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Apple & Ireland Appeal EU’s State Aid Decision

On Monday, Apple Inc. filed its appeal against the EU’s decision back in August that the American tech giant owes Ireland $14 billion in back taxes.

This move coincided with the EU’s release of a 130-page report detailing how it reached its decision requiring Apple to pay back the Irish government.

According to The Wall Street Journal, the EU claims that “two Apple units registered in Ireland brought in $130 billion in profit over an 11-year period that should have been taxed at Ireland’s 12.5% corporate tax rate, but instead remained largely untaxed anywhere.”

The American multinational challenged this claim, asserting that the EU’s investigation into its dealings with Ireland and the rest of Europe has had an agenda from the get-go.

An Apple spokesperson said, “It’s been clear since the start of this case that there was a predetermined outcome,” adding that the EU “took unilateral action and retroactively changed the rules” that applied to the American company.

Furthermore, a lawyer with the iPhone developer said the company is a "convenient target" for EU Competition Commissioner Margrethe Vestager, who’s often pushed by a desire to make the “headlines.”

Irish & US Governments Respond to the EU’s Apple Decision

Irish & US Governments Respond to the EU’s Apple Decision

The Irish government also responded to the EU’s decision saying that the organization “misunderstood the relevant facts and Irish law.”

The response issued by the Irish Ministry of Finance alleges that the European Commission “wrongly asserts that two Opinions given in 1991 and 2007 by the Irish Revenue Commissioners “renounced” tax revenue that Ireland would have otherwise been entitled to collect from the Irish branches of Apple Sales International (ASI) and Apple Operations Europe (AOE).”

It says, “The Opinions simply applied [Section 25 of the Taxes Consolidation Act 1997], which in accordance with the territoriality principle, taxes only the profits attributable to the branch, not the non-Irish profits of the company.”

Furthermore, “the Decision also mischaracterises the activities and responsibilities of the Irish branches of ASI and AOE. These branches carried out routine functions, but all important decisions within ASI and AOE were made in the USA, and the profits deriving from these decisions were not properly attributable to the Irish branches of ASI and AOE.”

The US Treasury also expressed their dismay at the EU decision following the release of their report.

“We continue to believe‎ the Commission is retroactively applying a sweeping new State aid theory that is contrary to well-established legal principles, calls into question the tax rules of individual countries, and threatens to undermine the overall business climate in Europe‎. Moreover, it threatens to erode America's corporate tax base,” said a Treasury spokesperson in a short statement on Monday.

Now What for EU & Apple State Aid Case?

Now What for EU & Apple State Aid Case?

This case sets the stage for what can be a game-changing decision on how the EU handles state aid and its various attempts at curtailing tax avoidance.

As pinpointed by The Wall Street Journal, “If Ireland and Apple successfully make their case, the EU could see the curtailment of a powerful tool aimed at limiting the help governments can give to individual companies. If the EU prevails, it could call into question tax arrangements by a swath of companies that have relied on tax rulings from authorities in Ireland, Luxembourg and other countries.”

Some analysts ultimately believe both Apple and Ireland will win this battle.

Robert Willens, a business professor at Columbia Business School in New York, says, “From my vantage point, Apple availed of a tax structure in Ireland that was available to anyone, they got no special treatment…I believe ultimately Apple and Ireland will prevail. To me, it looks like the EU is trying to make a statement with this case.

Tim Worstall writing for Forbes agrees, stating that the Apple-Ireland “arrangement, whatever it was, was available to all corporations that structured themselves to take advantage of it. Thus it is not state aid, it's just the simple application of Irish tax law. Something which is entirely within the power of the Irish government to decide as it wishes to.”

Now the EU’s general court will be working to reach a decision, one that could potentially take years to happen.

For the meantime, Apple will pay Ireland the money purportedly owed but it will remain in escrow until the court reaches its final verdict.