Apple Italy accused of using Cork affiliate to avoid tax

Italian media reported yesterday that Apple Italia "transferred" €879 million of profit earned in Italy between 2008 and 2013 to Cork-based Apple Sales International, in order to avail of Ireland's lower corporate tax rate (12.5 per cent as opposed to 43-44 per cent)

The reports, based on the findings of an investigation by the Milan public prosecutor’s office, claim the investigation has now closed prior to the filing of tax evasion charges against the US multinational. It is believed two senior Apple managers in Italy as well as Apple’s Sales International director in Cork, Michael O’Sullivan, have all been notified by the Milan judicial authorities.

Raid

Following a raid on Apple Italia’s Milan headquarters in 2013, investigators believe they have documentation that proves the scheme by which Apple Italia redirected proceeds from its Italian sales to Apple

Ireland

was illegal. The website of daily paper

La Repubblica

reported yesterday that Apple Italia was listed as a “consultant” for Apple Ireland, thus enabling the US colossus to transfer its Italian earnings to Ireland.

Furthermore, La Repubblica claims that there was "a widespread awareness" both amongst those who worked for Apple Italia and amongst its clients that the company was much more than a consultant. The investigators are likely to argue that the contract signature from Apple in Ireland was a "pure formality".

Whilst Apple Ireland did not respond to requests for a comment, a spokesperson for Apple Europe provided the following prepared statement:

“Apple is one of the largest tax payers in the world and we pay every euro of tax we owe wherever we do business. The Italian tax authorities audited Apple’s Italian operations in 2007, 2008 and 2009 and confirmed that we were in full compliance with the OECD documentation and transparency requirements. These new allegations against our employees are completely without merit and we’re confident this process will reach the same conclusion.”

The mention of the Paris-based Organisation for Economic Co-operation and Development is a reference to OECD guidelines for transactions between corporate subsidiaries which basically aim to ensure that the terms are similar to those between independent companies.

Last summer a European Commission report argued that in the period, 1991-2007, "the Irish Authorities confered an advantage on Apple..." At that time, Apple chief financial officer Luca Maestri contested the accusations saying that Apple had "always been very transparent with the Irish government", adding that Apple "wanted to be a good corporate citizen".

The fundamental question posed by this most recent investigation asks if Apple has been just that “good corporate citizen” in Italy. For the time being, it is believed that Apple Italia is still in negotiation with Italian Tax Authorities with a view to agreeing a solution to these tax evasion charges.