Following an eight-year legal tussle, Europe’s highest court has ruled in a “final judgment” that Apple benefited from massive tax breaks after Ireland contravened EU state aid rules.
All those years back in 2016, the European Commission (EC) said that a tax deal between Apple and Ireland was in breach of the European Union’s state aid laws and demanded the corporation cough up €13 billion ($14.3 billion) in back taxes.
Apple was later asked to pay a €14.3 billion ($15.8 billion) tax bill in 2018, which included the €13.1 billion European deemed the company had avoided – an advantage granted by Ireland between 1991 and 2014 – along with interest. This state aid was connected to the tax treatments of profits generated by Apple outside of the US by its entities Apple Sales International (ASI) and Apple Operations Europe (AOE).
Things didn’t end there. Fast-forward to 2020 and the General Court in the EU annulled the EC’s decision, stating the Commission had failed to sufficiently establish that Apple, among other companies, benefited from a selective advantage.
However in the final twist in this tale, the Court of Justice of the European Union said today [PDF] :
“On appeal, the Court of Justice sets aside the judgment of the General Court and gives final judgment in the matter, conversely confirming the Commission’s decision.”
It ruled the General Court “erred” when it judged the EC had “not proved sufficiently” that the IP licenses owned by ASI and AOE and related profits “should have been allocated, for tax purposes, to the Irish branches.”
“In particular, the General Court erred when it ruled that the Commission’s primary line of reasoning was based on erroneous assessments of normal taxation under the Irish tax law applicable in the case, and when it upheld the complaints raised by Ireland and by ASI and AOE regarding the Commission’s factual assessments of the activities of the Irish branches of ASI and AOE and of activities outside those branches.”
EC Vice President Margrethe Vestager said:
“Today is a big win for European citizens and for tax justice.” She said Ireland granted Apple “unlawful state aid which Ireland now has to recover. And this judgement is final.” She also described the ruling as a “win for the level playing field in the Single Market.”
Tackling tax avoidance isn’t only an issue involving Apple – Facebook and Google have also come in for criticism. The European Parliament has estimated that corporate tax avoidance costs the trading bloc up to €70 billion ($77.2 billion) annually [PDF].
Apple last night outlined raft of new devices and software which failed to move the needle on its share price. The latest development today is not exactly going to provide investors with confidence.
Alex Haffner, a competition partner at Fladgate, said in a statement:
“The ECJ’s decision is a dramatic one, not least as it overturns the findings of the EU General Court beneath it, which had upheld Apple’s appeal against the Commission’s findings that it had received unlawful state aid through tax advantages granted by the Irish government. In essence, the ECJ has found that the General Court adopted too literal an approach when it decided that the Commission had not shown to the requisite standard that Apple’s revenues outside the US should be attributable to Ireland and to an appropriate level of tax.
“Rather, the ECJ was prepared to look at the substance of the situation and whether, overall, Apple was being treated more favourably by the Irish government that it should have been. From a financial perspective Apple will now have to forgo €13 billion that has been sitting in escrow pending the outcome of the case. But perhaps of more relevance will be the sense that, again, the EU authorities and courts are prepared to flex their (collective) muscles to bring Big Tech to heel where necessary.”
The Register has asked Apple to comment. ®