The Chinese Government has accused Apple of tax avoidance and accused the company deliberately underreported its sales revenues in the country. The timing of the announcement has been questioned by some China watchers who say it is ironic that it has come at a time when Apple was releasing its’ latest iPhone into the Chinese market.
Tax authorities from China’s Ministry of Finance released documents which show Apple underreported its 2013 Chinese sales revenues by $1.3 billion.
According to Chinese media reports the Government last year went on a blitz against tax avoidance, closely inspecting the books and accounts of 1358 major accounting firms and 20,635 large companies, including Apple Computer Trading (Shanghai), Apple’s Chinese subsidiary.
A Ministry of Finance spokesman said the inspection of Apple Computer Trading’s accounts revealed the company had avoided paying $70 million in taxes by underreporting its sales revenues.
He said Apple had been ordered to make up the shortfall which it had done to avoid fines.
Apple has not responded to media requests for comment.
China University of Political Science and Law professor Shi Zhengwen said Apple’s alleged tax avoidance highlighted the fact that reform was needed in China to reduce tax avoidance by companies like Apple, and to increase compliance.
Apple’s Chinese market – which includes mainland China, Taiwan and Hong Kong – is its’ second biggest after the America’s with “reported” revenues of $13.2 billion in the third quarter of this year.
This revelation of avoiding taxes in China, adds to a growing list of accusations of tax avoidance by Apple. In 2014, The European Commission sought to limit an agreed deal between Apple and Ireland to drastically lower its tax bill for its European Union sales.
According to Irish media reports Ireland will, within the next few months, face censure by the Commission over the issue.
Last April Apple executives defended the company’s financial operations and accounting practices before an Australian Senate hearing, after Australian officials had described the company’s financial practices as “international tax avoidance”.