As Apple unveils new iPhone, China blasts firm for US$70m tax shortfall

PUBLISHED : Friday, 11 September, 2015, 7:01am
UPDATED : Friday, 11 September, 2015, 7:01am

As Apple announced its latest iPhone model, China's Ministry of Finance took the US tech firm to task for allegedly avoiding tax in one of its biggest markets.

While all eyes were on Apple chief executive Tim Cook as he unveiled the iPhone 6S and iPad Pro, China's tax authorities published information showing Apple had underreported revenue in the country by 8.799 billion yuan (US$1.3 billion) by the end of 2013, with an alleged tax shortfall of 452 million yuan (US$70 million).

According to the Beijing Times, finance ministry officials inspected the accounts of 20,635 firms and 1,358 accountancies in 2014.

Apple Computer Trading (Shanghai), the company's Chinese subsidiary, was found to have underreported revenue to the end of 2013 and was ordered to rectify the issue.

The ministry said Apple then paid up the shortfall, avoiding any fines.

Apple did not respond to multiple requests for comment.

This is not the first time Apple has been accused of not paying enough taxes. The European Commission last year sought to limit a deal struck between the US firm and Ireland to allow it to significantly lower its tax bill for its EU business.

Ireland is expected to face censure by the Commission over the issue within months, according to the Irish Times.

At an Australian Senate hearing in April, Apple executives defended the company's financial practices, which lawmakers described as "international tax avoidance".

Shi Zhengwen, a professor at the China University of Political Science and Law, told the Beijing Times that reform was needed to reduce tax avoidance and increase compliance.

Greater China – which includes the mainland, Hong Kong and Taiwan – is Apple's second largest market after the Americas, bringing in US$13.2 billion in revenue in the third quarter of 2015.

However, the company has not always had an easy time in the country, particularly from state media.

In recent months, CCTV has gone after Apple for "substandard" smartphone cameras and alleged data leakage, following on from a 2013 report when the broadcaster criticised the US phone maker for allegedly charging users in China for replacing faulty iPhone covers, something the firm does for free in other markets.

That criticism backfired however, after a Chinese celebrity tweeted in support of the report with a message that said "to be published at 8:20pm", leading many to accuse CCTV of enlisting popular Weibo bloggers to join in its criticism of Apple.