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Apple and Ireland win appeal against European Commission's €13 billion tax ruling

The European Commission previously ordered the US company to hand back €13 billion in unpaid tax.

The Apple case prompted significant criticism of the Fine Gael-led government.
The Apple case prompted significant criticism of the Fine Gael-led government.
Image: SIPA USA/PA Images

Updated Jul 15th 2020, 3:25 PM

A TOP EU court has ruled in favour of Ireland and Apple in their appeal against the European Commission’s finding that the country breached state aid rules in its dealings with the multinational.

The European Commission previously ordered the US company to hand back €13 billion in unpaid tax and over €1 billion in interest payments to the Irish government.

Both Ireland and Apple appealed that ruling and the General Court of the European Union has now found in their favour.

It is widely expected that this ruling will be appealed to the European Court of Justice, with parties having a little over two months to file an appeal.

In its judgement, the General Court of the European Union said:

By today’s judgement, the General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU.According to the General Court, the Commission was wrong to declare that Apple Sales International (ASI) and Apple Operations Europe (AOE) had been granted a selective economic advantage and, by extension, State aid.The General Court endorses the Commission’s assessments relating to normal taxation under the Irish tax law applicable in the present instance, in particular having regard to the tools developed within the OECD, such as the arm’s length principle, in order to check whether the level of chargeable profits endorsed by the Irish tax authorities corresponds to that which would have been obtained under market conditions.However, 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.

Apple Operations International (AOI) and Apple Sales International (ASO) were two Apple subsidiaries that were based in Ireland. 

The General Court of Justice went on to say: “The Commission did not prove, in its alternative line of reasoning, that the contested tax rulings were the result of discretion exercised by the Irish tax authorities and that, accordingly, ASI and AOE had been granted a selective advantage.”

Reaction

Both Apple and the Irish government have welcomed the judgement.

“This case was not about how much tax we pay, but where we are required to pay it,” an Apple spokesman said in a statement.

“We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society,” Apple added.

The government has welcomed the judgement, stating in a statement that Ireland has “always been clear that, based on Irish law, the correct amount of Irish tax was charged and that Ireland provided no State aid to Apple”. 

“Ireland appealed to the Commission decision on that basis and the judgement today from teh court vindicates this stance.”

The Department of Finance said the decision showed there had been “no special treatment” for the tech giant.

“We welcome the judgment by the General Court of the European Union annulling the Decision of the European Commission of August 2016, which alleged Ireland provided State aid to Apple,” the department said in a statement.

Ireland has always been clear that there was no special treatment provided to the two Apple companies – ASI and AOE. The correct amount of Irish tax was charged taxation in line with normal Irish taxation rules. Ireland appealed the Commission decision on the basis that Ireland granted no state aid and the decision today from the Court supports that view.

Finance Minister Paschal Donohoe said the judgement “proves Ireland was correct to pursue this case in the European courts”. 

The court was asked to determine whether two tax rulings delivered by Revenue in 1991 and 2007 allowed Apple to funnel profits through Irish-anchored structures without paying tax in any jurisdiction.

It is the first legal ruling in a case that formally kicked off in 2014 when the Commission opened an investigation into the matter, which concluded in 2016. The decision could have major implications for the European Commission’s plans to harmonise tax regimes across member states. 

The Commission had found that the two rulings had breached EU state aid rules designed to prevent individual companies from receiving favourable treatment from member state governments. As then-commissioner for competition Margrethe Vestager put it at the time, “Ireland had granted illegal tax benefits to Apple”.

After concluding that Apple had been paying corporation tax at an effective rate of just 0.005%, the Commission ordered the US company to hand back €13 billion in unpaid tax and over €1 billion in interest payments to the Irish government. 

Apple denied that it had ever sought special deals with any government and accused the Commission of selectively quoting “tiny figures”. 

In a statement this morning Vestager, who is now Executive Vice-President of the Commision, said that the body will “carefully study the judgment and reflect on possible next steps”.

“The Commission stands fully behind the objective that all companies should pay their fair share of tax,” she said. 

If member states give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the EU. It also deprives the public purse and citizens of funds for much needed investments the need for which is even more acute during times of crisis.

Political reaction

Following Apple’s appeal of the 2016 Commission finding, the Fine Gael minority government at the time, supported by Fianna Fáil, decided to join the appeal – prompting significant political and public opposition.

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Responding to the ruling this morning, former minister Charlie Flanagan said: “Important EU court ruling vindicates actions of Enda Kenny, Michael Noonan and government despite incessant hostility at home and abroad.”

Sinn Féin’s finance spokesperson Pearse Doherty TD said that “morally this is a terrible day” because Apple was allowed to avoid paying a “fair amount of tax”

“Apple had three stateless companies here, ‘we shouldn’t pay tax here, or anywhere in the world’. So, while the Department of Finance may be thinking that this is a good day for themselves, morally this is a terrible day,” Doherty told RTÉ’s Today with Sarah McInerney.

“The richest company in the world was able to generate over €100 billion of profits and not pay tax anywhere in the world on those profits despite the fact that the companies are incorporated here in Ireland. “ 

With reporting from Ian Curran and Dominic McGrath

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About the author:

Rónán Duffy

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