Ireland formally objects to European Commission’s €13bn Apple tax ruling

19 Dec 2016

Apple logo outside Apple Store in Berlin. Image: AR Pictures/Shutterstock

As the European Commission prepares to publish its full judgment on its €13bn ruling on Apple’s tax affairs, the Irish Government has pre-empted the Commission by formally objecting to the ruling.

Apple is also expected to launch its legal challenge this week, arguing that EU regulators ignored tax experts and selected Apple as a convenient scapegoat.

Apple, which employs more than 5,000 people in Ireland, will also argue that the European Commission (EC) selected a method to deliberately maximise the penalty.

‘Ireland does not do deals with taxpayers’

In a statement this morning, the Irish Government said that the EC had misinterpreted Ireland’s tax laws.

“Ireland does not accept the Commission’s analysis, which is why we have lodged an application with the General Court of the European Union to annul the whole decision,” the Government said.

“Ireland did not give favourable tax treatment to Apple – the full amount of tax was paid in this case and no State aid was provided. Ireland does not do deals with taxpayers.”

The EC sought a scapegoat, suggest Government and Apple

In its legal summary, the Government said that the EC’s ruling “mischaracterises” the activities and responsibilities of Apple Sales International (ASI) and Apple Operations Europe (AOE).

It said the branches of ASI and AOE carried out routine functions but all important decisions were made in the US, and profits derived from these decisions were not properly attributable to the Irish branches of these organisations.

Fundamentally, the Government is asserting that the EC has misapplied State aid law.

It argues that the EC attempted to rewrite Irish corporation tax rules and wrongly applied its own version of the “arm’s length principle”, which is not part of EU law or relevant in Irish law.

The Government also asserts that the EC’s line of reasoning misunderstood Irish law, failed to follow required procedures and infringed the principles of legal certainty and legitimate expectations by invoking alleged rules of EU law never previously identified.

“These are novel in their scope and effect are wholly uncertain,” the Government said.

Crucially, it warns that the EC has exceeded its powers and interfered with national tax sovereignty.

“The State aid rules by their nature cannot remedy mismatches.”

Finally, the Government asserts that “the Commission has failed to provide proper reasons for their decision”.

As the world awaits the EC’s full publication of its findings against Apple, if the Government has indeed done its homework and Apple applies its own significant resources to a full legal investigation, the EC may have found the wrong scapegoats to mess with.

Indeed, the perverse language in the ruling by Margrethe Vestager – signalling on one hand, the tax demand as a windfall for Ireland, while at the same time suggesting it was a boon for other countries too – could undermine the EC’s entire position as political rather than practical.

For its part, Apple will launch a legal challenge this week against the record $13bn EU tax demand, arguing EU regulators ignored tax regulators and corporate law.

According to Reuters, Apple will argue that the EC chose a method in order to maximise the penalty and ignored Irish tax experts and lawyers.

In Danish newspaper Berlinske last month, Apple’s legal counsel Bruce Sewell said that Apple was singled out for its success.

“Now the Irish have put in an expert opinion from an incredibly well-respected Irish tax lawyer,” Sewell said.

“The Commission not only didn’t attack that – didn’t argue with it, as far as we know – they probably didn’t even read it. Because there is no reference [in the EU decision] whatsoever,” Sewell said.

Apple logo outside Apple Store in Berlin. Image: AR Pictures/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years