Ireland is Apple’s type on paper: €13 billion tax bill overturned by the EU General Court
Friday 31st July 2020
Apple has been told it will not have to pay €13 billion in back taxes to Ireland, winning its appeal at the European Union’s General Court. This is a blow for the European Commission competition authority, which has been trying to crack down on the manipulation of tax regimes by major corporations.
Back in 2016, after a two-year investigation into the taxation patterns of Apple in Ireland, European Commissioner for Competition Margrethe Vestager announced that Ireland had granted illegal tax benefits to the tech giant. It is no secret that Ireland’s corporate tax rate of 12.5% makes it a first-world tax haven, with many Silicon Valley giants routing their European revenue through ‘offices’ in Ireland as a means of tax avoidance. The Commission claimed that Ireland had allowed Apple to attribute almost all of their EU, Middle Eastern and African earnings to an Irish head office that only existed on paper. As such, the company had shielded approximately €110.8 billion of non-US profits from tax. Serving the largest corporate tax fine in history, the Commission ordered a landmark repayment of €13 billion with interest, covering the alleged underpaid taxes in the period 2004-2014.
Naturally, then-CEO of Apple Tim Cook announced that they would appeal the fine, defending the company’s utilisation of the ‘double Irish’ tax system which involves eroding and shifting profits by running them through multiple Irish companies before tax is calculated and paid. The Irish government also formally appealed the ruling, with the Dáil Éireann rejecting the proposed payment of back taxes which amounted to €20 billion, approximately 10% of Irish GDP in 2014.
Apple’s appeal against the 2016 decision was a success, with the General Court of the EU dismissing the Commission’s case on the grounds that there was not enough evidence to suggest Apple had received ‘selective economic advantage’ (state aid) or broken anti-competition laws through minimising their tax bill. Whilst the European Commission could appeal this decision to the European Court of Justice, the emphasis on the lack of a ‘requisite legal standard’ demonstrating preferential treatment gives a quiet confidence that any appeal would go in favour of Apple/Ireland, as an appeal could only be made on a point of law.
In this instance the tech giant will get off lightly, remaining largely unscathed and €13 billion better off. Unfortunately, the same cannot be said for the Irish government. The state welcomed the recent decision, relieved that its work to secure foreign direct investment (FDI) from Apple remains intact and mutually beneficial. Yet the high-profile case has drawn unwanted regulatory attention to Ireland’s international tax reputation, deterring potential investors whilst also alerting current providers of FDI to the fact that some corporations may be receiving benefits that others are not. It has also drawn international attention to the prominent reality of tax avoidance by major brands and companies.
However, the extent to which this publicity will have an effect is questionable as other major corporations facing similar investigations breathe a collective sigh of relief at the ruling. The impetus to crack down on ‘sweetheart tax deals’ has seen cases brought against the likes of Amazon, Starbucks, Nike and Ikea, yet the overturning of Apple’s fine sets a precedent that European courts are unwilling to call beneficial tax regimes ‘state aid’, diminishing any likely success of penalisation.
