Apple Inc.'s tax settlement with Italy could set precedent for other tech giants, said analysts

U.S. technology giant Apple Inc. has agreed to pay Italy 318 million euros (347 million U.S. dollars) in back taxes, in a case that Italian tax officials are hailing as a victory.

Italy originally accused Apple of failing to declare income generated in Italy worth at least 879 million euros (958 million U.S. dollars) for the period between 2008 and 2013 by declaring the revenue in Ireland, which charges lower corporate taxes.

In early December, Apple chief executive Tim Cook called the case "political crap" and said "Apple pays every tax dollar" it owes.

But in the end, Apple officials agreed to the payment, which, based on the estimated non-taxed income for the period, is more than the 27.5 percent corporate income tax rate in Italy.

Apple declined to comment on the case, and tax officials would only confirm media reports that Apple had agreed to settle the case. A formal announcement on the settlement is expected in early January.

Tax experts said it was not immediately clear how strong of a precedent the case would set, but, regardless, it is still a significant settlement because it is the first time a major multinational technology company agreed to pay a major tax bill in one European country that had been declared in another European country.

"Accounting for revenue for big multinationals ... [could be] the biggest challenge for European tax officials," Bruno Romano, a tax law professor at the University of Modena, said in an interview. "It's unclear whether the Apple settlement is a one-off deal or whether it will have an impact on the way these cases are resolved in the future."

Calculating the national income of a multinational company, particularly an online company, because services performed in one country can generate income in another country. It can also be hard to calculate the value of brands, marketing, intellectual property, and other intangible assets.

Italy is just one of the European countries that have accused big technology companies of under-paying tax bills by declaring income and other revenue sources in low-tax European Union states like Ireland, the Netherlands, or Luxembourg.

Italian officials have said they were looking into the activities of online retail giant Amazon.com next, and in other countries the dominant search engine Google Inc., social media powerhouse Facebook Inc., software icon Microsoft Inc., and online auction leader EBay Inc. are among the companies garnering unwanted attention from tax authorities. If the Apple deal sets a precedent, it could trigger a flood of similar deals.

"Don't be surprised to see other countries try their luck against other multinationals," ABS Securities analyst Andrea Filippini told Xinhua.

The European Commission is looking into Ireland's tax policies with regard to Apple, so the Cupertino, California-based company best known for the Macintosh line of computers as well as the iPhone and iPad could get more bad news in the next few weeks when European Competition Commissioner Margrethe Vestager announces her findings.

The development in Italy may have scared some investors: Apple stock lost nearly 3 percent of its value in the two trading sessions after news of the settlement broke. Endit