EU court orders Apple to pay back billions

The European Court of Justice has ruled that Apple must pay back millions of euros in tax advantages to the Irish state. An investigation by the European Commission found that the tech company took advantage of Ireland’s rules to minimise its tax bill.

Between 1991 and 2014, the EU says Apple assigned profits to two Irish-incorporated subsidiaries which “existed only on paper.”

“These profits…were not subject to tax in any country under specific provisions of the Irish tax law”, according to the European Commission.

That allowed Apple to pay just a fraction of the tax it should have done.

In 2011 alone, the EU’s Competition Commissioner says her team found that one of Apple’s Irish subsidiaries recorded profits of around €16 billion, but used tax rules to claim only €50 million was eligible for tax in Ireland, meaning the company paid “an effective tax rate of 0.05 per cent on these overall annual profits.”

The European Commission calculated that the true amount of tax owed by Apple over two decades was €13 billion.

But in 2016 when the investigation was concluded and the European Commission demanded Apple open its wallet, Ireland wasn’t keen to have the money back.

Ireland’s objections

Since then, the case has worked its way up the EU’s legal system and the objections came, not only from Apple, but also the Irish government.

That’s because tech giants like Apple have become vital to Ireland’s economy based on a model of low corporate taxation.

It’s estimated that around 160,000 people work in Ireland’s tech sector, up by a third since 2019, according to the Central Bank of Ireland.

Ireland fears that if it becomes less attractive to do business there, its tech bubble economy could burst.

Apple successfully appealed the tax decision in 2020, but this morning the EU’s highest court, the Court of Justice of the European Union, set aside that appeal and ruled that “Ireland granted Apple unlawful aid which Ireland is required to recover.”

The outstanding tax of €13 billion has been sitting in a sealed account for years whilst the courts have wrangled over the decision.

The Irish government said it would now proceed to recoup the money.

“The CJEU [Court of Justice of the European Union] has found that the tax paid was insufficient and that a greater amount of taxation was required to be recovered. Ireland will of course respect the findings of the court regarding the tax due in this case”, Ireland’s Department of Finance said.

Apple’s response

Apple responded in a statement that it is “disappointed” by the ruling. The company claims that it had paid more than $20 billion in tax on those international profits, to US authorities.

“We always pay all the taxes we owe wherever we operate and there has never been a special deal. Apple is proud to be an engine of growth and innovation across Europe and around the world, and to consistently be one of the largest taxpayers in the world”, it said.

The ruling is a victory for the EU’s Competition Commissioner, Margrethe Vestager, who will leave office in a few weeks’ time. She said the light the EU had shone on tax regimes had forced Ireland to sharpen up its rules.

“Our investigations have decisively contributed to a mind shift, a change of attitude among [EU] member states. They have helped to trigger and accelerate regulatory and legislative reform. Take Ireland: Today, the Apple case could no longer occur. Ireland changed its corporate tax residence rules to prevent Irish incorporated companies from being stateless for tax purposes”, she said in the press conference after the ruling.

But she also warned that big corporations continue to look for loopholes to lower their tax bills including syphoning profits through countries, like Ireland, with low corporate tax rates.

“The unfortunate truth is that aggressive tax spending is still widespread…Ireland, the Netherlands, Luxembourg and Belgium seem to be central when it comes to profit shifting.”