Europe’s second-highest court on Wednesday overturned a ruling ordering tech giant Apple to reimburse Ireland for €13 billion ($15 billion) in back taxes.
The General Court ruled in favor of Apple and Ireland in a joint appeal of a 2016 ruling from the European Commission, saying the US tech firm does not have to pay the sum.
“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) TFEU1,” judges in Luxembourg said in a statement, making reference to EU competition rules.
“The Commission was wrong to declare” that Apple “had been granted a selective economic advantage and, by extension, state aid,” the statement read.
The Commission has two months to appeal the decision at the European Court of Justice — the bloc’s highest court — on points of law only.
EU targeted big tech in 2016 ruling
A 2016 ruling from European Commission said the iPhone maker had benefited from illegal state aid owing to two Irish court decisions that allegedly artificially reduced Apple’s tax burden.
The decision was part of a series of anti-trust cases that targeted major US firms including Starbucks, McDonald’s and Amazon.
The Commission had ruled that tax deals struck by Apple and other companies with countries such as Ireland, the Netherlands and Luxembourg constitute illegal state aid, a violation of EU regulations.
Both Apple and Ireland appealed that ruling leading to Wednesday’s decision.
Apple has had a base in the southern city of Cork since 1980, where it employs more than 5,000 people and through which it routes international sales, avoiding billions in corporate taxes.
Vindication for Apple and Ireland
“This case was not about how much tax we pay, but where we are required to pay it. We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society,” Apple said in response to the Wednesday ruling.
The government of Ireland said it had “always been clear” Apple received no special treatment, adding, “The correct amount of Irish tax was charged… in line with normal Irish taxation rules.”
The country’s biggest opposition party Sinn Fein criticized the decision, with spokesman Pearse Doherty saying it was “a bad day for the Irish taxpayer.”
DW business reporter Arthur Sullivan called the ruling a “big blow” for the EU, but said it was important to distinguish between this specific case and the wider fight against tax avoidance.
“This case looked at the issue of illegal state aid. Did Apple’s specific arrangements in Ireland amount to illegal state aid. The courts today said it didn’t,” Sullivan said.
“However…the competition commissioner Margrethe Vestager has been increasingly looking to tackle this issue. We’re seeing the Commission is increasingly willing to use tools they’ve never used before, such as bringing in voting on changes to the corporate tax structure in the EU…If that comes in, that would mean the fight is still very much on.”
Profit shifting under scrutiny
The ruling is a setback to the Commission’s fight — led by Vestager — to reduce the practice of profit shifting whereby multinational companies shift profits from a high tax jurisdiction to a lower one.
“The Commission will continue to look at aggressive tax planning measures under EU state aid rules to assess whether they result in illegal state aid,” she said, following the ruling.
The EU’s lower court last year overturned a ruling that had ordered Starbucks to pay €30 billion in Dutch back taxes. In a separate case, the court threw out a ruling against a Belgian tax scheme for 39 multinationals.
The ruling is likely to be taken into account in pending cases against Ikea, Nike, and other international firms.
The decision comes amid an EU campaign to increase taxation and limit the power of digital behemoths like Apple, though some member states are opposed.
Ireland’s economy has benefited from the presence of multinational corporations attracted by the country’s low tax rates. Dublin is seen as unwilling to accept a ruling suggesting that its tax laws are too lax.
kp/sms (AP, AFP, dpa, Reuters)