Irish govt & Apple to challenge multibillion EU tax demand

Irish govt & Apple to challenge multibillion EU tax demand
Apple is to challenge the European Commission's ruling obliging the tech giant to pay up to €13 billion to Ireland in back taxes. The Irish government also plans to appeal.

The company is due to begin a legal challenge at Europe's second highest court as soon as this week, according to Apple senior executives.

In August, an investigation by the European Union Competition Commissioner Margrethe Vestager concluded that Ireland provided Apple with a favorable tax rate.

That allowed the iPhone maker to pay one percent on EU profits in 2003 down to 0.005 percent in 2014.

The regulator ignored Irish tax experts and corporate law, maximizing the penalty, said Apple's General Counsel Bruce Sewell and Chief Financial Officer Luca Maestri in an interview with Reuters.

“Now the Irish have put in an expert opinion from an incredibly well-respected Irish tax lawyer. The Commission not only didn't attack that - didn't argue with it, as far as we know - they probably didn't even read it. Because there is no reference in the EU decision whatsoever,” said Sewell.

According to the company lawyer, Apple was singled out due to its success.

“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,” said Sewell, referring to the title accorded by Danish newspaper Berlingske last month.

At the same time, the Irish finance ministry claimed the EU regulator exceeded its powers. The Commission had “misunderstood the relevant facts and Irish law,” according to the statement released by the ministry on Monday.

“The Commission has no competence, under state aid rules, unilaterally to substitute its own view of the geographic scope and extent of the member state’s tax jurisdiction for those of the member state itself,” it said, setting out grounds for an appeal to the EU General Court.

The case centers on how Apple allocated European sales profits to what the EU described as “head offices” not subject to tax by virtue of their tax status in Ireland. Apple Sales International (ASI) and Apple Operations Europe (AOE), its Ireland-based units, have never been exempt from tax, the company says. Moreover, under the law, they are subject to deferred US tax.

READ MORE: Washington threatens Brussels over plan to demand billions in unpaid taxes from Apple

“These branches carried out routine functions, but all important decisions within ASI and AOE were made in the US, and the profits deriving from these decisions were not properly attributable to the Irish branches of ASI and AOE,” the Irish finance ministry said.