Apple under Investigation in Italy for Alleged Tax Evasion

Apple Inc (NASDAQ:AAPL) is under investigation by tax authorities in Italy for allegedly failing to pay proper taxes.

Based on the information obtained by Reuters from two judicial sources, the tech giant did not declare €1 billion from the local tax authority. L’Espresso, an Italian magazine first reported about the inquiry last Wednesday.

According to the prosecutors in Milan, Apple failed to declare €206 million in 2010 and €853 million in 2011. The source said there in an ongoing investigation to check the size of the tax. In its article, the Italian magazine indicated that investigators are looking if Apple filed some of its profits through its subsidiary Apple Sales International (ASI) based in Ireland to reduce its taxable income.

Apple confirms investigation

Apple confirmed that the Italian tax authorities are reviewing its tax returns amid allegations of tax evasion.  Kristin Huguet, spokesperson for the tech giant said Apple is aware about the inquiry. She said the company complied with all the tax laws in the country.

“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 O.E.C.D. documentation and transparency requirements. We are confident the current review will reach the same conclusion,” wrote Apple in a statement.

Previous investigations

Italian tax authorities investigated some multinational companies in the past. Fashion designers, Domenico Dolce and Stefano Gabbana were convicted of tax evasion and were sentenced to one year and eight months in prison related to a complaint in 2004 when they sold two of their brands to a company in Luxembourg to reduce their taxes. They were also ordered to pay a huge amount of penalty to the tax agency

According to public prosecutors, Dolce & Gabbana sold the brands in order to avoid declaring the royalties they received from the two brands. They fashion designers denied the accusation and appealed the conviction.

Giorgio Armani was to a nine-month suspended prison sentence and paid a penalty of $64,000 for bribery in 1999. He confessed that he paid off tax authorities in exchange for favorable audits.