American electronics giant Apple will pay the Italian treasury 318 million euro in order to pay off a dispute with the Italian tax services. Italian profit was diverted to the fiscally more advantageous Irish tax system.
Profit diverted to Ireland
Just like many other international corporations, Apple sought to pay the smallest amount of taxes possible and that meant it focused on Ireland. Profit from other countries was diverted to Ireland, so that Apple could enjoy from the country's beneficial tax structure.
Italian media state that Apple avoided paying 880 million euro in local corporate income tax between 2008 and 2013. Italian profit tax reaches 27.5 % while Irish corporate income tax is a mere 12.5 % while several other types of income even benefit from lower tariffs or are even exempted which reduces the actual tax rate even more.
The Italian tax services felt this diversion of profit was unjust and launched a legal investigation into Apple Italy's CEO and CFO and also into Irish Apple Sales International.
Precedent with possibly far-reaching consequences
Apple has now paid off any further investigations with a 318 million euro fine, although that decision may have far-reaching consequences. Apple has done the same thing in several other countries, including the United States, just like many other companies (including Twitter, Microsoft and Google) have done.
Both the European Union and the OECD want to make sure multinationals can no longer avoide taxes by fiscally moving their profit.