Apple says $14 billion EU tax clawback ‘defies reality and common sense’

Apple is appealing to Europe’s second highest court to overturn the European Commission’s 2016 ruling that it pay the record sum of over 13 billion euros to Ireland. The European Union’s order to Apple to pay over US$14 billion in back taxes “defies reality and common sense,” the U.S. firm said as the two sides sparred in the case.

Reuters:

Apple also accused the Commission of using its powers to combat state aid “to retrofit changes to national law”, in effect trying to change the international tax system and in the process creating legal uncertainty for businesses.

The EU executive dismissed the arguments, saying it was not seeking to police international tax laws and accused Ireland of not having done its homework when assessing Apple’s taxes. “The Commission contends that essentially all of Apple’s profits from all of its sales outside the Americas must be attributed to two branches in Ireland,” Apple’s lawyer Daniel Beard told the court.

He said the fact the iPhone, the iPad, the App Store, other Apple products and services and key intellectual property rights were developed in the United States, and not in Ireland, showed the flaws in the Commission’s case. “The branches’ activities did not involve creating, developing or managing those rights. Based on the facts of this case, the primary line defies reality and common sense,” Beard said. “The activities of these two branches in Ireland simply could not be responsible for generating almost all of Apple’s profits outside the Americas.”

MacDailyNews Take: The vast majority of the value in Apple products is created in the United States of America, where design, development, engineering work and more are accomplished. Therefore, under the current international tax system, the majority of Apple taxes are owed to the United States of America, not Ireland.

Good luck, Apple in an EU court deciding on a $14.4 billion EU-ordered tax clawback. We’re sure the judgement will be ever so fair.

25 Comments

  1. The case is not about taxation in the US or not. The case is about taxation of all EU (and I think Middle Eastern) sales, if not more, being funneled to one EU country, rather than to each country where the sales are made. Apple has a favorable tax regime in Ireland, to the detriment of other EU countries, which essentially amounts to state aid to Apple from Ireland, something that is not allowed in the EU. Apple is seriously twisting things here.

    1. This all BS, Apple didn’t twist Ireland’s arm for this Tax Regime as you suggest. Apple has created many EU jobs, improved many people’s lives, which add to EU tax base. So a successful run American company needs to be penalized in Taxes because they legally agreed to a tax situation the Irish proposed? Socialism at its best. Perhaps Ireland is at fault and should be subject to the proposed EU tax penalty. It sounds like Ireland broke the EU tax regulation. The EU has several losing European economies with over bloated governments which burden the more successfully run EU economies to foot the EU tax bill. Several EU countries contribute nothing productive to the EU economies. Apple should not foot the bill of these poorly run countries. Apple is an honest company which pays billions in taxes and produces jobs and services that improves people’s lives across the world. The EU should tighten their own tax belt buy reducing the over bloated governments they maintain. Even if the EU wins this 14.5 billion….non of this money will trickle down to useful things for the EU common citizen. This is total BS socialism at its best.

      1. The EU will not “win this 14.5 billion” no matter how the suit turns out. The money will go to Apple if Ireland wins and to Ireland if Ireland loses. No “EU common citizen” outside Ireland will see a cent of it in either case. This is not about bloated EU income taxes because THE EU DOES NOT HAVE A CORPORATE OR INDIVIDUAL INCOME TAX. The individual member states have their own taxes, which they can set as high or low as they wish, provided that they apply them uniformly and without the intent to lure individual companies away from other member states. Whether this Irish tax in question did so is a fact question for the court to determine.

        1. “The money will go to Apple if Ireland wins and to Ireland if Ireland loses.”

          What vapor money? The issue is the omnipresent EU suing Apple and Ireland for back taxes not paid. Common sense dictates if the money was not paid in the first place, please tell us HOW it will go back to Apple or Ireland. 🤣

          “The individual member states have their own taxes, which they can set as high or low as they wish”

          Agree 100% so tell us why the EU is suing Apple and Ireland for not paying back taxes. According to your post the sovereign EU nations can set the rates high or low, again agreed. Ireland set taxes for Apple by EU law. So, what’s the problem Mr. Know it All?

          Every fair minded person should CONDEMN this tax grab clawback EU lawsuit and fingers crossed Apple prevails…

          1. “HOW will it go back to Apple or Ireland?”

            Apple placed the money in escrow months ago. When the lawsuit is final, the escrow agent will cut a check, to Apple if Ireland wins and to Ireland if Ireland loses. The E.U. will, at most, have its court costs reimbursed. Wasn’t that simple? No grabbing anywhere in sight.

            “What’s the problem, Mr. Know It All?”

            I don’t know it all, but I do know that Ireland can only set its taxes as high and low as it likes if it applies the tax uniformly. The European Commission is alleging that Ireland cut a deal with Apple so that it would pay less taxes than its competitors. That isn’t allowed because it amounts to a government subsidy that tilts what should be a level playing field among all companies doing business within the Free Trade Zone. The clawback represents the additional amount that Apple would have paid if it had not received the subsidy. That’s the problem.

