While (at least some of) you are getting excited about the unveiling of new Apple products, in other news the European Union ordered Apple to pay Ireland USD14 billion in past taxes. It is a record amount. The Bloomberg article tells you everything you may want to know about the case, so you should read it.
What is going on? Apple is making a ton of profits. Unlike many other companies, thea very large portion of profits is attributable not to what Apple produces, but to its intellectual property. That allows Apple to book profits more or less wherever it wants. So all profits from European sales were booked in Ireland, which has a very low tax rate on profits: only 12.5%, as opposed to 35% in the US.
Apparently this was not enough. So Apple created a "head office" which existed only on paper but to which Apple attributed most of its profits. The neat trick was that the "head office" was not subject to Irish tax. This was a special arrangement between Apple and the Irish tax authority which was not available to other companies. By EU rules, all companies must be treated the same. This rule was broken by the special agreement hence the order for Apple to pay what it saved compared to a situation in which it would have been treated as any other company.
According to reports, Apple rarely paid more than 1% of its profits in taxes, and one year it paid 0.01%. How much is that? Imagine that your income is already above the tax-free amount and, in your summer job, you get $10 000. If your tax rate had been 0.01%, you would have paid...
Hey, I am not going to do the hard work for you. One thing I want to teach you in this course is doing some arithmetic in your head. Calculating 0.01% of something is not obvious. Do it yourself.
Answer: not a lot.
Here is the second question: someone tells Apple to give you 14 billion dollars. What do you do?
Well, if you are the Irish government, you go to court in order not to receive it. Go figure. Seriously, try to figure out why they would do it.
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