Apple to Pay 318 Million Euros in Italy to Settle Corporate Tax Probe

[MacRumors]

Apple has agreed to pay 318 million euros in Italy to settle an investigation that determined the iPhone and iPad maker failed to pay nearly triple that amount in corporate taxes in the country over a five year period, according to Italian newspaper La Repubblica.

Italian regulators in Milan concluded a tax probe of Apple in March, accusing the company of booking profits generated in Italy through an Irish subsidiary in an effort to lower its taxable income base and save 879 million euros between 2008 and 2013.

Apple has yet to comment on the deal, but previously said it has paid all necessary taxes in countries that it operates. "These new allegations against our employees are completely without merit and we're confident this process will reach the same conclusion," the company said in March.

Apple Italia is part of the company's European operation headquartered in Ireland, where Apple pays a significantly lower corporate tax rate compared to other EU countries. Ireland has a corporate tax rate of 12.5% for normal business activities, compared to a standard rate of 27.5% in Italy, per The Guardian.

Apple faces a similar Irish tax probe by the European Commission, which formally accused the company of receiving illegal state aid from Ireland in September 2014. A decision in the lengthy investigation has likely been delayed until early 2016, as the Brussels-based executive cabinet has requested supplementary questionnaires.

Apple's tax policies in Europe have come under intense scrutiny over the past three years, as the company is said to utilize multiple subsidiary companies located in the Irish city of Cork to move money around without significant tax penalties. Apple continues to deny any wrongdoing, and CEO Tim Cook recently described the accusations as "total political crap" on 60 Minutes.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Article Link: Apple to Pay 318 Million Euros in Italy to Settle Corporate Tax Probe

 

[SSD-GUY]

Yeah Tim. You really pay "every dollar" you owe.

 

[KPOM]

This sounds like Italy's case was weak and Apple settled to make it go away. It's 1/3 of what Italy was seeking. Remember Italy is in a weak budgetary position (not much better than Greece) and is in shakedown mode. It happens here at the state level. Suddenly what had been accepted practices for years become "abusive." Usually the two sides reach a settlement and practices change prospectively. I've seen this happen with much smaller companies. I wouldn't be surprised if the larger EU probe ends the same way.

 

[venusboy]

This is the scourge of the tech industry.

How many iPhones does Apple sell in Luxembourg, Ireland or the Cayman Islands ?

 

[Alenore]

This sounds like Italy's case was weak and Apple settled to make it go away. It's 1/3 of what Italy was seeking. Remember Italy is in a weak budgetary position (not much better than Greece) and is in shakedown mode. It happens here at the state level. Suddenly what had been accepted practices for years become "abusive." Usually the two sides reach a settlement and practices change prospectively. I've seen this happen with much smaller companies. I wouldn't be surprised if the larger EU probe ends the same way.

If that was that weak, Apple wouldn't have paid anything.

 

[MacUser2525]

This sounds like Italy's case was weak and Apple settled to make it go away. It's 1/3 of what Italy was seeking.

It is called a plea bargain where when guilty you take the best you can get so you do not take the chance of getting the worst possible result. If it was that weak they would have fought it for the win.

 

[mschmalenbach]

I would imagine having multiple jurisdictions crawling through your accounts, asking searching questions of your finance people which involve them doing things to find documents etc etc is a huge distraction from day to day operations - in some shape or form it is going to cost you somewhere in time, reduced efficiencies etc. So coming to some settlement makes sense.

Apple is in the spotlight for this because it is so well known, but an awful lot of relatively small companies, as well as the big ones, are taking advantage of these tax structures. They are totally legal. But as others have commented, when governments are scrambling for revenue, and big business is accused daily, rightly or wrongly, of screwing the tax payer, of contributing to wealth and income inequality, then these legal challenges should come as no surprise.

And if a CEO were to unilaterally decide to pay taxes at higher rates, to not use these tax structures, it would only be a matter of hours before a shareholder sued the company and its officers for failing in their fudiciary duty to maximise gains for shareholders, and I can't think of a CEO or other senior company officer that wants to get embroiled in that hassle. Every time a publicly listed company says it is acquiring another publicly listed company, you see these law suits being filed, usually he first filing is less than an hour after the acquisition is announced...

