Europe’s second-highest court has rejected an EU order for Apple to pay 13 billion euros ($21.25 billion) in Irish back taxes, dealing a blow to the bloc’s attempts to crack down on sweetheart tax deals.
In its order four years ago, the European Commission said Apple benefited from illegal state aid via two Irish tax rulings that artificially reduced its tax burden for more than two decades – to as low as 0.005 per cent in 2014.
“The General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU1,” judges said, referring to EU competition rules.
We will carefully study the judgment and reflect on possible next steps. @EU_Competition
— European Commission 🇪🇺 (@EU_Commission) July 15, 2020
Apple on Wednesday welcomed the ruling.
“This case was not about how much tax we pay, but where we are required to pay it. We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society,” Apple said.
The Irish government also welcomed the ruling.
“Ireland has always been clear that there was no special treatment provided to the two Apple companies. The correct amount … was charged in line with normal Irish taxation rules,” the finance ministry said in a statement.
Ireland had appealed against the EU decision “on the basis that Ireland granted no state aid” and the decision from the Court supports that view,” it said.
Not sure if the @IRLDeptFinance realise that the Court's ruling just made explicitly clear that the 0.005% Apple tax rate was not selective advantage. It was the law.
Think about that.
What would you call a country that legally charges 0.005% tax on a global multinational? pic.twitter.com/ebYGPVe8Aw
— Aidan Regan (@Aidan_Regan) July 15, 2020
The defeat for European Competition Commissioner Margrethe Vestager could weaken or delay pending cases against Ikea’s and Nike’s deals with the Netherlands, as well as Huhtamaki’s agreement with Luxembourg.
Ms Vestager, who has made the tax crackdown a centrepiece of her time in office, saw the same court last year overturn her demand for Starbucks to pay up to 30 million euros in Dutch back taxes.
In another case, the court also threw out her ruling against a Belgian tax scheme for 39 multinationals.
While 14 billion euros – including interest – would have gone a long way to plugging the coronavirus-shaped hole in Ireland’s finances, Dublin appealed against the Commission’s order alongside Apple because it wanted to protect a low tax regime that has attracted 250,000 multinational employers.
However, the government is likely to face strong criticism from opposition parties for not taking the cash, which could cover at least half of a budget deficit forecast to balloon to as much as 10 per cent of GDP this year.
The defeated side can appeal on points of law to the EU Court of Justice, Europe’s highest court.