Apple Says EU-Ireland Tax Order ‘Defies Reality and Common Sense’

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Apple on Tuesday argued that the European Union’s order for it to pay 13 billion euros ($14.3 billion) in back taxes to Ireland “defies reality and common sense,” as it kicked off its legal challenge against the ruling.

According to Reuters, Apple also said the European Commission was using its powers “to retrofit changes to national law,” which would create legal uncertainty for businesses.

Apple sent a six-person delegation led by its CFO Luca Maestri to the two-day court hearing taking place over Tuesday and Wednesday in Luxembourg. The company is arguing the same case that CEO Tim Cook made in a public letter about the tax ruling three years ago; namely, that Apple follows the law and pays all the taxes it owes in every country where it operates, including Ireland.

Apple also argues that nearly all of its research and development takes place in the United States, which is where the company pays the majority of its taxes.

“The Commission contends that essentially all of Apple’s profits from all of its sales outside the Americas must be attributed to two branches in Ireland,” Apple’s lawyer Daniel Beard told the court.

He said the fact the iPhone, the iPad, the App Store, other Apple products and services and key intellectual property rights were developed in the United States, and not in Ireland, showed the flaws in the Commission’s case.

“The branches’ activities did not involve creating, developing or managing those rights. Based on the facts of this case, the primary line defies reality and common sense,” Beard said.

“The activities of these two branches in Ireland simply could not be responsible for generating almost all of Apple’s profits outside the Americas.”

In 2016, the European Commission found Apple received illegal state aid from Ireland. Apple and Ireland both appealed the ruling, but the European Commission opened litigation against Ireland in October 2017 for its failure to procure Apple’s back taxes, and Apple has already almost finished paying the back taxes it owes. If the order is overturned, the money will be returned to Apple.

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