            The facts are, of course, in dispute, which is why they are having a trial. I hope Apple wins, but it isn’t a grab in either case. Nor is it an attack on Ireland (or American) national sovereignty. The E.U. treaties are a part of Irish law because they were ratified by the Irish Parliament, and confirmed by a popular referendum in 1972. The Irish freely agreed not to pass laws inconsistent with its treaty obligations.

            1. Money in escrow is not taxes paid, it is insurance savings.

              It doesn’t make sense to allow countries to set their own tax rates and then have a problem micromanaging the process. Companies come in all sizes and cannot be managed the same. We have KOZ zones and politicians come up with sweet tax deals to lure companies everyday.

              The problem is with the E.U. socialist even distribution dream that has never worked fairly wherever it has been tried…

            2. “We have KOZ zones and politicians come up with sweet tax deals to lure companies everyday.”

              Right. In the US. Where it is legal.

              Not in the E.U. Where it is illegal.

              Why the difference? Well, it seems unlikely that anyone will be physically harmed by a trade war between two American cities or even states. Several tens of millions of people died in wars sparked by rivalry between France and Germany—three wars in less than 70 years. Further millions died in smaller European conflicts. So, some forms of “sweet deals” that are OK in the US are illegal in Europe.

              Whether Apple’s deal with Ireland was a prohibited sweet deal is precisely the question before the court. I hope Apple wins, but that depends on the facts.

              The E.U. economic policies are not socialist. They specifically prohibit giving preferential treatment to state-controlled businesses. They are intended to allow private businesses to compete in free markets without the government tilting the playing field. That’s about as capitalist as you could ask.

              As for the dream not working, how many wars between E.U. member states have happened in the last seventy years? How has the increase in the European standard of living and life expectancy over those seventy years compared with the percentage increases in the US since 1950?

              Finally, what do you mean with that gibberish about Apple’s disputed tax payments placed in escrow being “insurance savings”?

  2. Thank you, MDN, for using the accurate term “tax clawback” rather than the inaccurate and defamatory “tax grab.”

    However, you offset that by suggesting that judges in the EU are government lackeys who will rubber stamp executive errors, no matter how egregious. You would be deeply offended if anyone suggested the same about recently appointed American judges. We will see what the court rules—and I hope Apple and Ireland win—but don’t assume the outcome based on the false premise that Europeans don’t understand or value an independent judiciary.

      1. If you owe taxes you have not paid, suing you to pay them is a clawback, not a grab. Even if you do not owe them, it is hardly a grab if the party that sues you will receive none of the disputed taxes. To be a grab, there has to be someone grabbing.

        The EU isn’t grabbing because it has no chance of a financial benefit—it will get none of the money. The party that would receive the taxes, the Republic of Ireland, is not grabbing, either, since it is supporting Apple in this lawsuit.

        1. “If you owe taxes you have not paid, suing you to pay them is a clawback, not a grab.”

          You posted here earlier that sovereign EU nations can set set taxes high or low as they wish. Apple paid all taxes by law to Ireland.

          The EU lawsuit is manufactured fantasy claiming Apple is not not paying back taxes. If that is not a “tax grab” for Ireland, NOTHING IS…

          1. First, learn to read. Then read my response above to this same dumb question. I said that EU members could set taxes as low or high as they liked, SO LONG AS the rules were applied uniformly to all potential taxpayers. That is the undisputed legal principle that governs this case.

            The dispute is over the facts, specifically whether Ireland applied a different rate to Apple than they did to its competitors. That is why there is a trial underway—to determine the facts. The court will hear relevant evidence and make a decision. That is how civilized countries resolve disputes, not on the basis of pure power politics. The whole European Project since 1945 has been about establishing due process to replace the national rivalries that led to repeated wars.

            1. It is you that doesn’t know how to read. Take off the socialist blinders.

              “If you owe taxes you have not paid, suing you to pay them is a clawback, not a grab.”

              The E.U. is claiming back taxes not paid, but the reality is they don’t like the sovereign country tax deal Ireland cut with Apple. The uniformity dream is the worst king of socialist dream.

              It’s none of EU’s business if they truly believe in sovereign countries and trusting them to make their own deals. Ireland is suing the E.U. and does not want or need the money.

              That is precisely why this is an EU manufactured LAWSUIT “tax grab” going after the richest cash company in history.

              And if the E.U. wins, watch what the big bully countries do with Ireland after they have gotten away with trampling on a sovereign nation will only embolden them further…..

  3. “Apple has a favorable tax regime in Ireland, to the detriment of other EU countries, which essentially amounts to state aid to Apple from Ireland, something that is not allowed in the EU”

    should be:

    “Ireland has bilateral tax agreements with EU countries to collect taxes from other Eu countries. Ireland sets a tax rate. Apple pays it. All LEGAL . Please note Apple has been in Ireland for years and years, the EU only started to perk up to the tax issue when Apple started making lots of money. The were fine years back with the Irish laws .

    But now realizing there’s lots of money the EU scratched their brains to overcome the legal agreements they had with ireland to come up with a fantastical ‘state aid’ argument to override the existing bilateral agreements etc that have been in place for years.

