Apple on Monday outlined its appeal of a $14 billion tax bill imposed by the European Commission in August, claiming it’s been unfairly targeted by the EU competition chief. And the Irish government hit out strongly at the Commission, saying it overstepped its authority by ordering Ireland to collect the tax from Apple.
Apple and Ireland both issued strongly worded statements on the same day the Commission published a 130-page report that sets out the corporate structures Apple has put in place in Ireland to minimize its tax bill. According to the report, one of Apple’s two Irish subsidiaries — both of which have no employees and no physical presence — had profits of $25 billion in 2014, but paid less than $10 million in tax.
Despite Apple CEO Tim Cook’s best efforts to persuade Europe’s competition commissioner, Margrethe Vestager, in one-on-one meetings earlier this year, Apple was hit with a €13 billion fine in August, leading to an angry backlash from both Dublin and Cupertino.
“Apple is not an outlier in any sense that matters to the law. Apple is a convenient target because it generates lots of headlines. It allows the commissioner to become Dane of the Year for 2016,” Apple’s general counsel, Bruce Sewell, told Reuters. Vestager was named Dane of the Year by Danish newspaper Berlingske last month.
Since becoming competition chief in 2014, Vestager has built a reputation for taking on some of the biggest U.S. companies operating in Europe, including Starbucks, Google and Amazon.
The report published Monday says Apple could reduce its tax bill to Dublin if it increased payments to its U.S. parent company or paid back taxes to other EU countries. Apple has indicated it may be willing to repatriate some of its cash to the U.S. if President-elect Donald Trump follows through on a promise to reduce the corporate income tax rate from 35 percent to 10 percent.
The Irish government also hit out at Europe in a terse statement, issued hours before the Commission’s report was published. Including a summary of the legal arguments it will present in its appeal, the government said Europe “misunderstood the relevant facts and Irish law.” It added that the Commission had overstepped the mark by “interfering with national tax sovereignty.”
In November Ireland lodged a complaint with the General Court of the European Union asking for the decision to be annulled. The Commission says it has built its case in the expectation of a court challenge, while Apple says it is “confident the ruling will be overturned.”
The Commission believes Apple funneled profits on all sales outside the U.S. through its two Irish subsidiaries and brokered sweetheart tax deals with the Irish government — constituting illegal state aid. The Commission says the deals allowed Apple to reduce its effective tax rate to just 0.005 percent — meaning it was paying just $50 in tax for every $1 million in profits.
The Commission’s report says the Irish government gave no reason why Apple received “selective treatment” when paying tax in Ireland, giving Apple a considerable advantage over other companies operating under the same tax rules.
Both Apple and the Irish government strongly disagree with the Commission’s interpretation of tax law, saying it is wrong for Apple to pay the bulk of its tax in Ireland when the economic value was not created there.