An apple with a hole (tributary). Apple again runs the risk of having to pay 13 billion euros in tax arrears in Ireland. The conflict between the Cupertino-based multinational and the European Union (EU), which dates back to 2016, seems to have no end. Another chapter opened yesterday, which gives for a series with seasons that follow each other with blows, with a very open ending.
The Advocate General of the EU, Giovanni Pitruzzella, yesterday proposed to the European Court of Justice, the European court of last instance based in Luxembourg, to annul the first instance decision of the Community General Court that the 2020 ruled in favor of Apple in its tax dispute with Brussels over some 13 billion euros in taxes that the US company should have paid in Ireland. The lawyer requests that this court rule on the matter again.
It is useful to review. In 2016, the European Commission, under the baton of the powerful Competition Commissioner Margrethe Vestager, asked the company chaired by Tim Cook to pay Ireland taxes valued at 13,000 million. Brussels' argument is that the company, in its opinion, had benefited from illegal state aid between 1991 and 2014. Ireland has one of the lowest corporate taxes in Europe ( 12.5%). These favorable tax conditions have allowed the country to attract technology multinationals (such as Google and Microsoft). The EU considers that Apple wanted to take advantage of Irish tax mechanisms to tax even less.
Through two subsidiaries, Apple Sales International (ASI) and Apple Orientations Europe (AOP) - which had a division in Singapore, considered a tax haven - the American group would have transferred the profits it had obtained to these companies according to the mechanism known in slang as “double Irish”, which states that the profits that come from the use of intellectual property licenses between two subsidiaries of the same company do not form part of the taxable base.
So the Commission said the effective rate on Apple's European earnings was just 1% in 2003 and 0.005% in 2014, with the approval of the Irish Government, to shield the multinational's business of the iPhone in the country.
The Community Executive claims that Apple evaded taxes for years and that Dublin should recover the lost revenue. Tim Cook described the Commission's intervention as "political bullshit". The then president of the United States, Donald Trump, ridiculed Vestager after calling her a "tax lady".
But according to what the subsidiary Apple Operations International (AOI), established in Ireland in 1980, verified in a US Senate hearing in 2013, “it had no employees or physical presence [in Ireland] and held its board meetings in California". According to the Panama Papers investigation (2016), both AOI and ASI were administered from another Apple branch called Appleby in Jersey (tax haven) between 2015 and 2016.
The litigation reached the General Court of the EU in 2020. However, the European magistrates then considered that Brussels had failed to demonstrate that there was a selective tax advantage that would have benefited the two Apple subsidiaries .
Irish Finance Minister Michael McGrath recalled yesterday that Dublin's position is that "Apple paid the correct amount of tax" in the country and that it was not "provided with any state aid".
However, the EU General Counsel, in the conclusions that were published yesterday, now believes that this first-degree judgment "incurred in a series of legal errors". In addition, in the decision, in his opinion, "he also did not correctly appreciate the existence or the consequences of certain methodological errors".
Pitruzzella's opinion, which calls for "a new assessment of the matter", is not binding, although it is usually taken into account, so everything suggests that the European Court of Justice (which does not go into the substance of the case, but examines whether the right has been applied correctly) will return the ball to the European Court of First Instance in the coming months to decide whether Apple has to pay or not.
The case "is of the utmost importance for the future of state tax aid" and to determine whether EU governments "can continue to grant large multinationals tax breaks in exchange for jobs and investment", said the lawyer for the Commission, Paul-John Loewenthal, at a hearing in Luxembourg in May.
