Apple takes fight against 13-billion-euro EU tax order to court

According to the company Commission's order is creating legal uncertainty for businesses

Apple challenged a €13bn tax charge from the European Commission in the EU’s second-highest court on Tuesday, escalating the landmark tax fight between the iPhone maker and EU regulator. According to a company's statement, the bloc's order obliging it to pay €13bn in back taxes to Ireland "defies reality and common sense."

Furthermore, the iPhone maker accused the executive European 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.

Apple’s arguments at the General Court, Europe’s second-highest, came after the EU executive in 2016 said the tech giant benefited from illegal state aid due to two Irish tax rulings which artificially reduced its tax burden for over two decades.

EU in particularly accuses Apple of parking untaxed revenue earned in Europe, Africa, the Middle East and India, in Ireland, which has emerged as a European hub for big tech and global pharma giants. This privilege allegedly gave Apple an advantage over other companies, allowing it to avoid taxes between 2003 and 2014 of around 13bn euros which, according to Brussels, constituted illegal "state aid" by Ireland. Apple fiercely denies the tax bill. The US government also insists the order by Brussels constitutes a major breach of international tax law.

The two days of hearings on Tuesday and Wednesday will now take place at the EU's lower General Court, where judges will give their judgement no earlier than 2020. Any appeal would then go the EU's highest court, the European Court of Justice, for a final decision that could land as late as 2021.

Representatives from Apple, Ireland and the EU already appeared in front of the EU General Court in Luxembourg today, where a panel of five judges was to hear arguments from both sides. Apple’s six-person delegation was led by Chief Financial Officer Luca Maestri, according to Reuters. Representatives from Luxembourg, Poland and the EFTA Surveillance Authority are also due to appear in front of the court over the next two days.

“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.”

The case is key to European Competition Commissioner Margrethe Vestager’s crackdown on sweetheart deals for multinationals, a campaign which has also led to action against Starbucks, Fiat, Engie, Amazon and others.

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