EU’s €13bn Apple tax claim ‘beggars belief’, Ireland says

During a hearing at the EU's highest court in Luxembourg on Tuesday, former attorney general Paul Gallagher, acting for the State, said the EU case “beggars belief” and accused the European Commission of “misleading” the court on points of Irish law.

A judgment is likely to be handed down in the first half of year, following a non-binding opinion by the court’s advocate general on November 9 this year.

It stems from a 2016 Commission ruling, which claimed Apple enjoyed sweetheart deals with successive Irish governments, allowing it to avoid paying €13bn in taxes on profits it earned from iPhones, iPads, and MacBooks sold outside the Americas.

The underpayment, the Commission said, amounted to illegal state aid and allowed Apple to pay an effective corporate tax rate of just 0.005pc in 2014.

Apple and Ireland fought that ruling and won, in a lower EU court, in 2020. Today's hearing was the Commission’s appeal against that decision.

“Its outcome will determine whether member states can continue to grant multinationals substantial tax breaks in return for jobs and investments,” said Commission lawyer Paul-John Loewenthal.

The Commission’s case hinges on a claim that two Apple branches in Ireland managed the firm's intellectual property (IP) licenses and that Ireland should have taxed more of the profits earned on the back of those assets.

Daniel Beard, representing Apple, told the European Court of Justice that the firm’s IP is designed and managed at its headquarters in Cupertino, California, and that it is paying around €20bn in taxes on those assets in the US.

“The Commission just got the facts wrong about what activities went on in Ireland,” he said. “The profits we’re talking about - those profits were in fact subject to the US tax regime.”

The Apple case is one of many novel tax decisions taken by competition chief Margrethe Vestager under the bloc’s state aid rules. She has lost similar cases involving McDonald’s, Starbucks and carmaker Fiat’s tax affairs in Luxembourg and The Netherlands.

The amount of contested tax in Ireland – now worth close to €14bn with interest, which which is being held in an escrow account – was the largest penalty meted out to any of the firms.