Apple’s €318m tax deal may affect other multinationals in EU

An agreement by Apple to pay €318 million to settle an Italian tax claim in relation to profits declared in Ireland could have EU-wide implications, according to commentators in Italy.

The agreement, as revealed in Italian media yesterday, relates to an investigation into Apple opened by the Milan public prosecutor’s office in November 2013 following a raid by the Italian finance police on Apple’s Milan headquarters.

In March this year, that investigation concluded that between 2008 and 2013, Apple Italia had “transferred” €879 million of profit to Cork-based Apple Sales International in order to avail of Ireland’s lower corporation tax rate. At that stage, the Irish corporation tax rate was 12.5 per cent, while it was 43-44 per cent in Italy. Apple has itself said, however, that it paid an effective tax rate of less than 2 per cent in Ireland over the 10 years to 2013.

Senior Apple managers in Italy as well as Apple Sales International director in Cork Michael O’Sullivan were all formally notified by the Milan judicial authorities as part of the investigation. Apple Italia is part of the the Californian group’s European operation which has its headquarters in Ireland.

‘Political crap’

Apple has been in negotiations with Italian tax authorities for some time. It has also been suggested that a recent meeting between Italian prime minister

Matteo Renzi

and Apple chief executive

Tim Cook

may have helped pave the way for the final financial settlement.

Earlier this month, speaking to CBS news programme 60 Minutes, Mr Cook dismissed criticism of the company's overseas tax policy as "political crap", claiming Apple "pays every tax dollar we owe".

Legal experts have pointed out that the relatively low tax payment is based on the fact that investigators have charged Apple not with “fiscal fraud” but rather with an “incomplete [tax] declaration”.

Italian investigators believe this case is a defeat not only for Apple but also for other multinationals which have benefited from favourable trans-territorial tax arrangements.

‘Creative’ accounting

A number of large players in the internet economy, including

Amazon

and

Google

, have come under close scrutiny from Italian tax authorities, with Google reportedly due to pay a fine similar to that paid by Apple in relation to its Italian tax declarations.

This scrutiny matches the mood in Brussels, where the European Commission recently extended its investigation into the alleged "sweetheart" tax deal between Apple and the State. The Government had expected the case to end soon, but renewed questioning before Christmas suggests the inquiry could extend until after the forthcoming election.

The investigation began in 2014, with the verdict originally expected early in 2016. Negative decisions have already been delivered in relation to the arrangements of Starbucks and Fiat Chrysler with Dutch and Luxembourg authorities.

Rome daily La Repubblica suggested the "fine" would be welcomed by organisations such as the International Monetary Fund, G20 and OECD which have long discussed the issue of internationally "creative" accounting by multinationals.