The EU suffered a major setback in its effort to curb profit shifting when a European court struck down an order for Apple to refund Ireland € 13bn ($ 15bn) in back taxes.
The commission’s landmark decision against Apple was issued in August 2016 by Competition Commissioner Margrethe Vestager in a shocking decision that put Europe on the map as a scourge of Silicon Valley.
The iPhone maker and Ireland had appealed the order, which Apple CEO Tim Cook criticized at the time as “total political crap.”
Vestager was derided as the “tax lady” of Europe by the President of the United States, Donald Trump, due to the case, as well as a series of antitrust fines that he imposed on Google.
The clear decision of the EU general court could now face another appeal to the European Union Court of Justice, with a decision expected no sooner than 2021, but Vestager only said that Brussels was studying the sentence.
In 2016, the EU accused Ireland of allowing Apple to park revenue earned in Europe, Africa, the Middle East and India and saved almost any tax.
Brussels said this gave Apple an advantage over other companies, allowing it to avoid Irish taxes between 2003 and 2014 of around 13 billion euros ($ 14 billion).
EU officials argued that it constituted Ireland’s illegal “state aid”.
But the EU court said the commission “failed to show the required legal standard that there was an advantage.”
The commission “was wrong” in declaring that Ireland-based Apple units “had obtained a selective economic advantage and, by extension, state aid.”
Apple welcomed the decision and reiterated that the profits in question were always destined for the United States and not Ireland.
“This case was not about how much tax we pay, but where we should pay it,” an Apple spokesman said in an email to AFP.
“We are proud to be the world’s largest taxpayer, as we know the important role that tax payments play in society,” added Apple.
Irish Finance Minister Paschal Donohoe said he welcomed the outcome in a case “that affected our reputation while pursuing this ruling.”
“It has always been clear that the correct level of taxes was collected and no state aid was provided,” he added.
Vestager said the EU “will carefully study the ruling and reflect on possible next steps,” which could include an appeal.
“The Commission fully supports the goal of all companies paying their fair share of taxes,” he added.
– ‘One percent’ –
Some observers have raised doubts about the Apple case, wondering if the EU was right to use the antitrust law to crack down on multinationals’ tax optimization strategies.
In similar cases, the same EU court reversed a Brussels order that Starbucks pay € 30 million in back taxes to the Netherlands.
However, in a separate decision, he said that Fiat must pay approximately the same amount to Luxembourg.
The case comes as the EU is trying to find ways to better trap digital giants to pay taxes where they do business, although some European capitals have opposed this.
“Today’s court decision illustrates how difficult it is to use EU state aid rules to collect taxes,” said Tove Ryding, tax expert at the European Debt and Development Network.
“If we had an adequate corporate tax system, we would not need lengthy court cases to determine whether it is legal for multinational corporations to pay less than one percent in taxes,” he said.
Conversations to reach a new global tax system in the OECD have stalled due to opposition from the United States.
Apple’s decision came on the eve of another landmark case in EU courts, this is a lawsuit filed by an Austrian activist against Facebook over data privacy.