    Then are trying by applying the definition ‘state aid ‘ to render something they had agreed with for years illegal. Ireland disagrees with the ruling. The EU says Apple owes Ireland billions which Ireland does not want. This is because powerful factors in the EU (some EU countries have more political power than little Ireland) want to make Ireland’s tax policies so unpalatable that Apple would choose to leave Ireland. The EU’s bias towards certain countries and to the detriment of others is why England wants to Brexit. The EU for example favours certain countries fishing rights over Englands etc .

    1. to be clear I’m not saying that Corporations not paying local taxes and funnelling it to one low tax country is all that morally great.

      I’m just arguing that Apple hasn’t done anything illegal, and the EU is trying to twist the definition and make what they’re accepted for years suddenly wrong and make Apple pay retroactive taxes.

      If the EU thinks countries should pay taxes in the countries of sales than they should CHANGE the tax laws and bilateral agreements. And then apply the new laws going forward. Changing definitions midstream and retroactively collecting taxes doesn’t seem fair.

      But the EU isn’t really committed to changing too much of the law as European companies also use the loopholes. they just want to SELECTIVELY attack mostly USA companies as they are locally politically powerless.

    2. Ireland does not have a bilateral agreement on taxation with any other European country. It is a party to the multilateral treaties that created and govern the European Union. It is bound by those treaties as firmly as by any domestic law (the same is true in the US: treaties form part of the “supreme law of the land”). There is a legitimate dispute over whether the Irish arrangement with Apple was allowed under those treaties. Modern countries have courts to resolve such disputes, which is what is happening here.

      Ireland and the UK both knew the score when they joined the EU. They knew that they were surrendering some autonomy in exchange for membership in a free trade zone that fostered free competition across national boundaries, rather than between national communities.

      The men who originally signed the treaties still remembered where a sharp focus on nationalism had led their continent in 1914 and 1939. Ireland still remembers, even if the Brexit party doesn’t.

      1. Hmm,

        ??

        “Ireland does not have a bilateral agreement on taxation with any other European country. ”

        I’m not super expert on corporate taxes but just a causal search:
        (I based my comment above on articles written by experts so I’m just trusting their comments on Irish taxes)

        article:

        “In November, 2008, Ireland signed a Double Tax Avoidance Treaty with Malta – the only EU country with which it did not already have such a treaty. Ireland also signed a double tax avoidance treaty with Georgia.”

        Revenue.ie

        “Ireland has signed comprehensive Double Taxation Agreements (DTAs) with 74 countries; 73 are in effect. The agreements cover direct taxes, which in the case of Ireland are:

        Income Tax
        Universal Social Charge
        Corporation Tax
        Capital Gains Tax.
        Commentary on typical provisions of Irish tax treaties.

        The following is a summary of the work underway to negotiate new DTAs and to update existing agreements:

        On 13 June 2019, Ireland and the Kingdom of the Netherlands signed a new DTA. Procedures are underway to ratify the DTA. The new DTA will replace the existing DTA between Ireland and the Netherlands on its entry into effect.
        On 13 June 2019, Ireland and Switzerland signed a Protocol amending the existing DTA and Amending Protocols between Ireland and Switzerland. Procedures are underway to ratify the Protocol.

        ()

        “Ireland and the UK both knew the score when they joined the EU. They knew that they were surrendering some autonomy in exchange for membership in a free trade zone that fostered free competition across national boundaries, rather than between national communities.”

        Yes, and they expect to be respected. But the EU is now being hijacked by factions with their own agendas.

        1. I stand corrected. However, the point remains that all these bilateral treaties have to comply with E.U. law. The European Commission claim is based on that, rather than any of the subordinate treaties.

      2. “their continent in 1914 and 1939. Ireland still remembers, even if the Brexit party doesn’t.”

        As a leftist Big Gubmint Life Member you don’t agree with Brexit, got it. I do believe they should rule their sovereign nation as they see fit.

        I take serious issue with your careless, callous and flippant comment that the U.K. does not remember the world wars that engulfed their country with nightly bombing raids and citizens forced into war.

        You are entitled to your opinion. You are not entitled to speaking for others and peddling FALSE INSULTING narratives…

        1. Obviously, the Brexiteers remember “their finest hour” when the UK stood bravely alone against barbarism. I do not think that they remember the lessons that the people who lived through that drew from it—that national rivalries often lead to war and only international cooperation (UN, Marshall Plan, EU, NATO, etc.) are likely to prevent it. Jingoism is not patriotism.

  4. Instead of enriching the 1%, taxes will pay for ordinary citizens’ health care, infrastructure, saving the environment, education, etc. Apple can afford it. It should Think Different and be a good corporate citizen for a change instead of being greedy and rationalizing its greed via legalese.

    1. Apple is the largest taxpayer in the USA and one of the largest taxpayers in the rest of the world.

      “ordinary citizens’ health care, infrastructure, saving the environment, education, etc”

      It already significant helps fund all that around the world.

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