Tomahawk, WI 11/14/2013 (BasicsMedia) –  Apple Inc. (NASDAQ:AAPL)’s tax practice has come under spotlight in Italy and the local government seeks to find out whether the Cupertino-based company has been doing something illegal over taxes.  Apple’s headquarters in Milan is reported to have been raided in which computers and other documents have been taken away for investigation. The smartphone maker is suspected of tax fraud which is believed to deny the Italian government about $1.4 billion.

In business, reducing tax bills is in the best interest of shareholders and companies put a great deal of effort in minimizing tax expenses. However, such tax reduction efforts are not supposed to be illegal. This is why the case of Apple being investigates by the Italian tax authorities doesn’t come as a big surprise for the company’s investors. However, things could be bad if the multinational company is found to have committed tax fraud. In Italy, wrongfully denying government tax is an offence which can result in suspension of a company’s business in the country plus hefty fines. In the latest case involving Apple, it is reported that the company uses Ireland proxies to reduce its tax pressure. Whether doing this is illegal or not is the subject of investigations.

The Cupertino-based company is not new to tax controversies. It has had a rough run with the U.S. and U.K. governments over taxes in recent months. However, so far, Apple’s tax practice has not being found to smell fraud in the countries. The company, in efforts to meet its obligation for the shareholder, passes its international taxes through Ireland which is said to enable it bypass taxes in Europe and other countries around the world.

It would not be good for Apple to find itself on the wrong side of the Italian tax regulations. Other multinational companies before it such as Domenico Dolce and Stefano Gabbana have faced the rough side of the Italian tax law, resulting in several months of suspended jail sentence and huge fines. Italian tax authorities have an appetite of going for the big multinationals to find their tax practices and if they conform to the country’s requirements.

Regulation of Apple tax practice

The company hopes that the authorities will give it a clean bill of health as regards its tax practices. But analysts also see potential regulation of Apple Inc. (NASDAQ:AAPL)’s international tax practices if in any case it id found not to be illegal, yet denies governments huge taxes. Such a move would impacted negatively on the company’s net income and payout to investors especially at this time when its business hasn’t been really good due to growing competition in the tech industry.

Apple has repeated sought to increase its revenue and improve its net income by cutting cost and increasing profit margins. This can be seen on the company’s pricing of its latest devices iPad Air and iPad Mini, all which ask for significantly higher start price compared to their older versions. The company is also seeking to increase its iPhone penetration to emerging markets to boost its revenue at a time when investors are asking for real value on their investment. It can only be hoped that the Italian tax authorities will not find the tech giant on the wrong side, others its reputation might also suffer a beating.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.