Apple will not have to pay €13 billion tax bill, rules EU court

15 July 2020, 19:00

Apple saw the €13 billion tax bill overturned due to insufficient evidence
Apple saw the €13 billion tax bill overturned due to insufficient evidence. Picture: PA
Nick Hardinges

By Nick Hardinges

Apple will not have to pay the Irish Government €13 billion in back taxes following a successful appeal in the European Union's second-highest court.

The decision in the EU's General Court in Luxembourg overturns a ruling in 2016 which found Apple had been granted illegal tax breaks by Dublin.

It sees both Ireland and the tech giant walk away victorious in their legal battle with the European Commission, which brought the case forward.

The General Court said it annulled the decision due to insufficient evidence that Apple broke EU competition rules or that Irish tax rulings favoured the tech giant.

'Not enough evidence'

The commission previously said Apple paid an effective corporate tax rate of just one per cent on profits from sales made across the European bloc by routing them through a firm based in Ireland - a move the commission claimed constituted illegal aid given to the tech giant by the Irish state.

However, the General Court found the commission was "wrong" to declare that Apple Sales International (ASI) and Apple Operations Europe (AOE) were given a selective economic advantage and, by extension, state aid.

It ruled that the commission did not succeed in showing to the "requisite legal standard" that there was an advantage - meaning there was not enough evidence to substantiate its claim.

However, the commission can appeal the ruling in the EU's supreme court, the European Court of Justice.

Minister for Finance Paschal Donohoe insisted Apple was not given preferential treatment
Minister for Finance Paschal Donohoe insisted Apple was not given preferential treatment. Picture: PA

Executive Vice President Margrethe Vestager - who is the European Commissioner for Competition, said the commission will be considering its next steps.

“Today’s judgment by the General Court annuls the Commission’s August 2016 decision that Ireland granted illegal state aid to Apple through selective tax breaks," said Ms Vestager.

"We will carefully study the judgment and reflect on possible next steps.”

'Apple not given preferential treatment'

She added: “The Commission stands fully behind the objective that all companies should pay their fair share of tax."

The €13.1 billion is currently being held in an escrow account, meaning it cannot be released until the European courts have come to a final decision over the case.

In a statement, Apple said: "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."

The Irish Government, which has always opposed the commission's ruling and had also appealed against it, said it had "always been" the case that it had not given favourable treatment to the tech giant.

Minister for Finance Paschal Donohoe said: "Ireland does not provide preferential tax treatment to any taxpayer. This is not the policy of any Irish government.

"The decision today by that court and their judgment is a vindication of our stance on this matter.

"It has always been our position that no preferential treatment was given to Apple, that based on Irish law the correct tax was charged."

'€13 billion thrown away'

Ireland's open economy is based on low corporate taxation and other incentives to attract multinationals which, in Apple's case, was significantly below the standard 12.5 per cent imposed on corporations.

The tech giant said that from 2003 to 2014, it paid $577 million (US) (€504.6 million) in tax on its profit generated in the country, in line with the tax laws in Ireland.

The Irish Government opposes any effort to force it to change its taxation practices, which have tempted some of the world's leading financial and technology firms to set up base in Dublin.

People Before Profit technical director Richard Boyd Barrett said the Irish Government had "thrown away" €13 billion which is "desperately needed in the face of the Covid crisis".

He said: "The Irish government should hang their heads in shame for supporting Apple in their appeal and using taxpayers' money to help prevent Ireland receiving 13 billion from Apple.

"That money, which is so desperately needed, could have been put to use in mitigating the Covid-19 crisis which is having such a massive impact on our economy and society."

In today's ruling, the Luxembourg-based court concluded: "The General Court considers that the Commission incorrectly concluded, in its primary line of reasoning, that the Irish tax authorities had granted ASI and AOE an advantage as a result of not having allocated the Apple Group intellectual property licences held by ASI and AOE, and consequently, all of ASI and AOE trading income obtained from the Apple Group's sales outside North and South America, to their Irish branches.

"The General Court considers that the Commission did not succeed in demonstrating, in its subsidy line of reasoning, methodological errors in the contested tax rulings which would have led to a reduction in ASI and AOE's chargeable profits in Ireland.

"Although the General Court regrets the incomplete and occasionally inconsistent nature of the contested tax rulings, the defects identified by the Commission are not, in themselves, sufficient to prove the existence of an advantage."

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