Today, Apple’s legal team, led by Apple CFO Luca Maestri, stood before five judges in the EU’s General Court to fight against the EU’s €13 billion tax order.
Tax rulings by Ireland in 1991 and 2007 had artificially reduced Apple’s tax burden for the last 20 years, allowing the company to pay tax rates as low as 0.005%, for example, in their main Irish unit in 2014. The European Commission has declared this as illegal state aid, and have filed a lawsuit against Apple.
Today in court, Apple’s lawyer, Daniel Beard, argued that it’s a matter of common sense that the two Irish branches are not responsible for the majority of profits outside the USA and that the regulator is just looking to create “headlines by quoting tiny numbers”
Beard argues that the iPhone, iPad, App Store and other Apple products, services and key intellectual property rights were not developed in Ireland, and were developed in the USA.
The Commission contends that essentially all of Apple’s profits from all of its sales outside the Americas must be attributed to two branches in Ireland.
The branches’ activities did not involve creating, developing or managing those rights. Based on the facts of this case, the primary line defies reality and common sense.
The activities of these two branches in Ireland simply could not be responsible for generating almost all of Apple’s profits outside the Americas.
As Ireland has already emphasised, it undermines legal certainty if state aid measures are used to retrofit changes to national law … and legal certainty is a key principle of EU law; one upon which businesses depend. Some may want to change the international tax system; but that is a tax law issue – not state aid.
European Commission lawyer Richard Lyal described Apple’s argument as “perfectly correct and perfectly irrelevant”, and went on further to accuse Ireland of giving Apple special treatment:
They simply accepted an arbitrary method proposed by the Apple Ireland subsidiaries. That in itself gives rise to a presumption of a special deal, exceptionally advantageous treatment. It is clear that the tax authorities made no assessment in 1991.
Irish lawyer Paul Gallagher calls the Commission’s decision “fundamentally flawed”, and says that Ireland had been the subject of entirely unjustified criticism, and the Apple tax case is due to a mismatch between Irish and U.S. tax systems.
The court will come to their decision within the next few months, but appeals by the losing party will undoubtedly prolong the conclusion of the case for years.