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Who did Apple LIE TO: Australia or America?

Testimony to US Congress contradicted statements made to Australia's parliament

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Australian parliamentarians, already hostile to international IT vendors over their pricing practices and use of transfer arrangements to offshore their tax obligations, are now at the point of grabbing torches and pitchforks and heading in the direction of Cupertino.

At issue is what looks like a contradiction between the evidence Apple gave to the Australian parliament's IT price inquiry, on the one hand, and what Apple has told the US Senate.

Back in March 2013, Apple VP Tony King, who leads Apple in Australia, gave evidence to the parliamentary inquiry in which he outlined his understanding of how Cupertino sets prices.

The exchange between Husic and King went like this:

Member of Parliament Ed Husic: “Okay. If, for example, you had a million iPads, what price would you purchase them for? Would it be the global price that you work out with your US parent or is it the global or harmonised price plus all the add on costs? What is the exact point at which there is an agreement on transfer price between you and the US?”

King: “It starts around a discussion of a unit of one. So, the volume consideration is not there. It is a unit of one consideration. We have product cost, translation to the local currency and then these other factors that may or may not be relevant in a market like import duties or goods and service tax (GST) or other factors like that.”

Husic: “So the US says: 'We take into account that and we are selling you this product via a transfer price agreement at X.' Is that what happens?”

King: “The product cost is set at a level that is broadly consistent in markets around the world in US dollars and then translated in local currency.”

Husic: “Who translates it?”

King: “We have a global team who looks after all of our product pricing around the world and they are based in the US.”

Husic: “Mr King, I am not understanding this. Who makes the final decision on price? Is it the US parent or is it you?”

King: “We set our prices worldwide from Cupertino with input from the local team for factors that may be relevant for the Australian market. We have a global equivalent pricing model that is established at a worldwide level.” (Emphasis added)

The problem is, Husic says, that last statement – that prices are set from Cupertino – doesn't square with what Apple has said elsewhere. As he told parliament on Tuesday night (May 28): “the US Senate report says the price is determined by Apple Singapore, not the US.”

In the US Senate report, it was revealed that the Irish-affiliated Apple Sales International takes title to products arriving at Asian distribution centres. ASI sells the products to Apple Singapore, which then on-sells them to retailers and consumers, as well as to Apple Australia.

Husic went on: “I am concerned the committee inquiry has been misled, either deliberately or accidentally. The corporate structure detailed in the US Senate report was never offered by Apple Australia and when pressed on its transfer pricing or price setting, I put it to the House that Apple deliberately avoided setting out the detail that became evident in the US Senate report.

“I call on Apple Australia to either correct the record or provide further detail as to the way it actually prices its products for Australian consumers,” he told parliament.

Speaking to The Guardian, assistant treasurer David Bradbury has chimed in, saying that both the pricing arrangements and Apple's tax arrangements should be infuriating to Australians.

Apple declined to comment for this article beyond its statement to The Guardian. ®

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