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Apple to Pay $348 Million to Settle Italy Tax Probe

The tax strategies of Apple and other U.S. companies have come under increasing scrutiny in Europe.

Ersin KISACIK / iStock / Re/code

Apple has agreed to pay $348 million to settle an investigation into alleged tax fraud, according to a report from the Italian newspaper La Repubblica.

Authorities in Milan told the publication that Apple was under investigation for failing to declare earnings in Italy from 2008 through 2013. Investigators say they found a huge gap between the $977.8 million the company reaped in revenue over that period and the $32.7 million paid in corporate taxes, according to the report.

Apple allegedly reduced its tax bill by booking sales through Ireland, where its European operations are headquartered and the taxes are substantially lower. Italy’s tax rate is 27.5 percent, versus 12.5 percent for Ireland.

Italian prosecutors are conducting a criminal probe into suspected tax evasion by three Apple employees. La Repubblica said two of the employees are executives based in Italy while the third is based in Ireland.

The European Commission has been cracking down on multinational corporations for funneling revenue through countries that offer sweetheart deals in the form of tax breaks and other incentives. Investigators have been examining Luxembourg’s tax treatment of Fiat Chrysler and online retailer Amazon, along with the deals Starbucks struck with the Netherlands.

Apple’s arrangements in Ireland attracted attention after a New York Times investigation exposed a practice dubbed the “Double Irish,” which allows companies to reduce taxes by routing profits through two Irish subsidiaries. The advocacy group Citizens for Tax Justice criticized Apple for holding $181.1 billion in offshore accounts — on which it would owe some $59.2 billion. It is among the most prominent of the Fortune 500 companies holding $2.1 trillion in accumulated profits offshore, the group claims.

Chief Executive Tim Cook has defended the company’s tax practices, telling CBS’s “60 Minutes” that Apple pays “every dollar we owe.” He said critics in Congress who fault the company for failing to bring home billions in profits from foreign sales should revise the U.S. tax code.

“It would cost me 40 percent to bring it home, and I don’t think that’s a reasonable thing to do,” Cook told interviewer Charlie Rose. “This is a tax code, Charlie, that was made for the industrial age, not the digital age. It’s backward. It’s awful for America. It should have been fixed many years ago. It’s past time to get it done.”

Apple declined comment.

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