Apple Inc. has agreed to pay the country of Italy $348 million (318 million euros) to settle a tax fraud probe. The U.S. tech giant, along with several of its senior executives, had been under investigation for quite some time, as the company had allegedly failed to declare its earnings in Italy.
Apple’s Italian subsidiary has agreed to fork over $348 million following an investigation into tax irregularities, as well as the company’s failure to declare its earnings in the country, said Italy’s tax office. The country’s tax authorities insisted that Apple failed to pay 880 million euros in tax between 2008 and 2013, and maintain that the company should have paid the entire amount it owed the country, but instead, it chose to pay a very small sum of 30 million euros.
It isn’t clear how Apple managed to arrive at the figure as compared to what Italy’s tax office had calculated. However, a spokesman for the tax agency confirmed that the tax figure was accurate, but chose not to divulge any more details.
According to Italian daily La Repubblica, Apple Italia should have paid corporation tax of 880 million euros for the period. However, after investigations that ran into several months, tax authorities have reached a deal with Apple to shutter the tax fraud case if the company pays up $348 million. Apple hasn’t commented on the settlement. However, the company has always insisted that it “never attempted to escape paying tax owed on profits made around the world.”
The settlement is expected to set a precedent for other European countries’ dealings with the company. The investigation and subsequent settlement comes against a backdrop of multiple multinational companies resorting to cross-border corporate structures to significantly reduce their tax liability. Investigators have long claimed there have been several secret and potentially illegal “sweetheart” deals that these corporations have signed to avoid a hefty tax bill.
It’s interesting to note that Apple Italia is part of the company’s European operation, which is headquartered in Ireland. The country has one of the lowest levels of corporation tax in the EU, reported Yahoo. As compared to Italy’s rather steep, but commonly prevalent, 27.5 percent tax for corporations, Ireland taxes corporate earnings from normal business activities at a very nominal rate of 12.5 percent. In Apple’s case, the company had conveniently chosen Ireland, but the case does relate to the broader one of multinational companies “parking” revenues and profits in low-tax countries, reported BBC.
Despite the lower rate of taxes, investigators in Italy claim they found huge discrepancies between Apple Inc.’s revenues in Italy, which were over 1 billion euros between 2008 and 2013. As compared to the same, the 30 million euros that was paid in tax in the country was way too low.
The investigation into tax fraud hinges on the claims that Apple avoids tax in Italy by booking its sales in the country through Ireland. According to Reuters, three senior-level Apple managers have been under judicial probe for the tax fraud, which is expected to continue. However now that Apple has chosen to fork out cash, the settlement will “likely have a positive impact” on the company’s case.
Ireland is attempting to close its infamous “double Irish” tax loophole, but that could take years. Meanwhile, Apple’s corporate activities in the country remain under investigation by the European Commission.
Incidentally, Apple isn’t the only company to operate from Ireland. Large tech corporations like Google, Twitter, Microsoft, and others, too, have operations there. The companies have been slowly expanding their workforce.
Apple’s CEO, Tim Cook, had earlier rubbished accusations that the world’s richest company was sidestepping U.S. taxes by stashing cash overseas.
“We pay every tax dollar we owe,” he had claimed.
[Photo by Aidan Crawley/Bloomberg/Getty Images]