In a significant legal decision, Apple has lost a €13bn (£11bn) tax dispute in the European Court of Justice (ECJ), a ruling that enhances the European Commission’s efforts to eliminate favourable tax arrangements for multinational corporations.
The ECJ’s ruling, a pivotal moment after several years of litigation, confirms that Apple must reimburse €13bn in taxes to Ireland. This follows the European Commission’s 2016 decision that Apple had received unfair tax advantages from the Irish government, essentially constituting unlawful state aid.
Initially, in 2020, Apple’s challenge against the Commission’s decision was successful at the General Court, which ruled that there was insufficient evidence to demonstrate that Apple’s subsidiaries had received a selective advantage. However, the ECJ has now overturned this ruling, siding with the Commission’s assessment of Ireland’s tax treatment of Apple’s profits generated outside the United States.
The decision is a notable victory for Margrethe Vestager, the EU competition chief who has built a reputation for taking action against large multinationals, including Fiat, Amazon, and Starbucks, over tax issues. Although some of her cases, such as those involving Fiat, have been overturned, this latest ruling supports her stance on unlawful state aid.
The legal battle began in 2016 when the European Commission mandated Apple to pay back billions in taxes, citing gross underpayment on profits from 2003 to 2014. Apple’s effective tax rate in Ireland was reportedly as low as 0.005% in 2014. Apple has had its European headquarters in Cork since 1980 and has vehemently denied any wrongdoing, with CEO Tim Cook dismissing the claims as ‘political crap.’
Following the initial favourable ruling by the General Court, the European Commission appealed, leading to this year’s advocate general recommendation to overturn the lower court’s decision. Although the advocate general’s opinions are influential, they are not binding. Nevertheless, the ECJ has now ruled in favour of the Commission.
In response to the ruling, Apple asserted that the dispute was about the allocation of tax payments between governments and insisted it has always paid due taxes in compliance with applicable laws. The company expressed disappointment with the ECJ’s decision, emphasising that the general court had previously annulled the case after reviewing the evidence comprehensively.
Separately, the ECJ also upheld a €2.4bn antitrust fine against Google, dealing with allegations of preferential treatment for its own shopping services. Like Apple, Google expressed disappointment with this ruling but noted that it has made changes to comply with the Commission’s decisions.
This landmark ruling reinforces the European Commission’s commitment to ensuring fair competition by addressing ‘sweetheart’ tax deals. Both Apple and Google face substantial financial repercussions as the ECJ affirms the Commission’s stance on unlawful state aid and antitrust violations.