Apple appeals EU tax ruling, claims Commission 'retroactively changed the rules'
Fulfilling a promise, Apple on Monday formally appealed a tax ruling by the European Commission ordering Ireland to collect at least $13.6 billion in back taxes.
The European Union "took unilateral action and retroactively changed the rules, disregarding decades of Irish tax law, U.S. tax law, as well as global consensus on tax policy, that everyone has relied on," Apple claimed in a statement to Bloomberg. The company has made similar statements in the past, insisting that it follows the law and pays everything it owes.
In a filing of its own, however, the Commission published more details of its two-year investigation, reiterating its stance that Ireland offered preferential tax treatment to Apple, something illegal under E.U. law. The Commission elaborated that Irish tax practices were "too inconsistent" to establish solid rules for profit allocation, and that the means used to produce taxable profit for Apple units didn't follow the arms-length principle for transfers between different parts of a company.
The Commission also defended itself against accusations leveled by Apple and Ireland, insisting that it respected both parties' procedural rights, and gave Ireland "ample opportunity" to make its positions known -- something that happened "on multiple occasions." Apple was only able to offer observations, but took advantage of that several times. The investigation never took its focus off of profit allocation methods, the Commission continued.
Apple's appeal joins an earlier one filed by Ireland, which nevertheless put out a new statement on Monday, attacking the E.U.'s charge that Apple shifted nearly all of its European profits to two "head offices" in Ireland -- Apple Sales International, and Apple Operations Europe -- so they couldn't be taxed.
"These branches carried out routine functions, but all important decisions within ASI and AOE were made in the U.S., and the profits deriving from these decisions were not properly attributable to the Irish branches of ASI and AOE," the Irish finance ministry said.
Apple has claimed that those units were never fully exempt from taxes, and are in fact subject to deferred U.S. taxation, though that would only apply if the company decided to repatriate the money -- something it has refused to do unless U.S. politicians grant it a tax holiday.
Officially Apple will have to pay the back taxes within a matter of weeks, Bloomberg said. That money will be held in escrow however, and the appeals process could take several years to resolve.
The European Union "took unilateral action and retroactively changed the rules, disregarding decades of Irish tax law, U.S. tax law, as well as global consensus on tax policy, that everyone has relied on," Apple claimed in a statement to Bloomberg. The company has made similar statements in the past, insisting that it follows the law and pays everything it owes.
In a filing of its own, however, the Commission published more details of its two-year investigation, reiterating its stance that Ireland offered preferential tax treatment to Apple, something illegal under E.U. law. The Commission elaborated that Irish tax practices were "too inconsistent" to establish solid rules for profit allocation, and that the means used to produce taxable profit for Apple units didn't follow the arms-length principle for transfers between different parts of a company.
The Commission also defended itself against accusations leveled by Apple and Ireland, insisting that it respected both parties' procedural rights, and gave Ireland "ample opportunity" to make its positions known -- something that happened "on multiple occasions." Apple was only able to offer observations, but took advantage of that several times. The investigation never took its focus off of profit allocation methods, the Commission continued.
Apple's appeal joins an earlier one filed by Ireland, which nevertheless put out a new statement on Monday, attacking the E.U.'s charge that Apple shifted nearly all of its European profits to two "head offices" in Ireland -- Apple Sales International, and Apple Operations Europe -- so they couldn't be taxed.
"These branches carried out routine functions, but all important decisions within ASI and AOE were made in the U.S., and the profits deriving from these decisions were not properly attributable to the Irish branches of ASI and AOE," the Irish finance ministry said.
Apple has claimed that those units were never fully exempt from taxes, and are in fact subject to deferred U.S. taxation, though that would only apply if the company decided to repatriate the money -- something it has refused to do unless U.S. politicians grant it a tax holiday.
Officially Apple will have to pay the back taxes within a matter of weeks, Bloomberg said. That money will be held in escrow however, and the appeals process could take several years to resolve.
Comments
OTOH, even if it were to lose, Apple will will merely set it off against taxes owed in the US, so it'll be the US taxpayers who lose. Ireland could pay a significant price in the long run by having become a less attractive place to do business.
I believe that Apple will lose it, even worse I believe it does not have a fighting chance. The Eurpoean commission has never lost an anti competition case before the European court. Remember the European commission does perceive the non paid tax as an anti competitve and thus illegal state aid from Ireland to Apple.
Damage control is the best Apple can go for.
So if I rent an apartment and the landlord and I agree on a price. And that city (JUST LIKE SAN FRANCISCO) has rent control... I live there for 15 years. The state that city is in (CALIFORNIA) starts running out of money to pay for all the freebies it promised - so legislature in Sacramento decides that rent control is not fair so they go after me even though I've done nothing wrong. I've been paying my rent agreed upon and both I and the landlord (who is very happy because I always pay on time) are told collect the money retroactively on my rent control apartment and that's ok?
And how come the other 100,000 that live in SF who also get rent control are not having to pay retroactively? So just because legislators found out I got a great job that pays well I am singled out over the other 99,999 people because they are barely getting by?
oh AND I'm paying the money NOT to the landlord who would be collecting it retroactively, but directly to the legislators in Sacramento instead?? And this is somehow fair?
So if our government decides the taxes weren't high enough for all of us. 10 years ago we should have started paying more. Every citizen working NOW is expected to pay that percentage more times the last 10 years (we won't charge unemployed people who lost their jobs due to badly written laws or over regulating) oh and its due in 2 weeks. Yeah I think that's completely fair.
Welcome to Venezuela and the "shake-down"!
(Patrick Pelata's tweet)
As for whether US taxpayers "lose" that would depend on whether Apple ever brings home all the profits held in foreign-controlled accounts. I don't believe they plan on doing so even if Mr. Trump extends a one-time tax holiday of 10-15%, and even that is not assured. Certainly they would repatriate at least a portion of their profits under the right circumstances, as shown by their identification of deferred taxes on a large amount of it, but Apple has never fully recognized and set aside taxes for the entire amount of profits they've realized, which they would not have to if they never had an intent of repatriating some amount of it in the foreseeable future. In the most recent mention from Apple that I've read the amount of profits for which Apple had no plans whatsoever and under any circumstance to bring back to the US amounted to around $100B in round figures.
Of course if Ireland is going to be awarded taxes anyway Apple could change their plans and make it taxable in the US instead, but they would still have to set aside additional taxes (on paper) over and above their current deferrals which to this point they have not AFAIK.
The EU can *easily* halt all Apple sales within its borders within a relatively short time, costing Apple billions.
It won't come to that.
EDIT: Checking it looks like only Bulgaria has a lower corporate tax rate than Ireland among the EU member countries. Theirs is 10% vs. Ireland's 12.5%. Most others are considerably higher, a good reason for Apple' activities in a country like Germany showing a paper loss with revenues shifted to low-tax Ireland.
http://money.cnn.com/2016/08/25/technology/us-eu-apple-tax/
The EU has no right to Apple worldwide profits. The taxes are based on Apple sales outside the US, not Apple sales inside the EU. They can go pound sand.
Or only ship LNG to NATO countries that actually puts 2% of GDP into their military. That would be Poland, UK, Greece and Estonia. That would likely fit President Trump's agenda quite nicely.
If Apple has to bring some jobs back to the US to appease President Trump it'll be worth the supply chain disruption to make this goes away as it should go away.
I didn't vote for The Donald but if the Europeans think that this is a good time hit US companies with big fines they are complete idiots.