Topline: Apple and the Irish government will this week appeal an European Commission ruling that the Cupertino-based tech giant saved $14.3 billion in taxes by striking a favorable deal with the Irish government.
- On Tuesday, the European Union’s General Court will begin hearing Apple and Ireland’s appeal following three years of preparation. A ruling in the case could take months but is likely to be appealed to Europe’s highest court, European Court of Justice, which would stretch the legal battle over years.
- EU antitrust chief, Margarethe Vestager levied the record tax bill on Apple in 2016 after arguing that Ireland had cut sweetheart deals that allowed Apple to avoid Ireland’s 12.5% corporate tax, already one of the lowest in the world, and instead pay rates as low as 0.005%
- This was done through two Apple subsidiaries–Apple Sales International and Apple Operations Europe–both based in Ireland. Profits from Apple purchases made in Europe were legally transferred to these subsidiaries, meaning taxes were paid in Ireland at the low rate, instead of to the country in which the iPhones, MacBooks, iPad sales were bought.
- Apple claims it is the largest taxpayer in the world and has denied wrongdoing while Vestager and the EU argue that Ireland’s favouritism allowed the iPhone maker to save $14.3 billion in taxes between 2003 and 2014.
- In a quirk of EU rules – Ireland would receive a $14.3 billion windfall if the Vestager wins the case. The Irish government may prefer to maintain the close relationship that has seen Apple, and scores of other tech companies choose Dublin as an European headquarters.
- The Irish government said the European Commission misunderstood Irish law and that the tax rulings in were legal
Tangent: Ireland has denied claims by the European Parliament that it behaves like a tax haven. The country was accused in March of “[displaying] traits of a tax haven and facilitate aggressive tax planning,” alongside Belgium, Cyprus, Hungary, Luxembourg, Malta and The Netherlands. Ireland’s economy has flourished in recent decades as aggressive tax policies and lower costs than other European capitals have wooed tech, finance and pharmaceutical companies..
Key background: Margarethe Vestager has talked tough on Big Tech in her first term as the EU’s antitrust enforcer but this case could test the limits of her powers.
Vestager already has one scalp from this campaign: Amazon in 2017 was ordered to pay $276 million to Luxembourg, its European headquarters, after similarly ruling that the Grand Duchy struck a sweetheart deal with the e-commerce giant.
The battle with Apple and the Irish government will be played for higher stakes with the case raising concern in Dublin that the trading bloc was infringing its sovereignty and internationally that EU was ripping up the rulebook on international tax.