Apple suffered a major defeat after the EU’s highest court ruled that the iPhone maker must pay 13 billion euros in back taxes, overturning an earlier decision in favor of the group. The Irish government said in a statement that it would not grant Apple a tax break, noting that it had already changed its tax laws. “The Apple case dealt with an issue that is now only of historical importance,” the government said.
The Apple case focuses on the ability of the European Union to intervene in the tax policy of a member state. The story goes back a decade and is based on Ireland’s practice of acting as a tax haven within the EU, luring large American companies to set up headquarters there and conduct their EU-wide operations from the island. The EU could not take kindly to a tax rate of less than 1 percent, as it takes away income from other countries. According to Margrethe Vestager, the head of the EU’s competition law, Ireland gave the company an illegal favor, so in 2016, acting as the responsible commissioner of the European Commission, she announced that Ireland had provided illegal support to Apple, which Ireland must demand back.
Apple CEO Tim Cook described the Commission’s position as “total political nonsense”. According to the company, the EU is “trying to change the rules retroactively and ignores the fact that our income is already taxable in the United States under international tax law.” To the surprise of taxpayers in Ireland, the Irish Ministry of Finance also fought hand and foot against Apple paying them taxes, since if their practices are overturned, thousands of well-paying jobs in Dublin will be at risk. The decision was challenged in court, and a lower court overturned the Commission’s order in 2020. However, the European Court of Justice annulled that decision in its final judgment today.
Responding to the judgment of the European Court of Justice, Vestager welcomed the court’s decision at a press conference held in Brussels. He said he was so surprised by the ruling against Apple that he broke down in tears because the Commission had lost an earlier appeal. “This is a big win for the commission. It’s a win for the level playing field of the internal market and for tax fairness.” The Irish Treasury said it would consider the ruling, but added: “The Irish position has always been that Ireland does not provide preferential However, the European Court of Justice upheld the Commission’s original finding that Apple’s tax structure in Ireland, which excluded profits from intellectual property licenses held by its international and European divisions, constituted state aid. double Irish’ structure after Ireland closed the loophole in 2015.
Apple accounted for its income from Europe in Ireland, where it did not pay any tax in agreement with the government
The case has been watched across the EU as it is a watershed moment in European tax cases for US IT companies. EU efforts to scrutinize deals between companies and member states have previously failed. Last year, Amazon won a court battle over its tax arrangements in Luxembourg after the European Court of Justice ruled that the Commission could not force the major US e-retailer to pay 250 million euros in back taxes to Luxembourg. Brussels also lost a similar case over Starbucks’ tax treatment in the Netherlands, but did not appeal the ruling.
The new global minimum tax rate, which came into effect in many countries this year, applies a 15 percent tax rate to corporate profits. But Dan Neidle, founder of the Tax Policy Associates think tank, said the European Court of Justice’s Apple decision would still have “significant consequences” that would force member states and multinationals to rethink how they allocate profits between countries. According to Neidle: “This is a huge win for the Commission, their strategy to override domestic tax rules on competition law and state aid has been successful. I and most observers thought it wouldn’t make it. We were wrong.” According to Aidan Regan, associate professor of political economy at University College Dublin, in Ireland we can expect the money to be used to solve big challenges, especially the chronic housing crisis.
Ireland must collect €13 billion from Apple. This will not be difficult, because while the parties were waiting for the decision of the European Court, Apple placed 14.3 billion euros in an escrow account in 2018. The money was invested in eurozone government bonds, which have since declined in value. The ruling is a major victory for Vestager, the EU’s competition chief, who is expected to leave her post this year. During his decade-long tenure, he has repeatedly taken on high-profile cases targeting the world’s largest technology companies.
Source: sg.hu
