Apple’s Focus on Facts May Aid Case on $14 Billion EU Tax Bill

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By Ben Stupples

In 2016, Apple Inc.’s profits of $45.7 billion were more than 10 times those of Starbucks Corp. and Fiat Chrysler Automobiles NV, leading multinational companies in their own industries.

Similarly, Apple may have better results than those companies when it argues against European Commission claims that it benefited from state aid, according to Bloomberg Intelligence litigation analyst Aitor Ortiz.

“Apple’s defense in the 13 billion-euro state aid case in the EU General Court may bring a better outcome, and a possible payment reduction, than arguments from Fiat and Starbucks in similar tax probes,” he wrote in an April 13 internal research note on Apple’s $13.8 billion state-aid battle.

The Cupertino, Calif.-based company is challenging “the facts of the case, arguing that the European Commission misinterpreted the tax rules and the company’s corporate structure” in its investigation, he added. “This defense could allow the court to reinterpret the facts rather than depart from current state aid legal precedents, which seem to endorse the commission’s findings.”

13 Billion Euros

EU Competition Commissioner Margrethe Vestager has prioritized the fight against countries’ special tax treatment for selected companies, arguing it amounts to illegal state aid. Along with the scrutiny of Apple, Starbucks and Fiat, authorities have also targeted McDonald’s Corp. and Amazon.com Inc. in state aid cases.

Last August, after a two-year investigation, the commission ordered Apple to repay about 13 billion euros in unpaid taxes to Ireland, where the company books most of its profits.

Some 10 months earlier, the commission ruled that Starbucks and Fiat benefited from tax advantages in the Netherlands and Luxembourg, respectively. Both countries have appealed the decision.

Different Defenses

Unlike Apple, Fiat and Starbucks have focused their defenses on “state aid legal requirements,” Ortiz said in the April 13 research note. This defense makes the chances of European courts voiding the original verdict “unlikely,” as the European Union’s case law on these issues is “solid.”

“Apple took a little more time” to appeal against the European Commission than Starbucks and Fiat “and made a stronger reference in their defence to taxation,” Ortiz added in an April 13 telephone interview with Bloomberg BNA. “Challenging the facts may give them more leeway in their defense.”

Permanent Establishment

Since announcing its verdict on Apple, the European Commission has made its investigative team—set up in 2013 by its deputy director general for state aid, Gert Jan Koopman—a permanent fixture.

Commenting on the commission’s investigation, an Apple spokeswoman told Bloomberg BNA in an April 13 emailed statement that the ruling last year “selectively” targeted the iPhone-maker.

If it stands, “Apple would pay 40 percent of all the corporate income tax collected in Ireland,” she added. “This has no basis in fact or law and we’re confident the ruling will be overturned.”

A spokesman for Fiat, meanwhile, told Bloomberg BNA in an April 13 emailed statement that the carmaker has “strong arguments” in favor of annulling the European Commission’s verdict.

A spokeswoman for the commission told Bloomberg BNA in an April 13 text message that all state aid investigations from the European Union’s executive body are “based on facts and law.”

“The commission will defend its decision in court,” she added with respect to the appeal for Apple’s state aid case, which is expected to be heard at a later stage than those involving Starbucks and Fiat.

Starbucks’s press office didn’t respond to emails and a voicemail requesting comment.

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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