The two-day Irish tax appeal is underway, with both Apple and Ireland appealing against a ruling that the Cupertino company must pay €13B ($14.3B) in underpaid tax over more than two decades.
Apple isn’t pulling any punches, its lawyer arguing that the ruling ‘defies reality and common sense’ …
Background
We recently provided a quick summary of events to date.
Apple CFO Luca Maestri is heading a team of six execs who will be giving evidence in the case.
The EU ruled that these arrangements were illegal. It was the Irish government, rather than Apple, which was found to have broken the law, but because the arrangement was not lawful it meant that Apple owed the taxes which should have been collected.
As both parties appealed, it was agreed that Apple would pay the sum into an escrow account, where it would be held pending the appeal.
Irish tax appeal – opening arguments
Reuters reports Apple’s opening arguments in the case.
One of Apple’s arguments is somewhat disingenuous.
The iPhone maker also accused the executive European Commission of using its powers to combat state aid “to retrofit changes to national law,” in effect trying to change the international tax system and in the process creating legal uncertainty for businesses.
The reason that profits from multiple countries are being attributed to Ireland is, of course, precisely because Apple chose to funnel all revenue from EU countries to two companies based there.
“The activities of these two branches in Ireland simply could not be responsible for generating almost all of Apple’s profits outside the Americas.”
Apple also didn’t deny the very low rate of tax paid on money received in Ireland.
Complicating matters, however, is the fact that Apple has since repatriated much of the cash to the US to take advantage of a tax break there, meaning that profits which were originally virtually untaxed have now been taxed in the US.
Ireland, which is also appealing, made two main arguments. First, that such rulings should not be retroactive. Second, that the EU is effectively trying to fix a global tax problem with a local ruling.
There will be further arguments from Apple and the Irish government throughout the day, and the European Commission is expected to make its case tomorrow. The judges will also hear arguments from Luxembourg, Poland and the European Free Trade Association, each of which has its own angle on the legality of the ruling.
“Some may want to change the international tax system; but that is a tax law issue – not state aid,” he said.
Although the Irish tax appeal hearing is short, we shouldn’t expect the matter to be settled anytime soon: a ruling is expected to take several months, and whichever side loses will almost certainly appeal to the European Court of Justice.
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