New corporate tax measures aimed at preventing multinational companies making profits in the UK and then shifting them overseas where they incur lower taxes could potentially impact a number of tech companies, including Apple, Google and Amazon.
Members of the UK government are seeking to close a tax loophole that currently allows online music, app, and book downloads to avoid the country’s 20% “value added tax” in favor of much lower international tax rates, reports The Guardian. If the push is successful, iTunes customers in the UK will instead be taxed at the appropriate rate for their own country.
However, the new law won’t go into effect until January 1, 2015, so there’s still time for things to change. Supporters of the change say that it will lead to more fair competition among foreign and domestic companies, since UK-based companies are currently at a major disadvantage due to the higher tax rate.
According to a report from Reuters, Apple is apparently under investigation in Italy related to unpaid taxes on more than $1.34 billion. The report quotes a “a judicial source with direct knowledge of the matter” and noted that the investigation is currently underway with authorities in Milan.
Milan prosecutors say Apple failed to declare to Italian tax authorities 206 million euros in 2010 and 853 million euros in 2011, one of the sources said, confirming a report by Italian magazine L’Espresso.
“The Apple investigation is under way,” the judicial source said on Wednesday, without giving details.
Reuters notes that Italian authorities in June handed down prison sentences and hundreds of million in fines for unpaid taxes to fashion designers Domenico Dolce and Stefano Gabbana.
The New York Times delves into a divisive subject in American politics right now: Tax avoidance. Apple, like most international companies, sidesteps many California, United States, European, etc., taxes by using tax havens like Nevada, Ireland, Luxembourg, and the Virgin Islands.
The problem for the protagonists is that this is all very legal and practiced by just about every multi-national company in the interest of remaining competitive and maximizing stockholder share. Like most matters of this sort, the problem lies with the laws and loopholes that allow this to happen. Big companies spend a lot of money on lobbyists making sure that those loopholes do not get closed.
What may not be terribly patriotic are Apple, Google, Cisco, and other’s lobbying efforts against paying U.S. taxes on repatriating their overseas earnings. Apple currently has $74 billion overseas and a “tax holiday” on bringing that money and over $1 trillion from other companies back into the U.S. could cost the U.S. federal government $79B, according to the report. (Great Graphic at Bloomberg on why the $1 trillion holiday is likely going to happen.)
Apple responded to the NYT below:
Apple hired a new leader for its tax department, according to an SEC filing this morning. Phillip Bullock, formerly Symantec’s Chief Accounting Officer, chose to leave the company he joined in 2006 to join the winning team in Cupertino.
Phillip A. Bullock, who was appointed as Symantec’s Chief Accounting Officer in September 2009, announced he will be leaving the Company to lead the tax department at Apple, Inc., and not due to any disagreement with the Company on any matters relating to the Company’s operations, policies or practices.
Bullok has years of experience in the industry, serving as Vice President of Tax and Trade Compliance starting in 2006. He took responsibility for Symantec’s corporate risk assurance function in March 2007, and then he became Chief Accounting Officer in 2009. Before Symantec, he worked for a small tax practice.
This looks to be Apple’s third major hire this year after it hired John Browett from Dixons Retail to head its retail department. Apple also hired Robin Burrowes from Xbox to head App Store marketing in February.
Apple is known for finding the best in the industry, so we suspect it is no different here. Just in time to submit those taxes.