There’s quite a peculiar situation underway in Europe, where Ireland doesn’t want to collect a mighty €13 billion ($13.6 billion) tax bill from Apple, and Apple certainly doesn’t want to pay it. But the European Commission, the EU’s cross-border regulator and antitrust enforcer, issued a judgment in August determining that Ireland gave Apple special treatment and the US tech giant owed the big bill for improperly underpaying its taxes all the way back to 2003.
Today both Apple and Ireland have come out strongly against the decision, which they intend to appeal against. Ireland’s position is that Apple didn’t receive any form of improper state aid because it was merely exploiting an offer available to all international companies (Ireland doesn’t try to hide the fact that it seduces overseas companies with a deliberately minimal corporate tax rate and a favorable tax regime). Apple is more strident in its criticism, describing the European regulators’ approach as politically motivated, turning a deaf ear to tax experts brought in by the Irish government.
"Apple is a convenient target because it generates lots of headlines."
In an interview with Reuters, Apple’s chief lawyer Bruce Sewell says that "Apple is not an outlier in any sense that matters to the law. Apple is a convenient target because it generates lots of headlines." He also adds that the European Commission’s interpretation of the relationship between Apple, via its Ireland-based shell entities, and the Irish state "is a complete mis-statement of corporate law, it's a misunderstanding of how corporations operate." Sewell is joined by Apple CFO Luca Maestri in pouring scorn on the EU in that conversation with Reuters, with Maestri also expressing Apple’s discontent in a separate interview with Germany’s Die Welt.
For its part, the European Commission bases its reasoning on a foundation of "economic reality." Apple’s effective tax rate for the revenues it channels through Ireland was less than 1 percent for most of the 2000s, according to the EC. Those numbers are disputed by Apple, which claims to have been the highest taxpayer in Ireland in 2014. Income from the company’s European sales goes through its Irish operations, but thanks to the structure of its operations there, that revenue is left almost entirely untaxed.
With the way this dispute is shaping up, it appears set for a prolonged battle. Apple is evidently determined to stand its ground and the European Commission is showing no sign of abating either. Tim Cook already described the ruling as "total political crap" and the latest comments from his company make similarly strong assertions against the European Union’s enforcers.