With the European Commission set to stop so-called “sweetheart” tax deals – contractual agreements between states and private companies – Apple might be forced to pay $14 billion (€13 billion) in back taxes to Ireland
May 27, 2023
On Tuesday, May 23, the European Commission’s (EC) appeal was heard at the Court of Justice of the European Union (EU) in Luxembourg. In the appeal, the highest European court has to decide whether Ireland has to collect the requested $14 billion (€13 billion) back taxes from Apple.
In its case against Ireland and Apple, the EC alleges that Ireland has been giving Apple an unfair competitive advantage through tax benefits. Ireland, Apple and the EC have been in a dispute over alleged unfair competition since 2016.
The supposed behaviour of Apple and Ireland is called state aid and is prohibited under Article 107 of the Treaty on the Functioning of the European Union (TFEU). The Article prohibits the gaining of unfair competitive advantages through government support.
Margrethe Vestager, the EU Commissioner for Competition, explained in a 2020 press releaseregarding the decision to appeal the General Courts judgement on the Apple case: “If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the European Union in breach of State aid rules.”
Investigations against Ireland and Apple in 2016 led the EC to order the Irish government to recover $14 billion, plus additional interest, in illegal tax benefits. Apple and the Irish government appealed this order with the tech giant saying the EC’s accusations would “strike a devastating blow to the sovereignty of EU member states over their own matters, and to the principle of certainty of law in Europe.”
Apple argues that it has already paid its fair share of taxes in all countries they operate in, including Ireland. According to the 2016 investigations by the Commission, Apple had an effective corporate tax rate of 0.005% in 2014 in Ireland.
Apple is not alone in being accused of profiting from the Irish tax system. The European headquarters of companies like Google and Meta are also in Ireland. Both have been accused of benefitting from the Irish scheme.
In 2021, Ireland joined the Organisation for Economic Co-operation and Development (OECD) agreement to operate a 15% minimum tax rate, ending its 18-year-long (2003-2021) low corporate tax rate of 12.5%. As The Guardian reported back then, in 2021: “Ireland attracted an estimated 1,000 multinationals in the tech, finance and pharma sectors on the back of its corporate tax policy, including Pfizer, Intel, Yahoo, LinkedIn, TikTok, Apple, IBM and Twitter.”
In the previous 2020 case, the General Court of the European Union (GCEU) found that the Commission had failed to meet the legal standard to prove that Apple received an unfair advantage.
The court clarified that the EC is empowered to scrutinise member states’ tax rulings under the state aid rules. However, in legal actions as such, the EC has a high evidentiary standard to meet.
Now the appeal has been heard. It is open to see if the Commission will meet the standard of proof and whether Apple will have to pay the $14 billion. A decision from the court is expectedon November 9, 2023.
Recently the Commission was turned down in state aid cases against Starbucks and Fiat Chrysler. Notably though, in 2021, the EU won its case against the Belgium tax scheme.
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This article was originally published on IMPAKTER. Read the original article.