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Apple tells ECJ that €13.1bn it was ordered to pay Ireland was paid in tax elsewhere



Apple has told the European Union’s highest court that €13.1 billion the European Commission ordered the Irish Government to recoup from Apple in back taxes was not due in Ireland at all and that €20 billion was being paid in taxes to the United States on the same profits.

Lawyers representing the European Commission, Ireland, Apple and other interested parties on Tuesday laid out their arguments before the grand chamber of judges at a hearing in the Court of Justice of the European Union (ECJ) on Tuesday.

The Commission is hoping it can convince the judges to overturn a defeat in the EU’s second-highest court in 2020. That found in favour of Apple and Ireland which had argued the company had not been given an unfair advantage with a “sweetheart deal”.

Speaking first, lawyer for the European Commission 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 ASI [Apple Sales Ireland} substantial tax breaks as compared to other Irish taxpayers,” Mr Loewenthal argued.

The Commission accused the general court of making “legal errors” in the 2020 ruling that rejected its arguments, by confusing aspects of Apple’s corporate structure.

“The general court compared the activities of the wrong legal entities in relation to the wrong evidence,” Mr Loewenthal argued. “That conclusion confuses the attribution of profit within ASI with the attribution of profit within the Apple group.”

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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 Commission’s arguments were rebuffed by the legal teams of Ireland and Apple.

Representing the Government, former attorney general Paul Gallagher accused the Commission of making “entirely misleading remarks”.

A reference to the Double Irish, an advantageous tax arrangement which Mr Gallagher said was not used in this case, was an attempt to “influence you like a jury”, he told the judges.

An estimate that Apple only paid an effective tax rate in the low single digits was arrived at by pretending that the entirety of Apple’s profits outside the Americas should have been taxed by Ireland, which is incorrect, he argued.

“Intuitively it would be astonishing if the activities in Cork were responsible for all the profit of Apple [intellectual property] outside the Americas,” Mr Gallagher said.

He described two Apple branches [in Ireland] as performing merely “routine distribution functions” and “routine assembly functions”.

“Ireland applied its tax rate to those profits which it was entitled to tax,” he insisted. “The Commission’s case on the facts is demolished.”

Speaking on behalf of Apple, Daniel Beard accused the Commission of making “numerous errors and misrepresentations” in its arguments.

An initial tax ruling by the Commission which ordered Apple to pay €13.1 billion in back taxes to Ireland “was wrong”, he continued. Apple was “only required to pay tax in Ireland on profits generated from activities taking place in Ireland”, he said.

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The Commission’s essential mistake was to state that significant research and development activities took place in Ireland, when they were in fact taking place in Cupertino in California.

“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. “Throughout this appeal process, the Commission has tried to confuse things and has done so again today.”

It was not correct to believe that accumulated profits made by Apple on its international earnings had not been taxed anywhere, he said, saying that the law of the United States allowed for the payment of tax on such international profits to be deferred.

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”, he insisted.

“The Commission is seeking to challenge findings of fact made by the general court, but it has no basis to do so,” Mr Beard said.

“There was no IP creation or development in Ireland… That was the crucial mistake made in the Commission’s decision; that was the reason the General Court was right. There was no special treatment, there was no state aid,” he concluded.

The hearing continues. A ruling in the case is expected within six months to a year.



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