Apple told the European Union’s highest court that it is paying €20 billion in tax to the United States on the same profits that the European Commission argues should be subject to back taxes of €13.1 billion in Ireland.
Lawyers representing the tech giant told a hearing in the grand chamber of the European Court of Justice that the commission had made “numerous errors and misrepresentations” in its arguments that Ireland should be paid the additional tax.
Apple is now paying “€20 billion in tax in the US on those very same profits the commission says should have been taxed by Ireland”, senior counsel for Apple Daniel Beard told the court.
[ Timeline of Apple’s €13bn Irish tax caseOpens in new window ]
The hearing in Luxembourg was held as the commission seeks to overturn a previous defeat in the dispute over Apple’s tax arrangements in Ireland, all stemming from a finding by the EU executive that Ireland gave the multinational a sweetheart tax deal.
The commission ordered Ireland to recoup €13.1 billion in back taxes, but its findings were disputed by Apple and Ireland, leading to a long legal battle while the disputed sum is held in an escrow holding account.
Apple was “only required to pay tax in Ireland on profits generated from activities taking place in Ireland”, Apple lawyer Mr Beard told the court.
[ Apple reports €63.5bn profit at main Irish subsidiaryOpens in new window ]
“The essence of this case is simple. The commission just got the facts wrong in terms of the activities that took place in Ireland,” he argued. “There was no special treatment, there was no state aid.”
Ireland’s former attorney general Paul Gallagher told the court that it would be “astonishing” if two companies in Cork he described as performing “routine” manufacturing and distribution activities were responsible for earning all of Apple’s intellectual property profits worldwide outside the Americas.
“Ireland applied its tax rate to those profits which it was entitled to tax,” Mr Gallagher insisted.
[ 2020 Apple verdict a victory for Ireland Inc but politically poisonousOpens in new window ]
The commission is hoping it can convince the judges to overturn a defeat in the EU’s second-highest court in 2020, which found in favour of Apple and Ireland’s arguments that the company had not been given an unfair advantage with a sweetheart deal in breach of EU fair competition laws.
However, the commission’s lawyer Paul-John Loewenthal told the court that “Ireland misapplied its tax law when granting the tax rulings” in decisions by Revenue in 1991 and 2007.
“That misapplication resulted in Ireland granting [Apple subsidiary] ASI substantial tax breaks as compared to other Irish taxpayers,” Mr Loewenthal argued.
The commission said the general court had made “legal errors” when it rejected its case in a 2020 ruling, by confusing aspects of Apple’s corporate structure.
Apple itself had inadvertently given a “perfect description” of its unfair advantage in 2013, the commission argued, when the tech company told a US Senate hearing that in order to attract investment, since the 1990s Ireland “has calculated Apple’s taxable income in such a way as to produce an effective rate in the low single digits”.
He concluded by repeating the commission’s position that Apple had received “investment incentives amounting to state aid” through a beneficial tax deal offered by Ireland, contrary to EU competition law.
The advocate general, an official adviser to the court, is expected to deliver his opinion on the case on November 9th, and the court’s final ruling may come early next year.
