The Securities and Exchange Commission may approve of Apple’s overseas tax strategies but Italian taxing authorities aren’t so sure. This week, those Italian taxing authorities announced that they are investigating whether Apple has paid all of its taxes.
According to the weekly magazine L’Espresso, taxing authorities are considering whether – wait for it – Apple avoided tax by filing through a subsidiary in Ireland. The amount said to be at stake is reportedly as high as €1 billion ($1.34 billion U.S.).
I know, shocking allegations. It’s amazing that we didn’t think of it first. Oh wait.
Yes, the Italian government is going after the tech company for the exact same thing that we’ve been whispering about – and listening to testimony before Congress about – in the U.S., and to be frank, other countries.
For its part, Apple has maintained the same position in Italy as it has in the U.S. (and elsewhere), saying:
Apple pays every dollar and euro it owes in taxes and we are continuously audited by governments around the world. 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.
So, nothing to see here, right?
I’m not so sure.
As its economy takes hit after hit, Italy has been scrambling to preserve its revenue stream – and perhaps its reputation – by ramping up scrutiny of international taxpayers. In June, fashion designers Domenico Dolce and Stefano Gabbana were found guilty of tax evasion and sentenced to one year and eight months in prison. This followed a massive fine on the Italian fashion duo in response to allegations of tax evasion related to a Luxembourg-based holding company that they controlled. Italy has even aggressively chased former Prime Minister Silvio Berlusconi, finding one of the world’s wealthiest men (ranked #194 on the world’s billionaire list in 2013), guilty of tax fraud and sentencing him to prison.
Italy didn’t just target individuals. Late last year, Italian tax authorities announced that they were taking a closer look at Google’s finances. The government alleged that Google failed to declare revenue totaling more than €240 million ($323.06 million U.S.). Google, of course, likewise denied any wrongdoing.
A number of countries have been crying over international tax maneuvering, especially as it relates to tech-oriented companies: Italy has been one of the most vocal. To prove how serious the country is, the center-left Democratic Party has proposed a law to force Google, Apple and other internet-based companies that advertise and provide goods or services inside the Italy to only do so with an actual tax presence in the country. The result? Revenues earned in Italy would be subject to tax. The so-called “Google tax” would raise about $1.35 billion a year for the cash-stressed country. Despite the appeal of those kinds of dollars, the tax, currently tabled, has a long way to go before being made law.
For now, no matter how much Italian taxing authorities might want the laws to be different, they’re not. The laws that they must deal with are those currently on the books. Apple maintains that it hasn’t done anything illegal, an argument that has proved to work for them so far. But so long as countries like Italy see money on the table, they’re likely to keep grabbing at it.