Apple, Ireland fire back in tax battle with European Commission

Vestager
European antitrust commissioner Margrethe Vestager. Image: Friends of Europe/Flickr

The tax-policy battle between the European Commission on one hand and Apple and Ireland on the other continued to escalate Monday.

The EU’s executive arm claimed in a 130-page document (PDF) made public this morning that Irish tax authorities have been “inconsistent” in their treatment of Apple and other companies, as The Wall Street Journal and other outlets reported. Apple generated $130 billion in profits over more than a decade that should have been taxed at Ireland’s 12.5% corporate rate, according to the EC, but the money was largely untaxed.

In August, the EC ordered Apple to pay as much as $14.5 billion in taxes and interest after ruling that a deal with the Irish government illegally granted undue tax benefits to the iPhone vendor. The figure is reportedly 40 times bigger than any previous demand under EU rules prohibiting countries from helping companies gain advantages over their competitors. The decision by the EC follows an investigation launched in June 2014.

But Apple executives recently told Reuters that it plans to appeal the ruling at Europe’s second-highest court, saying the company had been targeted because of its success. “Apple is not an outlier in any sense that matters to the law,” General Counsel Bruce Sewell said in a Reuters interview. “Apple is a convenient target because it generates lots of headlines.”

Interestingly, Ireland is teaming with Apple to appeal the ruling. Ireland released a statement (PDF) on Monday claiming the EC had “misunderstood the relevant facts and Irish law,” saying the commission “failed to follow required procedures” and exceeded its purview by interfering “with national tax sovereignty.”

Apple CEO Tim Cook previously took issue with the EC’s ruling, saying in an open letter that “the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money.”

The EU’s move could also strain growing tensions between the EU and the U.S. over the commission’s tax investigations into American companies, as the Journal has reported. A representative from the U.S. Treasury Department recently expressed disappointment in the ruling and said “retroactive tax assessments by the Commission are unfair, contrary to well-established legal principles, and call into question the tax rules of individual Member States,” according to the newspaper.