Apple to settle €318 million Italian tax dispute

US technology giant Apple has agreed to pay €318 million to settle a tax dispute with Italian authorities after the iPhone and iPad maker was investigated for suspected fraud.

The company's Italian subsidiary and several of its senior executives had been under investigation for fraud over its alleged failure to comply with obligations to declare its earnings in Italy between 2008 and 2013.

Italy's tax authorities say the company failed to pay €880m in tax between 2008 and 2013, according to Italian daily newspaper La Repubblica. But, after months of negotiations, the tax authorities agreed to close the case in return for about a third of that amount.

An Italy tax office spokesman confirmed the newspaper’s report was accurate but would not divulge further details. Apple did not respond to a request for comment.

The settlement comes amid mounting controversy over the tax arrangements of multinational groups which stand accused of utilising complex cross-border corporate structures to reduce tax bills.

Apple Italia is part of the company’s European operation which is headquartered in Ireland, a country with one of the lowest levels of corporation tax in the European Union and where large portions of the group’s worldwide profits have been booked.

Ireland taxes corporate earnings from normal business activities at a rate of 12.5%, which compares with a standard rate of 27.5% in Italy.

This month, the Apple chief executive, Tim Cook, described accusations that the world’s richest company was sidestepping US taxes by stashing cash overseas as “political crap” and insisted: “We pay every tax dollar we owe.”

The settlement of the tax dispute will not halt the criminal investigation into the conduct of three Apple Italia executives but will likely reduce the severity of any potential sanctions, La Repubblica said.

The decision to sanction Apple Italia marks a broader push by Italian authorities to shake off the country’s bad reputation for tax dodging. By the government’s own estimates, annual losses to tax evasion exceed €90bn with almost half that down to sales taxes not being paid.

Recent efforts by Matteo Renzi’s government have sought to rein in the country’s vast shadow economy and convince both individuals and companies to boost the state coffers.

Earlier this month, Italy's economy ministry hailed the success of a year-long voluntary disclosure scheme, which is expected to bring in at least €3.8bn. There were 130,000 declarations made under the amnesty, the ministry said, with the majority of hidden cash and assets held in Switzerland.

Italians working across the Swiss border will also have to face a stricter tax regime, after the two countries reached an agreement last week on how to tackle the issue. Once approved by both governments, the deal is expected to see commuters continue to pay tax in Switzerland and deduct this from income tax in Italy.

The murky finances of the Vatican have also been put under the spotlight this year, with the Holy See and Italy agreeing in April to share financial information. While the increased cooperation marks Italy’s drive to catch tax evaders, it also reflects Pope Francis’ bid to reform the Vatican administration which has been hit by waves of financial scandal and allegations of money laundering.