An order by the European Commission for Apple to pay a €13bn (£11.5bn) Irish tax bill “defies reality and common sense”, the tech giant said today as it launched a challenge against the ruling.
Apple accused the Commission of using its powers to fight state aid to “retrofit changes to national law” at a hearing at Luxembourg’s general court – the EU’s second highest court.
The EU ruled in 2016 that Apple had dodged taxes and received €13bn of illegal state aid from Ireland. It said that Irish tax rulings had artificially reduced the company’s tax burden over two decades, enabling it to pay tax at a rate of less than one per cent.
Apple and Ireland appealed against the ruling, and judges will hear arguments from both sides over a two-day hearing.
The company paid the bill – €14.3bn including interest – last year, but the funds have been held in escrow pending the outcome of the appeal.
“The Commission contends that essentially all of Apple’s profits from all of its sales outside the Americas must be attributed to two branches in Ireland,” Apple’s lawyer Daniel Beard told the court today, according to Reuters.
Apple’s products, services, and key intellectual property rights had all been developed in the US, not Ireland, said Beard, who argued this undermined the EU’s case.
“The branches’ activities did not involve creating, developing or managing those rights. Based on the facts of this case, the primary line defies reality and common sense,” Beard said.
“The activities of these two branches in Ireland simply could not be responsible for generating almost all of Apple’s profits outside the Americas,” he added.
The case is key to European competition commissioner Margrethe Vestager’s attempts to crackdown on sweetheart tax deals given to multinational companies, which has so far led to action against firms including Starbucks and Amazon.
Vestager had previously cited the 0.005 per cent rate of tax paid by Apple’s main Irish unit in 2014 as evidence of it paying unreasonably low rates. Beard dismissed the Commission’s criticism over the figure, saying it was seeking “headlines by quoting tiny numbers”.
Apple claimed to be the largest taxpayer worldwide, and said it was paying around $20bn (£16bn) of US taxes on the profits the Commission said should have been taxed in Ireland.
“As Ireland has already emphasised, it undermines legal certainty if state aid measures are used to retrofit changes to national law… and legal certainty is a key principle of EU law; one upon which businesses depend,” Beard said.
Ireland, which has accused the Commission of meddling with its sovereignty over tax affairs, said it had been subject to unjustified criticism.
Paul Gallagher, a lawyer for Ireland, said the Commission’s decision to order Apple to pay the tax bill was “fundamentally flawed”.
Lawyers for the Commission will make their case tomorrow, with a ruling expected in the coming months.
Main image credit: Getty