On Tuesday, May 23, the European Commission’s (EC) appeal was heard at the Court of Justice of the European Union (EU) in Luxembourg. In the appeal, the highest European court has to decide whether Ireland has to collect the requested $14 billion (€13 billion) back taxes from Apple.
In its case against Ireland and Apple, the EC alleges that Ireland has been giving Apple an unfair competitive advantage through tax benefits. Ireland, Apple and the EC have been in a dispute over alleged unfair competition since 2016.
The supposed behaviour of Apple and Ireland is called state aid and is prohibited under Article 107 of the Treaty on the Functioning of the European Union (TFEU). The Article prohibits the gaining of unfair competitive advantages through government support.
Margrethe Vestager, the EU Commissioner for Competition, explained in a 2020 press release regarding the decision to appeal the General Courts judgement on the Apple case: “If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the European Union in breach of State aid rules.”
Investigations against Ireland and Apple in 2016 led the EC to order the Irish government to recover $14 billion, plus additional interest, in illegal tax benefits. Apple and the Irish government appealed this order with the tech giant saying the EC’s accusations would “strike a devastating blow to the sovereignty of EU member states over their own matters, and to the principle of certainty of law in Europe.”
Apple argues that it has already paid its fair share of taxes in all countries they operate in, including Ireland. According to the 2016 investigations by the Commission, Apple had an effective corporate tax rate of 0.005% in 2014 in Ireland.
#Ireland gave illegal tax benefits to #Apple worth up to €13 billion: https://t.co/FppCWW52z4 pic.twitter.com/jkFqh35CO1
— European Commission (@EU_Commission) August 30, 2016
Apple is not alone in being accused of profiting from the Irish tax system. The European headquarters of companies like Google and Meta are also in Ireland. Both have been accused of benefitting from the Irish scheme.
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In 2021, Ireland joined the Organisation for Economic Co-operation and Development (OECD) agreement to operate a 15% minimum tax rate, ending its 18-year-long (2003-2021) low corporate tax rate of 12.5%. As The Guardian reported back then, in 2021: “Ireland attracted an estimated 1,000 multinationals in the tech, finance and pharma sectors on the back of its corporate tax policy, including Pfizer, Intel, Yahoo, LinkedIn, TikTok, Apple, IBM and Twitter.”
In the previous 2020 case, the General Court of the European Union (GCEU) found that the Commission had failed to meet the legal standard to prove that Apple received an unfair advantage.
#EUGeneralCourt annuls the decision taken by the @EU_Commission regarding the Irish #TaxRulings in favour of @Apple #Apple #EUCommission #StateAid pic.twitter.com/KoF6r1n82S
— EU Court of Justice (@EUCourtPress) July 15, 2020
The court clarified that the EC is empowered to scrutinise member states’ tax rulings under the state aid rules. However, in legal actions as such, the EC has a high evidentiary standard to meet.
Now the appeal has been heard. It is open to see if the Commission will meet the standard of proof and whether Apple will have to pay the $14 billion. A decision from the court is expected on November 9, 2023.
Legal teams take their place in Luxembourg for the final round in a court battle over whether Apple underpaid €13.1 billion in tax to Ireland.
The European Commission is attempting to overturn its 2020 defeat in the case, which found in favour of Apple and the Irish government. pic.twitter.com/1XCNa3GMUT
— Naomi O'Leary (@NaomiOhReally) May 23, 2023
Recently the Commission was turned down in state aid cases against Starbucks and Fiat Chrysler. Notably though, in 2021, the EU won its case against the Belgium tax scheme.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Featured Photo: Apple logo on a glass window. Featured Photo Credit: Trac Vu