In August 2016, the European Commission ruled that Ireland must recover up to €13 billion from Apple after it was discovered that the company was able to successfully avoid paying taxes to the country on virtually any profits.
Two Dublin-based Apple subsidiaries, Apple Sales International and Apple Operations Europe, are at the heart of the European Commission inquiry. ASI specifically was structured in such a way that all profits on the sales of all Apple products in Europe, the Middle East, Africa, and India were recorded in Ireland, allowing the company to significantly reduce its tax liabilities at a global level. While the profit was allocated to a head office in Dublin, the office in question had no employees and no premises. Nevertheless, ASI recorded a staggering €16 billion profit in 2011 and all but €50 million of that was allocated to the Dublin head office. Apple paid a meager €10 million in taxes to Ireland, effectively bringing its tax down to just half of a percent.
The European Commission ruled that because profits were being allocated to the Dublin head office arbitrarily, Apple had violated EU law by using its headquarters in Ireland to shield its profits and avoiding paying taxes. The commission also found Ireland to be in breach of EU law, arguing that its tax agreements with Apple gave the company an unfair advantage.
Apple, however, insists that the ruling is a violation of its fundamental “right to good administration” in a plea published by the European Court of Justice at the end of February. In the plea, Apple specifically challenged the fairness of the European Commission’s investigation, alleging that it was neither diligent nor impartial. Moreover, it argued that the court had fundamentally misinterpreted both Irish law and the ways in which the company generates its profits.
The European Commission has yet to release an official reply to the plea. In Brussels, however, many have indicated that it hasn’t been well received. “There is no human right to receive tax subsidies,” German Green MEP Sven Giegold, who sits on the parliament’s tax avoidance committee, told the Financial Times. “Even Apple does not stand above the law.” The European Commission has repeatedly insisted that it will defend its decision in court. The plea is expected to be heard in court at some point this summer.
Did you find this article useful?
Subscribe to our newsletter for more!