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Monday, May 07, 2012, 08:00 pm PT (11:00 pm ET)

Luxembourg official sticks up for Apple's iTunes operations in EU

Responding to a The New York Times report on Apple's efforts to reduce its tax bill, a Luxembourg trade official has spoken up in defense of the company's operations.

Georges Schmit, executive director of the Luxembourg Trade and Investment Office in San Francisco, defended Apple in a letter to the editor published by the Times on Monday.

The letter specifically took issue with an assertion from a report by the publication last month that Luxembourg had "promised" to tax Apple and other corporations at a low rate if they routed transactions through the country. The report, part of the publication's iEconomy series on Apple, portrayed the company as dodging billions of dollars in taxes each year.

Schmit argued that the Luxembourg-based operations of Apple's iTunes and other tech companies are "not the result of these e-service providers' intent to cheat the taxman," but rather "the consequence of a combination" of the following factors:

  • European indirect tax law applicable to cross-border business-to-consumer transactions in e-services.

  • A well-functioning E.U. internal market, which allows for cross-border trade of all e-services from a single location to all other 26 national markets.

  • The lowest tax rate in the applicable 15 to 25 percent range for standard VAT rates in the 27 European Union member states. So, iTunes S.à.r.l. collects 15 eurocents for every euro spent on iTunes services in VAT from each and every customer, wherever he or she is in the European Union.

The official concluded by noting that both Luxembourg and iTunes S.à.r.l. "simply apply" E.U. tax law in a "well-functioning Internet-based E.U. single market.

Apple itself has responded to the original report with a statement highlighting the "incredible number of jobs" that it has created in the U.S. in recent years.

App Economy growth

Source: TechNet


"By focusing on innovation, we've created entirely new products and industries, and more than 500,000 jobs for U.S. workers — from the people who create components for our products to the people who deliver them to our customers," the statement read. "Apple's international growth is creating jobs domestically since we oversee most of our operations from California."