The agreement between Apple and the California city dates back to 1998, and thanks to it, Cupertino profits annually from a 1 percent share of the sales tax charged on sales, which in the US replaces the value-added tax system used in other countries.
However, the budget of the small Californian city will be dramatically reduced after the intervention of the local authorities, and Cupertino will probably not avoid the dismissal of its employees because of this. This was reported by the Apple Insider server.
“The California Department of Taxation and Fee Administration (CDTFA) conducted an audit of one of our largest taxpayers and found that funds are being improperly distributed between the city and state budgets. Therefore, based on the results of this audit, CDTFA is requesting that a correction be made,” said Matt Morley, who serves on the Cupertino, California City Council.
Apple gradually grew into a technological giant, and the agreement concluded with the city of Cupertino was beneficial for him. Thanks to her, he got back 35 cents of every dollar he withdrew.
During the duration of the agreement, Cupertino earned 107.7 million dollars (about 2.4 billion crowns). But now Californian officials have additionally decided that Cupertino will have to return tens of millions of dollars to the state of California. The debt will also arise for Apple, which will have to pay additional taxes of about 20 million dollars, which is roughly 440 million crowns.
In order for Cupertino to be able to pay off the debt incurred in the coming years, the city management faces a set of difficult tasks. Politicians are talking about the fact that they will lay off dozens of employees due to austerity measures, reduce some services and, moreover, soon introduce new taxes. At the same time, the city council has already expressed its consent to allocate a total of 44 million dollars (about 970 million crowns) from the city’s reserve fund.
If the CDTFA decision goes into effect, the city’s tax revenue will be reduced by up to $30 million annually, a decrease of about 73 percent. Cupertino will appeal against the decision, but the whole process could take up to ten years.
The mayor of the city, Hung Wei, said that the solution for the city will not be easy at all. “We will have to look at the city’s finances and come up with a creative solution. But I am sure that Cupertino will handle this financial upheaval. But public safety will not be affected by budget savings, I can promise that,” concluded the politician.