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

A Landmark Ruling? – How a national court’s decision could change the EU

by Lea Schiller

When Germany’s constitutional court ruled that the European Central Bank (ECB) had violated the German constitution, the effects were immediate – the value of the Euro as well as the debt ratings of the eurozone countries fell. Next to being unprecedented, the decision also came at a time at which it puts pressure on the coronavirus relief package of the ECB – and the response among policymakers and legal experts was accordingly urgent.

Though the court issued its decision on the 5th of May, the case had been going on for much longer. It goes back to 2015, when the ECB established its public sector purchase programme (PSPP), which was supposed to stabilise the eurozone after the financial crisis by buying government debt.

In the years that followed, the German constitutional court asked the European Court of Justice (ECJ) for a judgement on the bond-buying program of the ECB twice, and twice did the ECJ issue its permission to the ECB. Now, on the grounds that the ECB was overstepping its mandate and failed to incorporate political oversight into the purchases of the bonds, the German constitutional court has ruled the ECB has violated the German constitution.

EU law still remains superior to national law, and the ECB is not a subject of German national law. The German central bank (Bundesbank) however, is bound by the decision of the German constitutional court. The ECB now has three months to explain why their bond purchases are proportionate to their mandate – otherwise, the Bundesbank, which is the biggest shareholder of the ECB, would have to pull out of the PSPP. And this is the crux of the issue: although the German constitutional court recognises the EU’s exclusive competence in monetary policy, it has still put forward a judgement on whether or not the ECB and the ECJ are operating within their mandate. It could set, as many have argued in the following weeks, a dangerous precedent.

The reactions to this ruling were widespread and mixed – in Poland for instance, prime minister Mateusz Morawiecki called the decision one of the most important rulings in the history of the EU, as it reaffirms the agency of member states. President of the European Commission Ursula von der Leyen meanwhile is considering starting a treaty violation proceeding against Germany. Monetary policy is an exclusive EU competence, she reasoned, and the ruling therefore posed questions that touched the heart of the EU’s sovereignty. Members of the European Parliament called for all EU institutions to support the decisions of the ECJ, to avoid putting the integrity of the EU’s court and the eurozone in jeopardy. In the end, not even legal experts share a consensus on what this decision means for the future of the ECB and, by extension, the EU. While some theorise it could lead to the break-up of the eurozone, others see the decision itself as a threat to the ECB’s independence. This is especially interesting since – though formally, the ruling has no effect on this – the ECB’s coronavirus relief package is a €750bn bond-buying program, which could now also be called into question.

Photo by Charlotte Venema on Unsplash

References

References:

EZB-Anleihekaufprogramm teilweise verfassungswidrig. (2020, May 5). Tagesschau. Retrieved from https://www.tagesschau.de/wirtschaft/urteil-ezb-anleihen-101.html

Urteil zu Anleihekäufen: EU prüft Verfahren gegen Deutschland. (2020, May 10). Tagesschau. Retrieved from: https://www.tagesschau.de/ausland/eu-kommission-vertragsverletzungsverfahren-101.html

German court criticises European Central Bank crisis bond-buying. (2020, May 5). BBC. Retrieved from https://www.bbc.com/news/world-europe-52542993

Münchau, W. (2020, May 10). The European Central Bank is deluding itself over German court ruling. The Financial Times. Retrieved from https://www.ft.com/content/fc487cac-9105-11ea-9207-ace009a12028

Taylor, C. (2020, May 8). German court ruling on ECB purchases is ‘laughable,’ Societe Generale chair says. CNBC. Retrieved from: https://www.cnbc.com/2020/05/08/german-court-ruling-on-ecb-purchases-is-laughable-socgen-chair.html