Apple wins landmark EU court case over $15 billion in taxes
A European Union high court ruled Wednesday that technology giant Apple does not have to pay $15 billion in back taxes to Ireland, as the EU’s executive commission wants.
The European Commission had claimed in 2016 that Apple had an illegal sweetheart tax deal with Irish authorities. But the Luxembourg-based General Court said Wednesday that ”the Commission did not succeed in showing to the requisite legal standard that there was an advantage.”
“The Commission was wrong to declare” that Apple “had been granted a selective economic advantage and, by extension, state aid,” said the Luxembourg-based court, which is the second-highest in the EU. The ruling can only be appealed on points of law.
The European Commission had ordered Apple to pay for gross underpayment of tax on profits across the European bloc from 2003 to 2014. The commission concluded that California-based Apple used two shell companies incorporated in Ireland to report its Europe-wide profits at effective rates well under 1%.
In many cases, multinationals can pay taxes on the bulk of their revenue across the EU’s 27 countries in the one EU nation where they have their regional headquarters. For small EU countries like Ireland, where many big tech companies such as Apple have their European headquarters, offering a low tax rate helps attract international businesses.
The Irish government immediately welcomed the ruling. “Ireland has always been clear that there was no special treatment provided” to the U.S. company, it said in a statement. “Ireland appealed the commission decision on the basis that Ireland granted no state aid and the decision today from the court supports that view.”
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Apple also said it was pleased by the decision, arguing that the case is not about how much tax it pays, but in what country. CEO Tim Cook has called the EU demand for back taxes “total political crap.”
The court ruling is especially stinging for EU Vice President Margrethe Vestager, who has campaigned for years to root out special tax deals. President Trump has referred to her as the “tax lady” who “really hates the U.S.”
She vowed to carry on the fight. “The commission will continue to look at aggressive tax planning measures under EU state aid rules to assess whether they result in illegal state aid,” Vestager said.
Even though taxation remains under the authority of its member countries, the EU is seeking to create a level playing field among the bloc’s 27 nations by making sure special deals including ultra-low tax rates with multinationals, like the one between Ireland and Apple, are weeded out. The Trump administration has said that the EU is unfairly targeting U.S. companies.
EU legislator Sven Giegold said the verdict “is a huge setback in the fight against tax dumping in Europe. EU state aid rules are clearly totally insufficient to tackle the problem. This must be a wakeup call.”
The ruling comes at a time when tax income for EU nations is especially welcome because of the economic impact of the COVID-19 pandemic. With cash-strapped households suffering, the EU wants to make sure multinationals making profits on the continent pay their fair share.
Meanwhile, the EU Commission was to unveil new plans to combat tax fraud only hours after the ruling in Luxembourg.
“In times like these, when we are passing multibillion-euro economic stimulus packages, we cannot afford to waste a single cent in tax revenue,“ said EU legislator Markus Ferber.
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