What's at the core of Apple's EU appeal over €13bn tax ruling?

Tomorrow, Europe’s second highest court will hear an appeal from Apple and the Irish Government on the €13bn back tax bill handed down from the European Commission in 2016.

In many ways, it is the defining corporate case in recent Irish, European and international history.

Please log in or register with Independent.ie for free access to this article.

Log In

New to Independent.ie? Create an account

Ask Apple or the Irish Government and they will say that this is a case of sovereignty and international tax law, including the right of individual states to run their own tax affairs and the principle of taxation accruing where a product is ‘created’.

But talk to EU officials and it’s a different tale: big corporations have avoided tax for too long and someone has to put a stop to it somehow. Apple, they say, had a tax rate here that was so low that it amounted to illegal state aid.

The General Court in Luxembourg is set to hear dozens, if not hundreds, of technical arguments supporting either side. A ruling is likely to take about a year, after which a further appeal by the losing ‘side’ to the European Court of Justice will kick off another multi-year process.

Convictions on both sides are ironclad.

Three years ago, CEO Tim Cook told this newspaper that the EU case amounted to “political crap” and that Ireland’s tax sovereignty was being undermined.

That view hasn’t changed.

“It’s been clear since the start of this case there was a pre-determined outcome,” according to Apple’s statement, echoing its original position. “The Commission took unilateral action and retroactively changed the rules, disregarding decades of Irish tax law, US tax law, as well as global consensus on tax policy, that everyone has relied on.”

Aside from an Irish Revenue ruling that it doesn’t owe any more tax, Apple’s basic defence is that because its products were designed in the US, that’s where the tax has always been owed.

“This case has never been about how much tax Apple pays, it’s about where that tax is paid,” the company statement said.

“Because our products and services are created, designed and engineered in the US, that’s where we pay most of our tax… If the [EU Commission’s] opinion is allowed to stand, Apple would pay 40pc of all the corporate income tax collected in Ireland, which is unprecedented and, far from levelling the playing field, selectively targets Apple. This has no basis in fact or law and we’re confident the ruling will be overturned.”

But EU officials are just as certain that they have the law on their side.

The European Commission has been muscular in penalising big tech companies in recent years. Apple’s biggest rival, Google, has been fined over €8bn in the last four years alone with at least one further probe under way.

Amazon too is increasingly coming into the spotlight.

And the figurehead in all of this activity, Commissioner Margrethe Vestager, has just been given a strengthened position in the latest Commission portfolio reshuffle.

Whatever way the Court decides, Ireland’s position on the issue – lining up with Apple to appeal the Commission’s €13bn ruling – has arguably had the effect that industrial and political strategists intended.

Other than the defence of its own tax regime, Irish policy makers have always argued that backing Apple sends a message to international investors that Ireland will back such investors. In doing so, Ireland has more to gain in the long term than gambling its exalted place among foreign direct investors just for a single €13bn swoop.

As it happens, FDI has remained high in Ireland. Far from running from the country, as some commentators feared in 2016, global tech players have bedded down here further. In Dublin, Google and Facebook employ nearly 10,000 between them, almost double the number when the original Apple tax ruling was handed down.

Apple itself has continued to incrementally grow its Cork base, employing over 6,000 people there.

But this case will be closely scrutinised around the world as a test of a new tax order.

Source: Read Full Article