If all goes to plan for Apple, this week will be all about the iphone 11. But Friday’s product launch will come just after fresh headlines about news it would rather people forget — allegations that it dodged taxes and took €13bn of illegal state aid from Ireland in exchange for creating jobs.
The accusations emerged in 2016 when the European Commission said Apple and Ireland had created an “artificial” profit arrangement enabling the iphone maker, in defiance of EU law, to pay a tax rate of less than 1 per cent.
Both Ireland and Apple appealed, and on Tuesday and Wednesday the court battle begins when judges in Luxembourg hear arguments from both sides.
Murmurings in Brussels’ favour could generate negative headlines for Apple and embarrass chief executive Tim Cook, who has tried to present the company as being on the side of consumers against other tech giants
with its emphasis on privacy and security. He has previously called the EU decision “total political crap” and accused the commission of rewriting Apple’s history and ignoring Ireland’s tax laws.
“This claim has no basis in fact or in law,” Mr Cook said in 2016. “We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.”
A ruling is expected by the end of next year. But whatever the outcome, the losing party is set to appeal. After that, an appeal is likely to go through the European Court of Justice where the case is expected to take three to four years to reach a conclusion.
At the hearing on Tuesday, all parties are expected to flesh out arguments heard before.
Apple has accused Brussels of “legal mumbo jumbo.” In 2016 its finance head, Luca Maestri, said the commission was ignoring the reality that Apple’s research and development happens at its Cupertino headquarters, whereas Ireland only performs distribution, procurement and logistics.
“They are simply pretending that all the value of the Apple products are generated in [the Irish city of] Cork,” he had said.
Brussels has accused Apple of avoiding taxes for more than 20 years on almost all profits in Europe and other global markets, by allocating profits to a “head office” in Ireland which had no employees and existed “only on paper”.
Ireland has long complained that the EU has interfered with its sovereignty, misunderstood state-aid rules, and accused Brussels of undermining Ireland’s low corporate tax-regime. It is expected to argue Tuesday that it has not granted Apple any selective advantage when it comes to taxes and that it couldn’t tax the company profits that are not taking place there.
When Brussels first imposed a record-breaking €13bn tax penalty on Apple, it triggered a vitriolic response in Dublin, Silicon Valley and even Washington, which accused Brussels of trampling on international tax norms.
Apple paid the fine last year — €14.3bn with interest — but it has been held in escrow.
