EU puts tax crusade on the line in Apple legal challenge – POLITICO

LUXEMBOURG — European Commission lawyers fought on Tuesday to save a 13 billion euro tax arrears order for Apple by telling the European Union’s top court that the legal challenge was essential for the future of privileged tax agreements to attract investment.

The EU executive is trying to overturn a 2020 court defeat that invalidated competition chief Margrethe Vestager’s finding that Ireland gave illegal state aid to Apple by not taxing the maker’s profits more of iPhone.

The case ‘is of the utmost importance for the future of tax state aid’ and whether some EU governments ‘can continue to give multinationals substantial tax breaks in return for jobs and investment’ , Commission lawyer Paul-John Loewenthal told the Court of Justice at a hearing in Luxembourg.

Vestager’s crusade against ‘aggressive tax planning’, primarily targeting US multinationals, has so far failed in EU courts, potentially showing the limits of using state aid law to affect tax policy. Ireland and Apple, backed by Luxembourg, are challenging the Commission’s decision, in a series of investigations into how the two countries offered favorable tax treatment to snag the European headquarters of multinational companies.

Tuesday’s hearing got to the heart of the matter of how Irish tax law was applied and how two of Apple’s units were taxed in Ireland for handling intellectual property licensing for sales of the company outside of North America.

Apple argues that the profits were taxable in the United States because that’s where the value of its products is generated. He said his Irish tax structure used the ability to defer US tax on foreign income and was not intended to avoid taxation altogether.

“All Ireland could do was apply its rate of tax and it applied the full rate of tax to the profits it was entitled to tax,” Paul Gallagher, a lawyer for Ireland, told judges. Ireland. These units performed “routine but not critical functions” in the development of Apple products.

The Commission has built “an imaginary world in which a global giant” hands over responsibility for its valuable technology to a separate company, he said.

Loewenthal argued that Ireland simply accepted Apple’s explanation of what the units were doing and described how Apple had previously changed its business, ostensibly to benefit from lower taxation, saying it had stopped holding physical board meetings in Ireland and moved to teleconferences.

The “substantial tax breaks” given to Irish units are similar, he quoted Apple, to incentives given by US states to attract investment, “thus amounting to state aid” and an unfair, illegal subsidy under EU law.

Apple said in 2017 that it had an effective tax rate of 21% on foreign income. The Commission said its effective tax rate on European profits was 1% in 2003 and 0.005% in 2014.

The court’s general counsel, Giovanni Pitruzzella, who is tasked with drafting a formal opinion on the case ahead of a final decision, said he would deliver his opinion on November 9.

The case is C-465/20 P Commission v Ireland and others