Apple, Ireland Wrap Arguments Over $14B EU Tax Bill

The main courtroom at the European General Court. (Photo via EU Curia)

LUXEMBOURG (CN) – Tech giant Apple continued its fight Wednesday against a demand for $14 billion in back taxes from the European Union, arguing alongside Ireland in the European General Court that EU regulations on corporate tax are “untethered from reality.”

Presiding Judge Marc van der Woude opened the hearing by commenting on how full the court chamber was.

“It hardly ever happens that as many people come back for the second day,” he said, highlighting the public interest in the case.

The outcome has substantial consequences for the EU’s competition commissioner, Margrethe Vestager, who has been leading the charge against what she sees as unfair dealings by tech giants like Apple, Amazon, and Google in the European Union. Vestager will take over as the next European Commission vice president in November.

The morning opened with a number of technical questions that had been left over from Tuesday’s nine-hour hearing at the EU’s second-highest court.

Daniel Beard of Monckton Chambers, arguing on behalf of Apple, requested that the court registrar change a number of references to Apple Inc. in the court’s record to “in Cupertino” referring to the iPhone maker’s headquarters in Cupertino, California.

Apple and Ireland – backed by Luxembourg, which has also faced accusations of being a tax haven – have emphasized that since the intellectual property of Apple resides outside of the EU, profits on its iPhones, iPads, and MacBooks should not be taxed within Ireland.

The European Commission disagreed, with its lawyer Richard Lyal claiming that Ireland “blindingly accepted” what Apple told the Irish government should be taxed.

The case dates back to a 2016 finding by the commission that Ireland had not properly assessed the tax liability of Apple, whose European headquarters are in Ireland, and demanded that Apple pay Ireland 13 billion euros, or about $14 billion, in back taxes.

But Ireland declined to pursue the windfall, and both the country and the tech giant appealed to the European General Court. U.S.-based multinationals operate 25 of the 50 largest companies in Ireland and pay an estimated 80% of all Irish corporate tax.

Despite appealing, Apple has paid 14.3 billion euros – the original 13 billion euro plus interest and fees – into an escrow account pending the outcome of the appeal.

On Wednesday, questions from the 11-judge panel focused heavily on what activities Apple undertook in Ireland, leading to Beard painstaking explaining how costs are shared by the two Apple subsidiaries in Ireland, Apple Sales Ireland and Apple Operations Europe.

Late in the afternoon, with questions from the judges exhausted, the parties moved on to final statements.

Former Irish Attorney General Paul Gallagher delivered closing arguments for Ireland, reiterating that the country gave no preferential treatment to Apple. Most of the European Commission’s ire has been directed at the island nation, as the EU attempts to stop its 28 member countries from offering sweetheart deals to multinational companies to headquarter within their borders.

EU countries are banned from offering so-called state aid, or financial benefits to certain companies and industries, under the bloc’s competition regulations.

Beard described the commission’s position as “simply untethered from reality” in his closing statements. Apple has maintained that the only activities its Irish holdings engaged in were not related to its intellectual property, such as ensuring its apps were translated into European languages and providing technical support.

“No one buys an iPhone in the hopes that it will break and they can call AppleCare,” Beard said, referring to the company’s extended warranty program.

Commission attorney Paul-John Loewenthal returned to give the executive body’s final statement after Lyal handled most of the questions Wednesday, a decision Loewenthal clearly stood behind. “My colleague, Mr. Lyal, has clearly demonstrated the commission’s position,” he said.

Judge van der Woude had the last word of the day when he asked all of the parties if anyone would object to the judges providing a joint ruling on the case. This week’s hearing covered two separate cases, one between Apple and the European Commission and the other between Ireland and the commission.

A ruling is expected to take months. After that, either side can appeal to European Court of Justice, the EU’s highest court.

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