Apple appeals against EU tax ruling, Brussels says no cause for low tax bill

Mon Dec 19, 2016 2:25pm EST
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By Julia Fioretti

BRUSSELS (Reuters) - Apple Inc. (AAPL.O: Quote) appealed on Monday against a $14-billion tax demand as the European Union issued details of its ruling that the iPhone maker won sweetheart tax deals from the Irish government which amounted to illegal subsidies.

The tech giant's combative stand -- its lead lawyer told Reuters that Apple was a "convenient target" for an EU antitrust chief driven by "headlines" -- underlined its anger with the European Commission, which it says ignored evidence from Irish experts before the decision on Aug. 30.

The Obama administration also voiced displeasure at what it said was the European Union helping itself to cash that should have ended up in the United States while many in Silicon Valley saw it as further proof that an envious Europe, having lost out on new tech markets, is trying to rig regulations against them.

Competition Commissioner Margrethe Vestager has rejected those claims and on Monday, while making no new comment on a case which is also being appealed by the Dublin government, the EU executive published an edited text of her judgment.

Apple's Irish tax arrangements have allowed it to pay tax at a rate of 3.8 percent on $200 billion of overseas profits over the past 10 years, according to a Reuters analysis of corporate filings.

This is a fraction of the tax rate in the countries where Apple’s products are designed, made and sold. The low rate is achieved by Apple telling U.S. authorities that the profits are earned by Irish units. Meanwhile, Apple and Ireland agree the profits are generated in the United States.

Among elements revealed by the Commission's edited text was a record of a meeting between an Apple tax adviser and the Irish revenue service in 1990 in which they discussed setting an apparently arbitrary ceiling on the profit on which Apple's Irish unit would be taxed locally.

A year after Apple's Irish branch had recorded a net profit of $270 million, its tax adviser proposed that no more than $30-40 million a year be taxed in Ireland, since the rest was attributable to technology and marketing businesses elsewhere.   Continued...

A 3D printed Apple logo is seen in front of a displayed European Union flag in this illustration taken September 2, 2016. REUTERS/Dado Ruvic/Illustration