Apple says $14 bln EU tax order 'defies reality and common sense'

Daniel Fowler
September 19, 2019

Luxembourg Apple and Ireland have hit back at the EU's order to recover a record 13 billion euros ($22.6 billion) in unpaid tax, telling the European Union's top court it amounted to double taxation on the United States tech mammoth's intellectual property.

Indeed, even if the European Commission is successful in making Apple foot the $14.4 billion back tax payment, the tech behemoth is certainly not in a strained cash position.

The EU alleged that "Apple paid essentially no tax on earnings in Europe" and "sought headlines by quoting tiny numbers, but this public campaign ignores the taxes Apple pays all across the world", Apple attorney Daniel Beard said at a hearing at the EU General Court in Luxembourg on Tuesday. Apple argues that the tax order was based on erroneous assumptions and, "defies reality and common sense".

"Apple is now paying around US$22 billion in tax in the USA on the very same profits that the [European] Commission says should also have been taxed in Ireland", the company said at the European Court of Justice at the start of the appeal in the bloc's biggest tax case.

"The divisions' actions didn't involve creating, managing or developing those rights".

"Based on the facts of this case, the primary line defies reality and common sense", he continued.

Regarding the issue that Apple's Irish branches generated a massive chunk of the company's overall profits, Beard noted that the said branches are not "responsible for generating nearly all" of the tech behemoth's non-U.S. profits.

Apple, along with the Irish State, have always fought against the Commission's decision. Apple is also now paying around 20 billion euros in USA taxes on the same profits that the Commission said should have been taxed in Ireland.

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Pending the conclusion of the case, Apple has blocked the funds in an escrow account: a total of €14.3 billion, after interest.

He pointed out that Apple pays an average global tax rate of 26 percent, which makes Apple the largest taxpayer worldwide.

The cases are: T-892/16, Apple Sales International and Apple Operations Europe v. Commission, T-778/16, Ireland v. Commission.

"There is no tax mismatch here", said the lawyer. That in itself gives rise to a presumption of a special deal, exceptionally advantageous treatment.

That argument is "perfectly irrelevant", said the commission's lawyer. "It is clear that the tax authorities made no assessment in 1991".

"It is a serious overreach for the commission to override national law", Paul Gallagher, a lawyer for Ireland, told the judges.

Ireland meanwhile reportedly said it had been the subject of entirely unjustified criticism and that the Apple tax case was due to a mismatch between the Irish and USA tax systems.

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