Apple says $14 billion European Union tax order defies reality and common sense

Andrew Cummings
September 18, 2019

Ireland said it had unfairly criticised and that the Apple tax case was due to a "mismatch" between the Irish and U.S. tax systems.

In August 2016, the Commission said tax rulings by Ireland in 1991 and in 2007 had artificially reduced Apple's tax burden for over two decades, effectively making it illegal state aid.

The European Union's order for Apple to pay 13 billion euros ($14 billion) in back taxes to Ireland "defies reality and common sense", the US company said on Tuesday, as it launched a legal challenge against the 2016 ruling.

As a result of the ruling, Ireland was forced to collect the billions of euro from Apple.

"The commission contends that essentially all of Apple's profits from all of its sales outside of the Americas must be attributed to two branches in Ireland", Apple's lawyer Daniel Beard told the court on Tuesday.

At the start of two days of hearings at the EU's General Court on Tuesday, Apple accused the commission of using its powers to combat state aid "to retrofit changes to national law" - in effect trying to change the global tax system and in the process creating legal uncertainty for businesses.

Regulators from the commission will meet with the Irish government and Apple officials on Tuesday and Wednesday of this week over the tax row. Apple's six-person delegation was led by CFO Luca Maestri, according to Reuters.

While the hearing lacks some of the box-office appeal of Monday's Brexit meeting a few miles down the road between U.K. Prime Minister Boris Johnson and Luxembourg counterpart Xavier Bettel, it's a blockbuster event for the EU's courts, with dozens of lawyers and lobbyists crammed into a chamber that's usually virtually empty.

The iPhone maker and the state want the ruling annulled because they claim the Commission made errors in its assessment of Irish tax law, state aid rules and in its assessment of the company's activities inside and outside Ireland.

'The Commission's decision is fundamentally flawed, ' Paul Gallagher, lawyer for Ireland, told the court.

The EU executive dismissed the arguments, saying it was not seeking to police worldwide tax laws and accused Ireland of not having done its homework when assessing Apple's taxes.

It has also claimed that the vast majority of its taxes are owed to the U.S. because the majority of the value in its products including design, engineering and development, is created there. President Donald Trump hasn't been silent either, saying Vestager "hates the United States" because "she's suing all our companies".

However, 9to5Mac noted that Apple choose to funnel all the revenue it earned from European Union countries to two companies based in Ireland. He has slammed her as the "tax lady" because of the investigations and heavy fines imposed on USA groups such as Google.

Apple, which has been present in Ireland since the 1980s, employs around 6,000 people in Cork, the country's second-largest city.

The Commission ordered Ireland to recover the illegal aid plus interest and that money - some €14.3 billion in unpaid taxes and interest is now sitting in an escrow account.

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