Apple has won its appeal against a European Commission ruling that it owed Ireland €13 billion ($14.9 billion) in taxes.
The General Court of the European Union decided that the European Commission did not prove that the Irish government had given the U.S. tech company a tax advantage.
The commission, the executive arm of the EU, had concluded in August 2016 that the Irish government granted illegal benefits to Apple and ordered it to recover 13 billion euros in unpaid taxes.
At the time, the commission said Ireland had enabled Apple to pay “substantially less tax than other businesses over many years,” which meant that the U.S. firm was allowed to pay an effective corporate tax rate of 1% on its European profits in 2003, which fell to 0.005% in 2014.
The Irish government and Apple decided to appeal the commission’s decision, with the company arguing the order to repay taxes “defies reality and common sense.”
Ireland, Apple and the European Commission now have two months to decide if they want to appeal the latest ruling and potentially take it to the EU’s highest tribunal.
In reaction to the court ruling, the Irish government said it has always been clear “that there was no special treatment provided to the two Apple companies” and that “the correct amount of Irish tax was charged taxation in line with normal Irish taxation rules.”
The European Commission said in a statement:
“[it] will continue to look at aggressive tax planning measures under EU State aid rules to assess whether they result in illegal State aid.”
[it] “will carefully study the judgment and reflect on possible next steps.”
Margrethe Vestager, Executive Vice-President of the European Commission, vowed that the Commission would continue to aggressively pursue what it considers “illegal state aid.”
“At the same time, state aid enforcement needs to go hand in hand with a change in corporate philosophies and the right legislation to address loopholes and ensure transparency. We have made a lot of progress already at national, European and global levels, and we need to continue to work together to succeed,”
A spokesperson for Apple said:
“We thank the General Court for their time and consideration of the facts. We are pleased they have annulled the Commission’s case.”
“We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society. Apple has paid more than $100 billion in corporate income taxes around the world in the last decade and tens of billions more in other taxes,”
Apple shares were up around 2% in premarket trading on the news.
This case was a centerpiece of the EU’s crackdown on taxation in recent years. It could impact how the Brussels institution deals with other companies over taxation matters.
Taxation is taking an even more prominent role in the wake of the Covid-19 crisis. With many governments stepping up their spending, they will be looking for new sources of revenue in the form of taxation.
In this context, there’s an ongoing debate as to whether the European Union should have its own digital tax — a levy on Big Tech to ensure they pay a fairer share compared to more traditional businesses.
Plans by some European nations, including France, to tax the technology behemoths more have met opposition from the United States, which argues the levy is discriminatory toward its domestic firms.
