Apple has faced a notable setback after the European Union’s top court ruled that the tech giant must pay €13 billion in back taxes. This decision reverses an earlier ruling that had favored Apple in a long-standing dispute over its tax arrangements in Ireland.
The case stems from a 2016 finding by the EU’s competition chief, Margrethe Vestager, who argued that Ireland had granted Apple an illicit sweetheart deal, resulting in a tax rate of less than 1 percent. On Tuesday, the European Court of Justice (ECJ) confirmed the European Commission’s initial decision, stating that Ireland provided Apple with unlawful state aid, which the country is now required to reclaim.
An earlier decision by a lower court in 2020 had overturned the Commission’s order. However, the ECJ’s latest judgment was unexpectedly unequivocal. In response, Apple CEO Tim Cook criticized the Commission’s stance, claiming it was an attempt to retroactively alter the rules and overlook that the company’s income was already taxed in the United States.
Reacting to the ruling, Vestager remarked, “It’s a win for the commission. It’s also a win for the level playing field of the internal market and for tax justice.” Ireland’s finance ministry noted it would review the ruling but reiterated its position that Ireland does not offer preferential tax treatment to any corporations or taxpayers.
The case has drawn widespread attention in the EU as a pivotal moment in scrutinizing Big Tech’s tax practices. It follows other high-profile cases, such as a win for Amazon concerning its tax arrangements with Luxembourg and a ruling on Starbucks’ tax treatment in the Netherlands, which the Commission did not appeal. Notably, the ECJ affirmed that Apple’s tax structure in Ireland amounted to unlawful state aid, predominantly due to how it excluded profits from intellectual property licenses held by its international and European arms.
Apple has since ceased its “Double Irish” arrangement after Ireland closed the related loophole in 2015. Moreover, a global minimum tax rate of 15 percent on corporate profits has been implemented internationally this year. Dan Neidle, founder of Tax Policy Associates, commented that the ECJ’s decision would have significant implications, forcing member states and multinationals to reevaluate profit allocations globally.
The outcome represents a considerable victory for the European Commission in its strategy to utilize competition law and state aid regulations to override national tax rules. While many, including Neidle, doubted the Commission’s approach, the ECJ’s ruling has proven them wrong.
In Ireland, there is already talk of how the €13 billion could potentially address major issues, such as the country’s chronic housing crisis. The funds have been held in an escrow account for six years, decreasing in value from the initial €14.3 billion due to investments in eurozone government bonds.
On the same day, the ECJ also ruled in a significant antitrust case against Google. The court found that the search giant had abused its market power by promoting its shopping services over those of competitors, upholding a €2.4 billion EU competition fine.
These rulings mark significant wins for Vestager, who is anticipated to leave her role as the EU’s competition chief this year. Throughout her decade-long tenure, Vestager has frequently taken on high-profile cases against some of the world’s largest technology firms.
For more details, visit the Financial Times.