What Apple’s victory could mean for the future of tech giants in the EU

by Lea Schiller

In 2016, the European Union’s (EU) Competition Commissioner Margrethe Vestager’s efforts to control low taxes for big, multinational companies led to the Commission ordering Apple to pay back 13 billion euros in unpaid taxes to Ireland. Including interest, that number has now surpassed 14 billion – a sum that both Apple and the Irish government have submitted an appeal against. To understand why, and what this could mean for other tech companies in similar positions, one has to look into both the history of the case and Ireland’s economy.

Apple had already been under fire in the US for corporate tax avoidance in 2013, a case during which US senators called Ireland a tax haven for global companies. Three years later, the European Commission ordered Apple to compensate the Irish government for the taxes it had not paid between 2003 and 2014 due to a preferential tax deal. Such a deal that was not available to other companies, which made it a case of illegal state aid under the EU law. Now, Apple’s appeal was approved by the EU’s General Court, which argued that the Commission had failed to provide enough evidence to prove that Apple was receiving preferential treatment.

The Irish government stressed that it had been clear Apple had not received any special arrangement. That Ireland welcomed the decision is hardly surprising, considering that Dublin is the host of many other multinational companies – with its low corporate tax rate, the country is an attractive location for large corporations, and they provide a considerable number of jobs and income for the country. Receiving several billion euros in taxes is, at least for the Irish government, a penalty in this scenario. Apple CEO Tim Cook had been even more decisive in his judgement of the EU’s move to order Apple to pay back its taxes, saying it was “political crap”.

The EU now has two months to appeal the decision and is expected to do so. The EU’s appeal will then be presented to the EU’s highest court, the European Court of Justice, which will issue a final decision. Vestager stated she would study the judgement carefully and then decide on her next steps but added the Commission will continue to investigate aggressive tax deals to multinational companies.

Apple’s successful appeal has been called a landmark ruling – not least because Amazon and Google have submitted similar appeals that are still pending. Apple’s case could create a precedent and deliver a setback to the efforts that have been made towards curbing the monopolistic position of big tech companies in Europe.

Photo by Medhat Dawoud on Unsplash

References

Bodoni, S. & White, A. (2020, July 15). Apple Wins Fight Over $14.9 Billion Tax Bill in Blow to EU. Bloomberg. Retrieved from: https://www.bloomberg.com/news/articles/2020-07-15/apple-wins-eu-court-fight-over-14-9-billion-tax-bill

Espinoza, J., Beesley, A., Bradshaw, T. & Williams, A. (2020, July 16). Apple wins landmark court battle with EU over €14.3bn of tax payments. The Financial Times. Retrieved from: https://www.ft.com/content/1c38fdc1-c4b3-4835-919d-df51698f18c4

Ray, S. (2020, July 16). Apple Wins €13 Billion Tax Avoidance Case Against EU Antitrust Regulator. Forbes. Retrieved from: https://www.forbes.com/sites/siladityaray/2020/07/15/apple-wins-13-billion-tax-avoidance-case-against-eu-antitrust-regulator/

Satariano, A. (2020, July 15). Apple Scores Legal Victory Against $14.9 Billion E.U. Tax Demand. The New York Times. Retrieved from: https://www.nytimes.com/2020/07/15/business/apple-eu-ireland-tax.html