This week at the European Court of Justice (ECJ) in Brussels, Apple lost a major, €13 billion Irish tax case. The ruling came as the European Commission has increased efforts to suppress “sweetheart” tax deals for multinational corporations.
This comes after a legal battle that started in 2016 in which the iPhone maker claimed the European Commission wrongfully demanded that €13 billion in tax breaks should be repaid to the Irish government by the tech giant. The European Commission claimed that these tax breaks were “illegal” because they gave Apple an unfair competitive advantage.
The ECJ ruling declared that the European Commission’s 2016 decision that Ireland unlawfully granted Apple — whose EU headquarters are in Cork, Ireland — aid in their tax treatment of profits from operations outside the United States. The case stated that between 2003 and 2014, the company grossly underpaid tax on profits. The EU’s competition watchdog found that beneficial tax rulings from the Irish government mean that Apple effectively paid a tax rate of 0.005% in 2014. Following the ECJ ruling this week, Ireland is now required to recover the €13 billion.
In 2020, the European General Court, a lower court of the ECJ, annulled the decision by the European Commission in 2016, claiming there was not enough evidence that Apple’s subsidiaries had enjoyed any advantage from the Irish tax breaks. This annulment has now been set aside following the ECJ’s hearing this week.
Margrethe Vestager, the EU competition chief, declared in 2016 that Apple had indeed benefitted unfairly from the tax breaks. Following this week’s result, she labelled the outcome as a “big win for European citizens and for tax justice.”
Apple has dismissed the claims made by the European Commission. Tim Cook, the chief executive of the company, called the accusations “political crap.”
Following the ruling, Apple released a statement saying:
“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. […] 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,” the statement says.
Verstager and the commission maintain that Ireland had misapplied Irish tax laws in rulings that favoured the tech multinational. “These tax rulings attributed the bulk of the taxable profits to two Irish subsidiaries of Apple to what was a stateless head office. These head offices existed only on paper – no tables, no chairs, no activities. The profits were thus not taxed anywhere,” Vestager said.
In response to claims that by being tougher on corporate operations and tax, the EU risks pushing away big businesses and foreign investment, Vestager simply stated that “Europe is a formidable place to do business.”
The Irish government reacted to the news from Brussels, saying: “The Irish position has always been that Ireland does not give preferential tax treatment to any companies or taxpayers. Ireland will of course respect the findings of the court regarding the tax due in this case.”
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Google’s antitrust lawsuit
Elsewhere, the same day, the ECJ ruled against Google in an antitrust lawsuit. The court upheld a €2.4 billion fine from the European Commission issued in 2017 in a case that concerned Google favouring its own online shopping services on their search engine.
In response, 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.”
The fine, which had been appealed by Google and its parent company, Alphabet, is one of many penalties imposed by the European Union for violating the bloc’s competition rules. These fines have totalled around eight billion euros between 2017 and 2019.
Next week, the ECJ will decide on yet another fine against Google related to a separate antitrust lawsuit, this one being worth around €1.49 billion.
Brussels has faced obstacles in the past few years in defending its tax enforcement rules, with recent cases being lost to both Amazon and Starbucks. But Tuesday’s rulings demonstrate the European Commission and ECJ’s willingness and ability to hold multinationals accountable for their tax and antitrust activities on the continent.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Cover Photo: The Main Courtroom at the European Court of Justice. Cover Photo Credit: European Court of Justice.
