Apple's appeal against $14.4B EU & Ireland tax payment is this week
Apple is due to head to the European Union General Court over its tax affairs this week, with the iPhone maker set to commence arguments on Tuesday to reverse a ruling by the European Commission that caused it to pay Ireland 13 billion euros ($14.4 billion) in back taxes.
Apple's Irish headquarters
The date for the showdown between the regulator, Ireland, and Apple was set in mid August, with the appeal set to take place on Tuesday and Wednesday at the second-highest tribunal on the continent. While a final ruling on the matter may take months to arrive, the first signs of Apple's fate will be via a pair of initial rulings set for publication on September 24.
The courtroom tussle is over a 2016 ruling by the European Commission claiming Apple was provided preferential tax breaks by Ireland, including one rate as low as 1% on European profits in 2003, and as little as 0.005% in 2014. Through a financial process commonly called the "double Irish," Apple funneled its European revenue through Ireland to take advantage of the rates.
The European Commission's decision led to an order for Apple to pay 13.1 billion euro to Ireland, along with 1.2 billion extra in interest. Naturally, both Apple and Ireland opposed the ruling.
Neither Apple nor the European Commission offered a comment to Fortune ahead of the hearing, with Ireland advising it "profoundly" disagreed with the fine. Apple did however refer to comments it previously made about its tax payments, including a statement made in November 2017, insisting it complies with tax laws and that it was the largest taxpayer in the world, spending over $35 million in corporate income taxes over a three-year period.
Under EU rules, preferential tax treatment like the rates provided to Apple is forbidden, including in cases where individual member states offered companies benefits not available elsewhere in the European Union.
The total balance of 14.3 billion euros has been retained in escrow throughout the appeals process and will remain so until its completion, in case it has to be return to Apple, though so far the escrow account has lost 16 million euro in value despite it being invested in typically safe sovereign and quasi-sovereign bonds.
Regardless of the result of the hearing, it is possible the major tax battle could go on for years longer, with it potentially being sent to the EU Court of Justice, the continent's highest tribunal.
Outside of Apple, the courtroom fight has the potential to affect other multinational companies that have become targets of the European Commission for tax reasons. A win to the European Commission could embolden it to conduct further investigations, and possibly more fines to be paid.
According to European Parliament member Sven Giegold, the legal activity has "very big consequences" on a political level, suggesting "If Apple wins this case, the calls for tax harmonization in Europe will take on a different dynamic, you can count on that."
So far, individual member states like France and Austria have explored the possibility of applying extra tax measures against major tech companies, but work to produce Europe-wide tax reform is moving at a far slower pace.
Apple's Irish headquarters
The date for the showdown between the regulator, Ireland, and Apple was set in mid August, with the appeal set to take place on Tuesday and Wednesday at the second-highest tribunal on the continent. While a final ruling on the matter may take months to arrive, the first signs of Apple's fate will be via a pair of initial rulings set for publication on September 24.
The courtroom tussle is over a 2016 ruling by the European Commission claiming Apple was provided preferential tax breaks by Ireland, including one rate as low as 1% on European profits in 2003, and as little as 0.005% in 2014. Through a financial process commonly called the "double Irish," Apple funneled its European revenue through Ireland to take advantage of the rates.
The European Commission's decision led to an order for Apple to pay 13.1 billion euro to Ireland, along with 1.2 billion extra in interest. Naturally, both Apple and Ireland opposed the ruling.
Neither Apple nor the European Commission offered a comment to Fortune ahead of the hearing, with Ireland advising it "profoundly" disagreed with the fine. Apple did however refer to comments it previously made about its tax payments, including a statement made in November 2017, insisting it complies with tax laws and that it was the largest taxpayer in the world, spending over $35 million in corporate income taxes over a three-year period.
Under EU rules, preferential tax treatment like the rates provided to Apple is forbidden, including in cases where individual member states offered companies benefits not available elsewhere in the European Union.
The total balance of 14.3 billion euros has been retained in escrow throughout the appeals process and will remain so until its completion, in case it has to be return to Apple, though so far the escrow account has lost 16 million euro in value despite it being invested in typically safe sovereign and quasi-sovereign bonds.
Regardless of the result of the hearing, it is possible the major tax battle could go on for years longer, with it potentially being sent to the EU Court of Justice, the continent's highest tribunal.
Outside of Apple, the courtroom fight has the potential to affect other multinational companies that have become targets of the European Commission for tax reasons. A win to the European Commission could embolden it to conduct further investigations, and possibly more fines to be paid.
According to European Parliament member Sven Giegold, the legal activity has "very big consequences" on a political level, suggesting "If Apple wins this case, the calls for tax harmonization in Europe will take on a different dynamic, you can count on that."
So far, individual member states like France and Austria have explored the possibility of applying extra tax measures against major tech companies, but work to produce Europe-wide tax reform is moving at a far slower pace.
Comments
It really does provide an unfair advantage. It takes significant sum to set up all the relevant shell companies and accounting schemes to take advantage of such loopholes so smaller companies or those that only operate in one jurisdiction can’t do it. Even if they could it would still be morally wrong.
The EU commission is elected by 27 governments. If you go against the commission... well... then you mess with the governments of 27 nations. And they just agreed to ask the competition commissioner of the last 5 years to continue. It is totally unheard of, but she now has 5 more years in the job! Not only that. She got promoted to executive vice-president of the EU Commission with the added responsibility of... everything digital. Why is it that Tim Cook does his outmost to stay on her bad side? In local TV she ridiculed him for being half her height - shown with a hand gesture (sorry... no link but it was rather rude). Unlike Trump the lady is not for turning. With Apple having a focus on privacy she could be the best thing that happened to Apple. Instead she is the worst.
Just pay the taxes and spend the same amount on wind farms from and in her home country with some words about the importance of contributing locally. And then start talking privacy... she could completely disrupt the business model of Google, Facebook etc.
I’m assuming this is a typo. Maybe $35 billion?
The $14.4 B in this case amounts to a power grab on potential US tax income. It will either revert to Ireland’s government or the US government. It is essentially the EU saying that Apple holding it’s corporate cash in Ireland means Apple should pay a corporate tax there.
It beggars belief that posters here can know so little and yet post so authoritatively.
The investigation followed very clear guidelines and a summary was made public. Now the case will be heard.
Up to now we have known very little about the details so making broad claims about power grabs doesn't make a lot of sense because it based on nothing. The truth is there was a thorough investigation and now both sides will present their views. Further down the line we will learn the outcome but one thing should be clear the EU doesn't do power grabs.
Which is why I say this EU maneuver WAS designed to pick the US Treasury’s pocket....
So now, it’s possible that the money might come directly out of the hide of Apple investors. Or largely accrue to investors if Apple wins.
Which means, if they lose, it’s important for Apple to get to cash neutral ASAP. You can’t tax zero net cash.
That's the thing.
But…it was by definition "legal". There were tax laws that applied to the place of business, and Apple followed them to the letter.
These tax laws were designed to encourage multinationals to settle in Ireland, boosting the dead local economy, and they were very effective.
The bone of contention at this point is merely whether Apple should have to pay for following the letter of the law, or whether Ireland covers the cost for having created laws that were apparently in violation of EU tax policy. (You can tell from my wording where I think the onus falls.)