Is Apple About to Be Bitten by Italian Tax Authorities?
Italy can now be added to Apple Inc.‘s (NASDAQ:AAPL) European grand tour of tax issues. A source with direct information on the matter told Reuters an investigation into Apple is underway for concealing 1 billion euros ($1.34 billion) in taxes. The only insight provided by the source was a simple statement. ”The Apple investigation is under way.”
In May, Apple’s Irish connections were examined by the U.S. Senate’s Permanent Subcommittee on Investigations. Apple was able to “shift billions of dollars in profits away from the United States and into Ireland” using “a special corporate tax rate of less than two percent,” according to a report produced by the subcommittee. When the global spotlight turned on Ireland, Irish Finance Minister Michael Noonan pledged to institute changes. “Ireland wants to be part of the solution to this global tax challenge, not part of the problem,” Noonan said in an address to the Irish Parliament.
Tim Cook, Apple’s CEO, testified at the May subcommittee hearing. Cook asserted that “gimmicks” are not practiced by the company to evade taxes in the U.S. “Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the U.S. in order to avoid US tax.”
Internationally, Cook said Apple did everything by the books. “International revenue accounted for about two-thirds of Apple’s revenue last quarter. Revenues from international operations are taxed in accordance with the laws of the countries where they are earned.”
In June, fashion designers Domenico Dolce and Stefano Gabbana of Dolce and Gabbana were found guilty in Italian courts of purposefully concealing money from Italian tax authorities. The New York Times covered the decision. The judge rendered the verdict because Dolce and Gabbana sold their brands, Dolce and Gabbana, and D&G, to a holding company in Switzerland in 2004. By taking this action, they were seeking to not pay royalties amounting to approximately 1 billion euros ($1.34 billion).
Massimo Dinoia, a lawyer for the men said that, “We will read the reasons for the verdict, and we will appeal.” An initial payment of 500,000 euros ($672,800) was ordered; it is part of a larger fine that could reach 10 million euros ($13.4 million). A 20-month suspended prison sentence was also ordered.