APPLE Accused of Hiding More Than $1 Billion From Italy's Taxman...
Italy investigates Apple for alleged tax fraud: sources
BY MANUELA D'ALESSANDRO
MILAN Wed Nov 13, 2013 2:35pm EST
(Reuters) - U.S. tech giant Apple is under investigation
in Italy for allegedly hiding 1 billion euros ($1.34 billion) from the local
tax authority, two judicial sources with direct knowledge of the matter told
Reuters.
Milan prosecutors say Apple failed to declare to Italian
tax authorities 206 million euros in 2010 and 853 million euros in 2011, one of
the sources said, confirming a report by Italian magazine L'Espresso.
"Checks on the size of the tax are under way,"
the source said.
The Italian subsidiary of Apple booked some of its profit
through Irish-based subsidiary Apple Sales International (ASI), thus lowering
its taxable income in Italy, the source said.
"Apple pays every dollar and euro it owes in taxes
and we are continuously audited by governments around the world," the
company said in a statement. "The Italian tax authorities already audited
Apple Italy in 2007, 2008 and 2009 and confirmed that we were in full
compliance with the OECD documentation and transparency requirements. We are
confident the current review will reach the same conclusion."
The maker of the iPhone is the latest prominent
corporation to become the target of a tax inquiry in Italy amid a global
crackdown aimed at preventing companies such as Google, Amazon and others from
avoiding taxes.
In crisis-hit Italy, tax authorities faced with dwindling
revenues have become more aggressive with domestic and multinational companies.
In June, fashion designers Domenico Dolce and Stefano
Gabbana were handed a 20-month suspended prison sentence and a heavy fine for
hiding hundreds of millions of euros in unpaid taxes. Both deny any wrongdoing.
"There is a global process under way and the Italian
tax authority is one of the most active," said an Italian tax source.
"In general, the focus is shifting towards multi-nationals that are able
to lower their tax base through their international operations."
To try to fix public finances, Italy's largest ruling
party, the center-left PD, has proposed legislation to oblige companies that
advertise and sell online in Italy to do so only through agencies with a tax
presence in Italy.
The proposal, dubbed the Google Tax, is meant to combat a
tendency by corporations to shift revenue out of Italy and into low-tax
countries such as Luxembourg or Ireland.
A U.S. Senate investigation in May revealed that Apple
structured its operations so that the vast majority of its non-U.S. profits are
reported in Ireland, by companies which, through an unusual feature of Irish
tax law, are not tax resident in that country.
ASI contracts with mainly Chinese companies to
manufacture iPads and iPhones. ASI then sells these products to another Irish
company which resells them to retail subsidiaries in Italy and other European
countries.
The pricing of the inter-company transactions ensures
that the lion's share of the profit ends up with ASI, the Senate report said.
Low profits in countries like Italy mean low tax payments there.
Countries usually consider companies registered on their
territory to be tax resident there but Irish law allows ASI to be tax resident
nowhere. This means its profits go untaxed.
($1=0.7442 euros)
(Additional reporting by Lisa Jucca in Milan and Tom
Bergin in London; Editing by Alistair Lyon and David Evans)
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