So this may sound like Apple is admitting it did wrong, otherwise why pay anything at all. But my take on this, is that it is paying money to make a distraction go away. This is a company that does hundreds of billions of dollars of business around the world each year. Paying way less than 1% of revenue to make a major problem go away would be seen by many as simple the pragmatic thug to do, with no admission of guilt...

 

[KPOM]

If that was that weak, Apple wouldn't have paid anything.

Not necessarily. I've seen this played out at the state level here with community banks. Most states have some vague "anti-abuse"' language in their statutes. When there is a budget crunch suddenly something that was acceptable for decades gets declared "abusive" and they go after some high profile companies. The first few settle for a fraction of the claim, and then everyone else gets the message that the rules have changed prospectively.

That sounds like the case here. Italy didn't start investigating until their budget crunch.

 

[KPOM]

It is called a plea bargain where when guilty you take the best you can get so you do not take the chance of getting the worst possible result. If it was that weak they would have fought it for the win.

It was a civil investigation. It's a settlement.

9to5Mac says the settlement was the full amount Italy was asking while this site says 1/3. Arn, if you read this, can you clarify?

Update: I just read the Reuters article. Italy claimed Apple understated taxes by about $900 million, poked around for a year, and then offered to settle for $350 million, which Apple accepted.

 

[MacUser2525]

with no admission of guilt...

When you have agreed to pay you have made an admission of guilt that is why the charges were brought in the first place what you did was illegal. These corporate parasites do it all the time around the world and the chickens are finally coming home to roost as governments start looking into these supposedly legal methods of not paying taxes that everyone else has to.

 

[selfsilent]

Apple paid what it was owed. However, the Italian government decided to move the goal posts to get more money from Apple, the same way that other companies try their best to swindle money from Apple.

Can you imagine how many people they have working to do Apple's taxes. Big companies will always use the unfixed loop holes. If they are there, use them.

 

[bobbie424242]

Buuuuut .... good guy Tim Cook said all of this was 'political crap' ?

 

[Kaibelf]

In other news, Italy is still an economic mess and now this well is dry. Stay tuned for their "investigation" into Google, then Uber, then anyone else who can help them subsidize their poor planning.

Buuuuut .... good guy Tim Cook said all of this was 'political crap' ?

He was referring to America claiming that they should get a cut of taxes on sales abroad. Tim's right. America isn't entitled to the world's money just because we happen to be the most effective at oil wars.

 

[Mums]

Italy is probably my favorite country. Maybe being run by the mafia isn't such a bad thing. And the church which is a competing mafia.

 

[furi0usbee]

Tim, why waste time with the Apple TV hobby? Owe a billion, pay $300 million. They should add "tax avoidance" as a product category in their annual pie charts. I would love to see that piece of the pie!

Italy is probably my favorite country. Maybe being run by the mafia isn't such a bad thing. And the church which is a competing mafia.

LOL. Both have killed for good reason though...

 

[omerbaker]

Yeah Tim. You really pay "every dollar" you owe.

Tim owes governments money like conscripts owe governments their lives.

Italy is probably my favorite country. Maybe being run by the mafia isn't such a bad thing. And the church which is a competing mafia.

What's the difference between the mafia and any other government?

LOL. Both have killed for good reason though...

No other entity has killed more than governments. EVER.

 

[hiddenmarkov]

When you have agreed to pay you have made an admission of guilt that is why the charges were brought in the first place what you did was illegal. These corporate parasites do it all the time around the world and the chickens are finally coming home to roost as governments start looking into these supposedly legal methods of not paying taxes that everyone else has to.

Its not necessarily an admission of guilt. It could be a business decision to just make it go away. Its not a murder rap. Corporate misdoings go to page 2, then 4, then off the grid fast. Sadly its expected. Like the lack of surprise over a corrupt politician.

