Apple fights $14-billion court battle over “phantoms”

Apple Inc. sought to rebut claims by the European Commission that Irish units at the center of its fight to overturn a record 13 billion-euro ($14.3 billion) tax bill are nothing but phantoms.

Judges weighing Apple’s legal challenge on day two of a hearing at the EU’s General Court homed in on the exact functioning of the Irish branches that allowed Apple revenues to be covered by a national tax deal labeled as illegal by regulators.

The EU asserts the units received selective tax treatment that allowed Apple to allocate all sales profits to two companies that “existed only on paper.” Apple attempted to show that each business wasn’t a ghost while saying strategic decisions over products and sales were made elsewhere and profits should also be taxed elsewhere.

“This wasn’t some kind of shell company, this was a company doing things in the U.S.,” Apple’s lawyer Daniel Beard told a five-judge panel of the Luxembourg-based court about one of the firms. He said that no critical decisions on intellectual property were made in Ireland.

Marc van der Woude, a Dutch judge, quizzed the EU’s lawyer late Tuesday on what evidence the European Commission had to show whether the Apple units determined strategy or drew up business plans.

The business “looks like a phantom company in your perspective,” he said. Other judges dug into details of how the branches were run and how the Irish government determined that the revenue should be taxed there.

A court ruling, likely to take months, could empower or halt EU Antitrust Commissioner Margrethe Vestager’s tax probes into complicated corporate structures used by many American technology firms. The EU has also scrutinized fiscal deals done by Amazon.com Inc. and Alphabet Inc and may draft new rules to net digital companies’ revenue.

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Apple fights $14-billion court battle over “phantoms”