Apple claims Brussels breached its fundamental rights in tax case
Tech giant challenges fairness of demand to pay €13bn to Ireland
Apple is claiming that the European Commission breached its fundamental “right to good administration” when it demanded last year that the tech giant pay €13bn in back taxes to Ireland.
The legal argument was one of 14 so-called “pleas” lodged by the company in its appeal against the commission’s finding that a favourable tax regime granted by Dublin over 11 years constituted illegal state aid.
The pleas were published by the European Court of Justice on Monday, setting the stage for one of the biggest competition cases ever handled by the Luxembourg-based tribunal.
Apple’s two main arguments challenge the fairness of the commission’s investigation and maintain that Brussels made fundamental errors in its interpretation of Irish law and of the way in which the tech giant generated its profits.
Specifically, the pleas claim the commission “violated the principles of legal certainty and non-retroactivity”, failed to conduct “a diligent and impartial investigation” and breached the EU’s Charter of Fundamental Rights.
The iPhone maker says that by failing to give reasons for its decision, the commission infringed the company’s “right to good administration” under the charter, which guarantees impartial, fair and timely treatment.
One critic of Apple in Brussels said its resort to a “fundamental rights” defence was “hilarious”.
“There is no human right to receive tax subsidies,” said German Green MEP Sven Giegold, who sits on the parliament’s tax avoidance committee. “Even Apple does not stand above the law.”
Several other of Apple’s pleas relate to the commission allegedly misunderstanding Irish tax law and providing “self-contradictory” and poorly researched assessments of how the company attributes profits to its US headquarters.
Lawyers said the sheer range of Apple’s relatively experimental arguments reflected what an unusual test case this was for Brussels. “The [commission’s] tax ruling cases are novel, so the pleas are also novel,” said Philipp Werner, competition partner at Jones Day.
Margrethe Vestager, the EU’s competition commissioner, has dismissed claims that state aid rules are arbitrary or untested, pointing out that the EU has challenged corporate tax arrangements since the 1980s. In a recent speech in Ireland she said multinational companies were “pushing the boundaries of aggressive tax planning”.
Apple’s two Irish companies — Apple Sales International and Apple Operations Europe — hold the rights to make and sell the company’s products outside North and South America but pay very low tax rates as most profits are allocated to a head office not considered resident for Irish tax purposes.
Apple argues profits should be taxed in the US where its intellectual property is created although taxes are not paid until the profits are actually brought back to the US.
However the commission argued that the Irish tax rulings — letters outlining how Apple would be taxed in Ireland — in 1991 and 2007 artificially cut the company’s Irish tax bills to below 1 per cent of its European profits.
The Irish government is also appealing against the commission’s decision, using arguments which echo Apple’s logic.
The commission said it will defend its decision in court. Apple reiterated the statements that it made in January, when the commission’s decision was published, saying it paid a worldwide tax rate of 26 per cent.
The court hearing is expected after the summer.