased only 1% from a year earlier. Given that the iPhone accounts for two-thirds of Apple’s revenue and sales in the remaining one-third (consisting of iPad and Mac revenue) dropped, investors have expressed concerns about the future of the company.
Google on the other hand is convincing investors that its dominance, helped by its strong mobile advertising sales, will remain stable. The company is poised to capture 32% of the mobile ad market this year, according to eMarketer, while Facebook is expected to stay well behind with around 20%. The profitability of Google’s search engine and other online services have been generating so much profit that the company has been investing in all types of potential growth projects such as self-driving cars.
Apple Pay contactless payments use proven NFC (near field communication) technology built into compatible devices in conjunction with the iPhone’s existing Touch ID fingerprint sensor for security, allowing single step transactions. NFC automatically launches Pay when placed near a NFC terminal resulting in rapid transactions; supporting ‘queue busting’ customer journeys, such as transport hubs or supermarket checkouts.
Apple Pay can also be used online in a similar manner as long as merchants add support to their mobile apps. The payee credentials are held in the scheme’s enterprise systems but the transaction is tokenised, so no card information is available to the retailer.
Apple Pay maximum contactless payments will initially be limited by the wider industry agreed of £20 (rising to £30) but as early confidence builds in Apple Pay, it’s hard to see this limit remaining in the long term.
From a merchant perspective there is a 0.15% fee per transaction, which may initially limit merchant adoption. Following Apple Pay's UK launch, many of the earlier disputes over Apple transaction fees seem to be resolved – so all eyes are on the level of adoption in the UK which many think will comfortably surpass the US.
Today marks the launch of Apple Pay in the UK. First launched in the US last autumn and now reaching UK shores, UK customers will now be able to pay for items by tapping an iPhone or an Apple Watch to a card reader. Participating locations include Marks and Spencer and Waitrose, as well as TfL (Transport For London), the company which runs the London Underground.
Richard Koch, Head of Policy at The UK Cards Association, commented, "The introduction of Apple Pay and other new innovative ways to make card payments is great news for consumers and retailers, especially with the increase of the contactless payment limit to £30 from September.
“There has been major growth in the use of contactless as customers and retailers recognise how fast, easy and secure it is to make payments. Innovations such as mobile technology open up new opportunities for consumers to pay with contactless and we expect the surge in use to continue as a result.
“The introduction of the new £30 contactless limit from September is significant as it will narrow the gap between contactless payments and the average card transaction value of £44. Cards are increasingly the preferred method of payment for many consumers, now totalling three-quarters of all retail sales in the UK, and new innovations will only contribute to this.”
Recent figures show there was a 331 per cent rise in use of contactless in 2014, which is behind the increasing shift from cash to cards for low value payments.
According to Transport for London (TfL), on 13 March 2015 the number of contactless taps made on a single day across London's transport network reached one million. Over 14 per cent of all pay as you go journeys across TfL services are now made using contactless, with over 60 million journeys made in the last six months.
US technology giant Apple has broken records once again, this time posting the biggest every quarterly profit of any public company worldwide. The company posted quarterly revenue of $74.6 billion (€65.8 billion) and record quarterly net profit of $18 billion (€15.8 billion) for its fiscal 2015 first quarter ended December 27, 2014.
The results present a huge gain on Q4 2013 figures, which saw Apple post revenue of $57.6 billion (€51 billion) and net profit of $13.1 billion (€11.5 billion).
The results were fuelled by all-time record revenue from iPhone and Mac sales as well as record performance of the App Store. iPhone unit sales of 74.5 million also set a new record.
“We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high,” said Tim Cook, Apple’s CEO. “Our revenue grew 30% over last year to $74.6 billion (€65.8 billion), and the execution by our teams to achieve these results was simply phenomenal.”
“Our exceptional results produced EPS growth of 48% over (NJMCDirect for online payments)last year, and $33.7 billion (€29.7 billion) in operating cash flow during the quarter, an all-time record,” said Luca Maestri, Apple’s CFO. “We spent over $8 billion (€7 billion) on our capital return programme, bringing total returns to investors to almost $103 billion (€91 billion), over $57 billion (€50 billion) of which occurred in just the last 12 months.”
Apple announced it forecasts its fiscal 2015 second quarter revenue to be between $52 billion and $55 billion (€45.8 billion and €48.5 billion).
