The legal fight between Apple and the European Commission is heating up as the company submits its appeal to the EU General Court refuting the accusations of withholding its profits worth tens of billions of dollars from EU tax authorities.
The European Commission said in August that the iPhone manufacturer has been enjoying "preferential tax treatment" provided by the Irish government for more than 10 years, what resulted in more than €13 billion of unpaid taxes. The Commissioner Margrethe Vestager claimed that the tax deal between the American tech giant and Ireland went against the laws of the European Union since it was a masked state aid for the Ireland.
Earlier today, Apple (NASDAQ: Apple [AAPL]) has handed in its official appeal against these accusations to the General Court of the EU while the experts believe that the conflict of this scale will be handed over to the highest European Court of Justice in the next months. The tech company argues that the EU authorities have simply ignored the opinion of the international tax experts who commented on the case and disregarded the corporate law in order to inflate the sum of the fine, reports Reuters.
The latest update to the Commission's case that was published today claims that Apple made advantage of its European headquarters in Dublin by appearing "stateless" for tax residency purposes through a number of controversial subsidiaries and allowing its profits generated in all non-Irish and non-US markets to escape taxation. According to the regulators, the profits did go through Apple's Irish operations, though the company used two Irish subsidiaries that were not recognized as tax-residents anywhere, explains the Irish Times. Apple's CFO Luca Maestri told Reuters in an interview that the issue in question emerged from the regulatory loophole based on the differences between the tax regulations in different countries:
"Vestager is arguing that the base on which we should pay taxes in Ireland is essentially all the profits we generate outside the United States ... in a place that doesn't do any engineering, doesn't generate any intellectual property for us. The difference between those two creates exactly the kind of loophole that the Commission has now been able to exploit," he said.
The Irish Times adds that the case against Apple's tax operations has already seriously damaged the relationships between Irish government and the European Commission. Next to Apple, Ireland has also made a legal challenge today accusing Brussels of abusing its power and failing to behave in accordance with the duty of care, says The Independent:
“The Commission has exceeded its powers and interfered with national tax sovereignty. The Commission has no competence, under State aid rules, unilaterally to substitute its own view of the geographic scope and extent of the member state's tax jurisdiction for those of the member state itself," said Ireland's Department of Finance in the statement.
This has sparkled a serious conflict between Ireland and the Commission as the country claims that it had no grounds to collect taxes from non-resident subsidiaries whereas the regulators argue that Ireland was supposed to do exactly that. Ireland also claims that it will not take responsibilities for legal loopholes created by other countries. So far, the European Commission has not issued any response to these accusations.
Apple's General Counsel Bruce Sewell said that Apple was a "convenient target" because it instantly created free publicity for the Commission's activities.