1/ Thread giving background on the shocking victory of #Apple and Ireland victory against the @EU_Commission yesterday in the EU General Court @EUCourtPress
2/ Recall the facts: Two stateless subs of Apple (Irish-incorp’d, U.S.-managed and controlled). Apple loaded the stateless subs with valuable IP, so all the IP profits end up there.
3/ DG-Comp and its hard-charging leader, M. Vestager (not VP of EC), heard the U.S. Senate hearings on Apple. They learned about “stateless income” and the “double Irish with a Dutch sandwich.”
Something was clearly amiss; they investigated.
Something was clearly amiss; they investigated.
4/ They found BILLIONS of unreported income.
5/ But what could the EC do? The subs weren’t in Europe. They were stateless. They were stateless because (then) Irish law and U.S. law accommodated corporate statelessness. But the EC didn’t think it could go after Irish residence rules because those rules were not selective.
6/ Each sub had a branch in Ireland with real activities. The EC reasoned that, as between the branches and the empty head-offices of the stateless companies, only the branches had any substance. So, the profit of the stateless subs could only have been earned in the branches.
7/ By this reasoning, which the GCEU described as “allocation by exclusion,” the Commission put all of Apple’s non-American profit into Cork, Ireland. Apple, please pay Ireland $14B.
9/ The result in Apple was bonkers, and everyone, even the EC, knew it. But the EC really added only one step to Apple’s aggressive tax plan. Apple used BEPS to move the profits from the rest of the world to the stateless cos. The EC just moved it one more step: to Ireland.
10/ The tax world went crazy. Treasury wrote an unprecedented 25-page legal brief explaining to the Commission how it had gotten EU law wrong.
treasury.gov/resource-cente…
treasury.gov/resource-cente…
11/ The United States sought to intervene in the case in the EU court, but it was denied standing
13/ The real world, which usually keeps a safe distance from the tax world, also went crazy. Apple CEO Tim Cook called the decision “total political crap.” The Senate Finance Committee wrote an angry letter about Apple. 
14/ Obama’s Treasury Secretary, Jack Lew, also wrote the EC to complain
15/ Vestager wrote back:
15/ Things were getting heated.
16/ Yesterday’s appeals inevitably followed. Second thread on the outcome in the GCEU to follow …
