Apple Files 14-Point Appeal Against European Commission's $14 Billion Tax Edict (appleinsider.com)

An anonymous reader shares an AppleInsider report: Apple has filed its appeal with the European court of appeals, all declaring that the European Commission's decision to levy $14 billion in taxes on Apple on behalf of the EU is erroneous, against the rule of law, and should be stricken. The 14 points of appeal introduced by Apple on Monday challenge the European Commission (EC) on several fronts. Primarily, Apple contests that the Cork, Ireland, headquarters of Apple's European wing was properly set up, in accordance with all regulations and laws. Additionally, other apparent accounting blunders by the EC while making its decision were brought up as well. Apple points out that the taxable income attributed to the Ireland branch was misapplied, giving more weight to the Irish operation than it should, and that back taxes were being applied to worldwide profits.

Comments

Re:"Taxes applied to worldwide earnings"

[Anonymous Coward]

Ireland was part of an agreement that set minimum corporate taxes. They ignored the agreement, therefore Apple owes money.

Re:U.S. profits too???

[aXis100]

Of course Apple transfers profits. They do this by one company division charging another division a fictional/unrealistic licensing fee, causing the worldwide retail branches to see higher costs and be less profitable, whilst the Irish licensing branch becomes more profitable.

The fact that the Irish branch barely employs any people and is largely just a convenient IP holder makes this even more blatant.

See https://en.wikipedia.org/wiki/...

Re:EU has no tax powers

[TFAFalcon]

They are trying to enforce the agreement that companies have to be taxed equally. This agreement has a very good reason for existing - so countries can't give special tax breaks to companies based in that country while heavily taxing all foreign competition.

Ireland is part of this agreement. So they aren't allowed to give Apple a special deal.

Re:"Taxes applied to worldwide earnings"

[bsolar]

Apple was abiding with a special deal Ireland made with them but the deal was illegal according to EU regulations. What the EU did is basically tell Ireland "you cannot treat Apple favourably compared to other companies since it would be unfair to the companies not getting the special deal, so your special deal is null and void and your own regular taxation applies instead".

Re:U.S. profits too???

[Kiuas]

Apple doesn't transfer U.S. profits to to the EU, so how is it fair for the E.U. to tax Apple on U.S. profits again exactly?

To my understanding this is not about US profits. The 14 billion comes from Apple applying what's known as the double Irish tax loophole that used to exist in Irish law, allowing them to effectively dodge paying taxes to either the EU or the US. Quoting the wiki:

two Irish companies are used in the arrangement. One of these companies is tax resident in a tax haven, such as the Cayman Islands or Bermuda. Irish tax law currently [NOTE: not anymore, wiki wording is out of date] provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Irish company not to be tax resident in Ireland. This company is the offshore entity which owns the valuable non US rights that are then licensed to a second Irish company (and this one is tax resident in Ireland) in return for substantial royalties or other fees. The second Irish company receives income from the use of the asset in countries outside the United States, but its taxable profits are low because the royalties or fees paid to the first Irish company are tax-deductible expenses. The remaining profits are taxed at the Irish rate of 12.5%.

For companies whose ultimate ownership is located in the United States, the payments between the two related Irish companies might be non-tax-deferrable and subject to current taxation as Subpart F income under the Internal Revenue Service's controlled foreign corporation regulations if the structure is not set up properly. This is avoided by organizing the second Irish company as a fully owned subsidiary of the first Irish company resident in the tax haven, and then making an entity classification election for the second Irish company to be disregarded as a separate entity from its owner, the first Irish company. The payments between the two Irish companies are then ignored for American tax purposes.

The loophole was closed last year:

Under Finance Act 2015, a new system has been introduced whereby innovative companies who choose to incorporate in Ireland can now benefit from the introduction of the Knowledge Development Box (the “KDB”) in Ireland, the scheme is seen as a replacement for the “double-Irish” tax system which was recently closed. An effective tax rate of 6.25% can be obtained on qualifying profits generated in periods commencing on or after 1 January 2016.

So Apple (and other large tech companies) have been using both the double irish as well as its other variant the Dutch Sandwhich which functions similarly, to dodge taxes on both sides of the Atlantic, while claiming to European tax-authorities that they're paying tax to the US, and to the US that they're being taxed in Europe, while in reality the majority of the income is not taxed in either. The EC is arguing that the use of these loopholes goes against EU regulations and that they now want these companies to pay what they actually should have been paying all the time. This is going to drag in courts for a long time, and Apple is going to claim that since it functioned within Irish law (at the time) it shouldn't have to pay anything. The EC on the other hand, is going to build their case on the grounds that the Irish law itself that allowed for this arrangement was in breach of EU law and cannot be followed and back-taxes are owned.

This whole case is one of several ongoing ones regarding the use of tax-havens to dodge corporate taxes, which has been (and still is in some senses) relatively easy to do for large multinationals. The EU is currently trying to crack down on it, whereas the US, especially now under Trump's heavily wall street backed cabinet, is g

Re:U.S. profits too???

[DarenN]

The double Irish tax maneuver is worthless on its own without the Dutch sandwich.

The double Irish involves having an Irish registered company legally headquartered elsewhere than the EU (like the Caymans) as well as an Irish registered company headquartered in the EU. This used to be allowed, but it is not allowed any more (and existing structures of this sort have to wind down over the next few years).

There are two components to this. First, the Irish tax is based on where the income is made and only tax Irish income, so do not tax based on income from sales outside the country. This seems reasonable on it's own, but it interacts with other countries tax rules which tax based on where the income is booked. As a result, a company can book profits in Ireland, and fall into the gap between these positions.

The second component is profit moving - the resultant profits can be moved between the resident company and the non-resident company at no (or extremely low) taxes, but moving the money out of the EU to the external HQ would be taxed heavily from Ireland. However, this is not taxed heavily in Holland (due to historical attachments to the Dutch Antilles). So the organization move the money to Holland (inter-EU transfer, low tax), and from that subsidiary to the tax haven (Dutch law, low tax) and then have it in a tax haven for a very low cost. Where they sit on it because the US tax is punishing.

The solution is not higher taxes, it's closing these gaps that companies exploit.

Re:EU has no tax powers

[DarenN]

Actually, that's not correct. They're enforcing an agreement that all companies inside a jurisdiction have to be treated the same. If Ireland wanted 0% corporate tax, and applied that to everyone that would be inside the rules. What the Commission decided is that the deal Apple got was an unfair subsidy because no-one else used it. Ireland and Apple say that it was available to everyone, so it wasn't a subsidy and it wasn't unfair.

Re:About stealing

[TuxThePenguin2205]

The US has a President that gloated about not paying tax saying that it made him "smart"