Apple loses in EU top court over tax bill of EUR14.3bn in Ireland

Apple’s tax dispute with Brussels over €14.3bn has suffered a setback after an advisor to the EU top court suggested that an earlier ruling on its business in Ireland be rescinded.

Giovanni Pitruzzella said that the landmark ruling which ruled against the EU order to Apple to pay back taxes of €14.3bn to Ireland should be “set aside”.

These opinions are not binding, but they can have a significant influence on the final decisions of the EU’s highest court.

The General Court of the EU, which is the second highest court in the EU, ruled that in 2020, despite supporting the EU right to investigate tax arrangements at national level, Brussels failed to prove that Apple received an unfair economic advantage over taxes in Ireland.

Pitruzzella, however, said that the court “had committed a series errors in law”, and “failed correctly to assess the substance and the consequences of certain methodology errors”. He said that the court had to “undertake a new assessment” as a result.

Next year, the ECJ is expected to rule on this case.

Margrethe Vestager, the EU’s competition commissioner, said that Apple’s tax arrangement gave it a tax rate less than 1% and a unfair advantage over its rivals. This was in violation of the state aid rules.

Ireland collected €14.3bn from the company as disputed back taxes and interest in 2018. The funds have been placed in an escrow fund while the legal process is ongoing.

Aidan Regan is an associate professor at University College Dublin who specializes in Irish corporation tax. He said that the argument of the commission was that Ireland “gave Apple an unfair advantage on the market” because it allowed them to accumulate so much money tax-free for such a lengthy period of time.

Apple stated that the General Court’s decision “was very clear” that Apple did not receive any selective advantage or state aid. We believe this should be upheld.

Ireland also claimed that the company was not given any preferential treatment on Thursday.

Michael McGrath, Ireland’s finance minister, said that Ireland has maintained that Apple received no state assistance and that it paid the correct amount of Irish taxes.

The opinion sheds light on Ireland’s long-held strategy of keeping corporate tax low to encourage investment. The 12.5% tax rate has helped to attract multinational tech and pharmaceutical firms and led to a boom in returns. The corporation tax receipts of the country have tripled over the last eight years, reaching a record €22.6bn in 2013.

Ireland is establishing a sovereign fund in order to save windfall taxes proceeds. However, as the country prepares to increase the corporation tax rate from 15% to 15% under an OECD agreement, the corporation tax revenue has fallen dramatically for the last three months.

Regan stated that if the ECJ rules in favor of the payment to the Irish exchequer, other EU countries and the US will likely claim a part of the payment.

The commission stated that it would not comment on the views expressed by the advocates-general.

Apple’s case is a part of an overall crackdown by Brussels launched in 2013 on alleged tax sweetheart deals in member countries.

Other parts of the commission’s tax deal have also been subject to legal challenges. Brussels has appealed against a General Court ruling that overturned an order ordering Amazon to pay taxes in Luxembourg.

The commission also lost a similar lawsuit over tax deals between the Netherlands and Starbucks, but did not appeal.

Vestager has taken a leave from work to pursue her bid for the European Investment Bank.

She said, on X (formerly Twitter): “All businesses should pay their fair tax share.” “The fact is that @apple paid (almost no) taxes.”

Alec Burnside is a partner at Dechert in Brussels. He said that Brussels uses the state aid laws to target alleged unfair tax treatment, because member states cannot agree on legislation regarding taxation, which requires unanimous agreement.

He added, however, that this use of “old law for new purposes” was not acceptable. . . “The commission is entangled in years of litigation because it raises questions of principle and practices”.