Projected business impact > costs of "bad" press and lawyers who could be of better use elsewhere (assuming apple is total in house council)...make the bad press go away. They could be in the right. Its just not worth it to prove it.


Governments not liking this need to look at the source of the problem, themselves. They create the "loopholes" to attract business. They just don't show up in code. They are voted on. A grand champion made the stance we have to dangle some fruit to attract people. Maybe some political action committee money greased wheels...leave that out since another ballgame and one with no facts to argue over.

Its really on them to suck it up when corp entity A (or B, or C) has better tax lawyers than they do. Kind of sort of happens when the private lawyers need to justify ungodly rates per hour.

Tell me why I am paying you 800 an hour?

Rips apart tax code, lives and breaths to bend this to untold levels, shows savings.

Oh....um, yeah this is why. Very nice,very nice indeed.

 

[venusboy]

The situation in Europe is very different to the one in the US.

Apple pays its tax on its US profits and doesn't repatriate overseas profits to avoid paying even more tax - fair enough. It would be foolish to do otherwise.

What's happening here in Europe is the aggressive use of transfer pricing to send profits to other countries within the EU with low corporate tax levels. So you have a company that makes huge revenues in Italy but declares its profit in Ireland. Up until January 2015 iTunes customers didn't even pay sales tax in their own country.

I have SME clients that pay more corporate taxes than Apple in France.

 

[Bubba Satori]

Apple needs to come up with some new adapters.

 

[TheRealTVGuy]

27.5% ??! No wonder companies (and individuals for that matter) are looking for legal ways to mitigate these charges. Government waste, dirty politics, and the fact that the whole tax code needs a clean sweep aside, I wish we could look at a flat-tax scenario that charges individual AND corporate income between 10-15%

Either that, or go to the "Fair Tax" where everyone is taxed when they spend, not when they make their money. And before you cry foul that that effects low income families disproportionately, check out the plan at: http://fairtax.org/faq .

 

[Woyzeck]

Apple is in the spotlight for this because it is so well known, but an awful lot of relatively small companies, as well as the big ones, are taking advantage of these tax structures. They are totally legal.

Obviously it's not legal.

 

[Mike Oxard]

And if a CEO were to unilaterally decide to pay taxes at higher rates, to not use these tax structures, it would only be a matter of hours before a shareholder sued the company and its officers for failing in their fudiciary duty to maximise gains for shareholders, and I can't think of a CEO or other senior company officer that wants to get embroiled in that hassle.

Has this ever been proven? Apple could probably spin the payment of full taxes to be a positive thing for the image of the company, so would share prices actually fall? They are in a position to lead the way in social responsibility and shame other companies into doing the same.

 

[sportsfan]

Somehow the world leaders need to come together and solve the tax problem. Because this is no different than one city offering tax breaks to lure a company from another city. It is a race to the bottom, why wouldn't a foreign nation undercut another by a few percentage points and get all the tax gains, without having to supply any infrastructure to the company (roads, legal system, etc...).
Personally I would say just get rid of most corporate taxes and shift the savings to increasing employee pay as the tax money needs to come from somewhere....and then increase the progressiveness of the tax code to keep the "job creators" from awarding themselves even more absurd compensation.

 

[danakin]

Yeah Tim. You really pay "every dollar" you owe.

Doesn't quite come off as unequivocal anymore.
Apple is no more sanctimonious than any other big multinational corporation. They all have the same bottom line: grow shareholder value and sometimes the rules get bent.

 

[wilsonlaidlaw]

The transfer pricing arrangement for transferring tax liability to a low tax regime has been around for at least 30 years and probably longer. If governments wanted to get serious about preventing revenue loss by means of this loophole, they have had plenty of opportunity to do so. So why don't they - answer it is easier to pick the low hanging fruit and tax the average joe and small businesses, since they have neither the spare cash nor the clout to fight the taxman through the courts, like the multi-nationals do. Hopefully the Italian decision might put some backbone into the tax authorities and encourage them to tackle multinational tax avoidance, so that there is more money to spend on things that governments have to do and we all need, like health, education and major infrastructure.