European Commission outlines appeal against Apple's €13bn tax ruling
iGiant says case alleging state aid from Ireland was 'categorically annulled'
Last year Apple won a long-fought legal battle against the European Commission, which argued it had received unlawful state aid from Ireland that allowed it to swerve nearly €13bn in back taxes.
Today the European Commission published a summary of the grounds it intends to pursue in an appeal.
The commission claims that the General Court of the European Union made "several errors of law" in overturning the initial decision, and its arguments demonstrated "contradictory reasoning". This included failing to understand the commission's initial investigation, particularly when it came to Apple's tax and intellectual property structure.
"The General Court misinterprets the Decision by concluding that the primary finding of advantage relied solely on the lack of employees and physical presence in the head offices of ASI and AOE and did not attempt to show that the Irish branches of ASI (Apple Sales International) and AOE (Apple Operations International) in fact performed functions justifying the allocation of the Apple IP licences to those branches," it said.
Roughly translated, the claim is that the General Court wrongly conflated headcount at Apple's Irish business units, and the responsibility they hold for allocating intellectual property. The commission described this as "a breach of procedure".
In recent years, Apple has opted to record all its non-US sales in the Republic of Ireland, thanks to the former's favourable tax regime. In addition to having some of the lowest corporate tax rates in Europe (12.5 per cent, compared to 19 per cent in the UK and 28 per cent in France), Ireland's tax framework allowed large multinationals to limit their exposure further by using schemes like the now-infamous Double Irish.
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Unlike other companies that - completely legally - exploited the Double Irish scheme, Apple received the nod from the Irish taxman to split its operations into two separate branches: ASI and AOE. This, the commission argued, was tantamount to unfair state intervention, and ordered it to repay €13bn in 2016. That money was held in escrow, pending appeal.
The irony is Ireland doesn't actually want to collect the tax. Certainly, €13bn is a lot of money – especially for a country of 4.9 million. But in the long run, Ireland believes it benefits more from being an attractive base of operations for multinationals, which employ a decent chunk of the labour force.
Ireland does receive some tax payments from these outfits. Apple, for example, paid €1.5bn in the three years prior to 2017. This, it claimed, accounts for 7 per cent of all corporate income taxes paid in the republic. Whether this amount is appropriate, or comes at the expense of other countries, is another matter for debate.
Apple's UK retail arm made £1.37bn in the year ending September 2019, with a gross profit of £337m. After costs, which include a £25m dividend payment to Apple Retail Europe, that shrunk to £39m, leaving it with a tax payment of £6.2m.
Apple has repeatedly insisted its tax affairs are fit and proper, saying in a 2017 open letter: "Apple believes every company has a responsibility to pay its taxes, and as the largest taxpayer in the world, Apple pays every dollar it owes in every country around the world.
"The debate over Apple's taxes is not about how much we owe but where we owe it. As the largest taxpayer in the world we've paid over $35 billion in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT."
We've asked Apple for comment. In a statement provided to Bloomberg, Apple described the commission's initial case as "categorically annulled" and said the General Court judges were "clear in their determination that Apple has always abided by the law in Ireland, as we do everywhere we operate." ®