Published: Thu, September 19, 2019
Markets | By Otis Pena

‘Defies reality and common sense’, Apple on $14 billion EU tax order

‘Defies reality and common sense’, Apple on $14 billion EU tax order

The EU's order for Apple (NASDAQ:AAPL) to pay €13B in back taxes to Ireland "defies reality and common sense", the tech giant said as it launched a legal challenge against the 2016 ruling.

The State's appeal in the Apple ruling will be heard by Europe's second highest court in Luxembourg later today in what's being described as the world's biggest tax case.

He said the fact the iPhone, the iPad, the App Store, other Apple products and services and key intellectual property rights were developed in the United States, and not in Ireland, showed the flaws in the Commission's case.

During Tuesday's legal proceedings, Apple's lawyer, Daniel Beard, argued that Apple products and intellectual property rights were all developed in the USA, making the said goods subject to American jurisdiction, Reuters reported.

"The [Irish] branches' activities did not involve creating, developing or managing those rights", Beard said. "Based on the facts of this case, the primary line defies reality and common sense", Beard reportedly said.

"The activities of these two branches in Ireland simply could not be responsible for generating nearly all of Apple's profits outside the Americas".

Apple was sent a $14bn tax bill by the European Commission in 2016, instructing Dublin to recover the "illegal" tax benefits allowed to the iPhone maker over the preceding 20 years.

The Irish government is in court, fighting to stop Apple paying it billions of dollars.

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"We have concluded that Ireland granted undue tax benefits of up to 13 billion euros to Apple".

"The European Commission has tried to rewrite Apple's history in Europe, to ignore Ireland's tax laws and, in doing so, to disrupt the global tax system", Tim Cook said in an open letter in 2016.

Beard also apparently dismissed criticism of the 0.005 percent tax rate paid by Apple's main Irish unit in 2014, which was cited by the Commission in its decision, saying the regulator was just seeking "headlines by quoting tiny numbers".

Meanwhile, Ireland has since been forced to take the billions of euro from Apple. Poland and the EFTA (European Free Trade Association) Surveillance Authority support the Commission.

"There is no tax mismatch here", said the lawyer.

That argument is "perfectly irrelevant", said the commission's lawyer.

"Ireland has been the subject of entirely unjustified criticism", former attorney general Paul Gallagher told the EU General Court.

This became possible after a major tax overhaul in the USA at the end of 2017 that allowed Apple to repatriate profits made overseas. Its initial 1991 tax deal with Apple involved "no real assessment" of how Apple should be taxed, when Irish officials "simply accepted an arbitrary method proposed by Apple Ireland subsidiaries".

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