Apple clash with EU over its phantom head office in Ireland
APPLE and EU competition watchdogs clashed on a public stage for the first time since regulators ordered Ireland to claw back a record-breaking €13 billion (R191.04bn) in back taxes from the iPhone maker.
The EU’s August decision is “seriously flawed” and implies Apple products such as its best-selling smartphones are designed in the Irish city of Cork, rather than the US, a lawyer for the California-based tech giant argued during a state-aid conference in Copenhagen on Friday. An EU official hit back, saying the company was creating a “very nice tax story.”
“There are great products in Ireland, but it’s not the iPhone,” said Andreas von Bonin, an attorney for Apple at Freshfields Bruckhaus Deringer. “The iPhone is a US product and not an Irish product.” The EU’s conclusion is not in line with “reality.”
In an order that reverberated across the Atlantic, the EU slapped Apple with the multi-billion euro bill, saying Ireland granted unfair deals that reduced the company’s effective corporate tax rate to as little as 0.005 percent in 2014. The US Treasury said the EU was making itself a “supra-national tax authority” that could threaten global tax reform efforts.
The EU decision focused on how Apple allocated almost all its European sales profits to what the regulator said was a head office not subject to tax.
“The value creation happens in the US, the distribution logistics happen in Ireland,” said Von Bonin. “Therefore, under the international tax rules, the profit should be attributed to the US and the profit should be attributed to the US parts of the Irish units.”
Apple is “creating a very nice tax story,” said Karl Soukup, a director in the European Commission’s competition arm. “It’s about fog and creating perceptions”, but what Apple is doing is “mixing up Apple and the head office” of the Irish units as if they were one.
“When we started to look into this head office, what we found is that this head office in fact does not exist. There is no address, there are no employees, there are no premises, there are in fact no real activities,” said Soukup. “The only thing which exists are the minutes of the board meetings.” – Bloomberg