Due to tax payments: Apple to court in Europe

Before the General court of the European Union (EuG) is this Wednesday very much. The judges in Luxembourg to decide in the first instance on the tax practice of the electronics group Apple in Ireland and on the decision of the EU Commission that the company has to pay EUR 14.3 billion in taxes to the Irish state – where the government in Dublin, the money not want to have. The amount is the by far the highest in the history of the EU state aid proceedings.

Werner Mussler

economic correspondent in Brussels.

F. A. Z.

Philip Plickert

economic correspondent based in London.

F. A. Z.

But it is in the Apple case is not just about the money. The judges will decide on the future of a special Form of tax-saving models, the so-called “Tax Rulings”. The “tax deals”, the use of the tax authorities, with each of the company, the terms and conditions of its tax to negotiate payment. In the Apple case (as in several other cases), the EU-Commission Deals for prohibited state aid. If the judges see it differently, the business model of the Brussels authority and the Image of competition Commissioner Margrethe Vestager to the debate.

the profits of Ireland way in the “management seats” outsourced

Both Apple and the government in Dublin have appealed against the Commission decision of August 2016, after which the company would have to pay back 13 billion euros plus interest to the Irish state. In principle, the EU has authority against the suspected tax dumping, no hand, because the tax policy (such as the design of the tax rates) falls within the competence of the member States. Therefore, aid was and is against various States (along with Ireland which are mainly Luxembourg, the Netherlands and Belgium) legally. Your Argument is: If a country negotiates with a single company, the modalities of its tax payments, quasi, then, is to the detriment of other companies and, therefore, it is an unlawful aid.

In the Apple case, the benefits of which go back to a already in 1991, granted to Irish tax notice, which was replaced in 2007 by a second, similar. The Irish authorities have approved a scheme of taxation, the taxable profits were to the knowledge of the Commission artificially low expected. Two Ireland-based Apple company could outsource (the sales subsidiary Apple Sales Europe and for the manufacture of certain computer series company responsible for Apple Operations Europe) in Europe the gains of Ireland way in the “management seats”. Because these were in any country in the world settled down, they had to pay no taxes. Nevertheless, there has been almost the whole of the profits, has complained Vestager at the time. Only a fraction have VAT paid Apple Sales Europe in Ireland. The effective corporate tax rate have in 2014 amounted to only 0.005 percent.

Favorable conditions for multinational corporations to create

Apple is contrary to the Brussels-based arguments completely. In the hearing before the court of first instance, in September 2019, the Apple lawyer said, the profits of the Irish subsidiaries had been taxed where they were incurred in the United States. There, the company was in accordance with international tax law, primarily liable for the tax. The great Apple products had all been in America and designed, the associated intellectual property there. The EU competition authorities would have to examine what value is created-added in Ireland – that it was only to logistics and distribution. The reason why the tax deals with the Irish authorities were not yet completed, the white Apple, of course, not exactly to call it. The company complains, however, that the Commission is trying to interpret a “thirty-year-old tax practice as”. The harmful to the legal security.

Apple paid for the 14.3 billion Euro, only once, you are currently in an escrow account. The government in Dublin sees the court’s decision with concern. A judgment in favor of the EU would bring a Commission of the Irish state, a billion-Money that he could use in the current recession. In the current budget and a hole of 23 to 30 billion Euro gap, according to an estimate by Finance Minister Paschal Donohoe. But first, it could be that other EU States would be entitled to a share of the money. And secondly, it means the government would have faced a short-term rain long-term risk to the Irish economic model. It builds on creating favorable conditions for multinational corporations.