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Brussels says no Cause for Low Tax Bill as Apple Appeals Against EU Tax Ruling

Brussels says no Cause for Low Tax Bill as Apple Appeals Against EU Tax Ruling
As the European Union issued details of its ruling that Apple Inc. maker won sweetheart tax deals from the Irish government which amounted to illegal subsidies, the iPhone maker appealed on Monday against a $14-billion tax demand.
Underlining its anger with the European Commission, which it says ignored evidence from Irish experts before the decision on Aug. 30, the tech giant's combative stand according to its lead lawyer is that Apple was a "convenient target" for an EU antitrust chief driven by "headlines".
While many in Silicon Valley saw it as further proof that an envious Europe, having lost out on new tech markets, is trying to rig regulations against them, the Obama administration also voiced displeasure at what it said was the European Union helping itself to cash that should have ended up in the United States.
Competition Commissioner Margrethe Vestager published an edited text of her judgment as she rejected those claims and on Monday made no new comment on a case which is also being appealed by the Dublin government.
According to analysts reading of Apple’s corporate filings, the company’s Irish tax arrangements have allowed it to pay tax at a rate of 3.8 percent on $200 billion of overseas profits over the past 10 years.
Compared to the tax rate in the countries where Apple’s products are designed, made and sold, this is just a small fraction. Apple tells the U.S. authorities that the profits are earned by Irish units and this has made possible the low rate. Meanwhile, Apple and Ireland agree the profits are generated in the United States.
A discussion to set an apparently arbitrary ceiling on the profit on which Apple's Irish unit would be taxed locally in a meeting between an Apple tax adviser and the Irish revenue service in 1990 was revealed in the elements by the Commission's edited text.
Since the rest was attributable to technology and marketing businesses elsewhere, its tax adviser proposed that no more than $30-40 million a year be taxed in Ireland a year after Apple's Irish branch had recorded a net profit of $270 million.
"[Apple’s tax adviser] confessed there was no scientific basis for the figure. However the figure was of such magnitude that he hoped it would be seen to be a bona-fide proposal," the excerpt cited in the Commission judgment read.
Another element that stood out was its concern about the way Dublin did not set time limits on its rulings on how Apple's income would be taxed while independent tax experts scanned the documentation for more clues to Vestager's overall approach. That could signal trouble for other multinationals facing Brussels' ire, not just in Ireland but in several other EU countries.
Setting up a legal battle that could remain a factor after celebrity businessman Donald Trump succeeds Obama in the White House next month and that has strained Transatlantic relations, Apple lodged its appeal at the EU's General Court.
It continued to believe that "the Commission is retroactively applying a sweeping new state aid theory that is contrary to well-established legal principles, calls into question the tax rules of individual countries, and threatens to undermine the overall business climate in Europe‎. Moreover, it threatens to erode America's corporate tax base", the U.S. Treasury Department said in a statement.

Christopher J. Mitchell

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