Apple has lost a high-profile, €13bn (£11bn) Irish tax battle with Brussels in a decision that will bolster the European Commission’s efforts to clamp down on favourable “sweetheart” tax deals for multinationals.
The European court of justice (ECJ) ruling, which had been eagerly awaited, comes after years of legal wrangling over whether the European Commission was right to demand in 2016 that €13bn in “illegal” tax breaks for Apple should be repaid because it gave the iPhone maker an unfair advantage.
The ECJ ruled that a lower court win for Apple should be overturned and backed the commission’s 2016 decision that Ireland had granted Apple unlawful aid relating to the tax treatment of profits generated by Apple’s activities outside the US which Ireland is now required to recover.
In 2020, the general court, a lower court, annulled the commission’s 2016 decision, saying it had not sufficiently established that Apple’s subsidiaries had enjoyed a selective advantage. That ruling has now been set aside by the ECJ, which has confirmed the commission’s 2016 decision.
The ruling is a victory for Margrethe Vestager, the EU competition chief, who concluded in 2016 that the iPhone maker had benefited from billions-worth of unfair tax breaks from the Irish government.
Vestager, who is due to step down this year, has been seen as a tough enforcer willing to take on powerful multinationals such as Fiat, Amazon and Starbucks over their tax bills. However, some of the cases have not stood the test of time and court decisions against Fiat in 2022 have since been overturned.
The case brings to a close years of litigation that began in 2016 when the commission had ordered Apple to pay billions of euros for gross underpayment of tax on profits between 2003 and 2014. Apple, which has had its European headquarters in Cork since 1980, was found by the EU competition watchdog to have benefited from tax rulings from the Irish authorities that meant in 2014 it in effect paid a tax rate of 0.005%.
Apple had rejected the accusations, saying no state aid had been paid and Tim Cook, the chief executive, called the claims “political crap”.
Apple successfully challenged the commission in the general court, the EU’s second highest court, which concluded in July 2020 that Brussels had failed to show that Apple had received an illegal economic advantage in Ireland over tax.
The commission appealed and last year Giovanni Pitruzzella, the advocate general to the ECJ, recommended that it overturn the general court’s earlier decision. Pitruzzella said the general court had made errors in law and needed to carry out a new assessment. He recommended that the ECJ refer the case back to the general court for a new decision on the merits of the case.
Pitruzzella’s recommendation was not legally binding and did not have to be followed by the ECJ but opinions of advocate generals carry great weight and usually influence the court’s final decision.
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Apple said after the ECJ ruling: “This case has never been about how much tax we pay but which government we are required to pay it to. We always pay all the taxes we owe wherever we operate and there has never been a special deal. Apple is proud to be an engine of growth and innovation across Europe and around the world, and to consistently be one of the largest taxpayers in the world.
“The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the US. We are disappointed with today’s decision as previously the general court reviewed the facts and categorically annulled this case.”
Separately, the ECJ also ruled against Google, upholding a €2.4bn antitrust fine from the commission in a case that centred on whether Google wrongly favoured its own online shopping services. In this case the advocate general told the ECJ in January that Google should lose its appeal.
Google said: “We are disappointed with the decision of the court. This judgment relates to a very specific set of facts. We made changes back in 2017 to comply with the European Commission’s decision. Our approach has worked successfully for more than seven years, generating billions of clicks for more than 800 comparison shopping services.”