Apple Heads To Court Over £11bn Bill For Back Taxes

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EU’s General Court to hear appeal against European Commission’s record 2016 fine, itself part of a broader crackdown on low tax rates paid by tech giants in Europe

Apple is set to head to court on Tuesday to face off against European Commission officials, who argue the company took 13bn euros (£11.5bn) in illegal state aid from Ireland.

The case is an appeal by Apple and the Irish government against a 2016 fine by the Commission, part of a broader crackdown by the EU on multinationals – including large tech companies such as Google, Amazon and Facebook – that are accused of paying too little tax in Europe.

In Apple’s case, the Commission alleges that Apple and Ireland entered into an “artificial” profit arrangement that allowed it to pay a tax rate of less than 1 percent on its sales from across Europe.

Ireland accuses the Commission of infringing upon national sovereignty and undermining the country’s low corporate tax regime.

The European Commission. Image credit: European Commission apple
European Commission

Tax break

The country argues it did not grant Apple any selective advantage, and cannot tax Apple on profits that are not taking place in the country.

Apple, for its part, says it has abided by Irish and US tax laws, and that the tax rate it pays in Europe is low because key work such as design, engineering and development takes place in California.

“This claim has no basis in fact or in law,” Apple chief executive Tim 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.”

Apple paid the fine last year, but it has been placed in escrow.

The hearing on Tuesday and Wednesday takes place at the EU’s General Court in Luxembourg, the bloc’s second-highest court, with a ruling expected by the end of next year.

But either side is set to appeal upon losing the case, meaning the matter is likely to go before the European Court of Justice, where it could take a further three or four years to conclude.

‘Digital tax’

The case is an embarrassment for Apple, which launched the iPhone 11 last week and is set to deliver the device to stores on Friday.

The case is part of a broader crackdown on the low tax rates paid by many tech firms and other multinationals, which saw Google last week agree to pay nearly 1 billion euros to France to settle a tax dispute.

France has instituted a digital services tax that targets the biggest tech companies – most of which are based in the US – with the UK and Germany also having announced plans for digital taxes.

Meanwhile, the incoming Commissioner for Economic Affairs Paolo Gentiloni said on Monday he would propose an EU-wide digital tax if reform did not appear on a global level.

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