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Apple loses EU court battle, fined €13 billion in Irish tax

Posted on by darion

Apple’s decade-long legal battle over a €13 billion tax debt ends with the company losing in an EU court.

Conclusions:

  • Following a ruling by the European Court of Justice against Apple, the company has been ordered to pay $14.4 billion in back taxes to Ireland.
  • This historic ruling could change tax rules across the European Union, cutting tax breaks and promoting competition in public services.
  • Despite a recent fine of €1.8 billion ($1.99 billion) for abusing its dominant market position and ongoing investigations under the Digital Markets Act, Apple remains subject to regulatory scrutiny in the EU.

Apple suffers EU tax debacle

Europe’s highest court ruled against Apple Tuesday in a major decision involving the tech giant’s tax affairs in Ireland. The ruling ends a decade-long legal battle that began in 2014 when the European Commission, the EU’s executive arm, opened an investigation into Apple’s tax payments in Ireland, where the company’s European headquarters is located. The commission ordered Dublin to recover up to 13 billion euros ($14.4 billion) in back taxes from Apple, saying the tech company had received “illegal” tax benefits for two decades.

In 2019, Apple and Ireland appealed the Commission’s decision, and in 2020, the General Court of the European Union sided with Apple, invalidating the Commission’s 2016 decision. The court found that the Commission had failed to prove that the Irish government had granted Apple a tax advantage. However, the Commission appealed that decision, leading to a recent ruling by the European Court of Justice (ECJ).

The case, which began under outgoing competition chief Margrethe Vestager, underscores the ongoing conflict between U.S. tech giants and the EU, which has been handling issues ranging from data protection to taxation and antitrust. The ruling is expected to have significant implications for how EU countries offer tax incentives to attract international companies.

Greater implications for tax laws

The ECJ decision is seen as a landmark ruling that could affect future tax arrangements between EU member states and large multinationals. Fiona Scott Morton, a professor of economics at Yale University and a consultant at the Bruegel think tank in Brussels, commented on the case’s wider implications. She argued that tax competition between EU states had distorted the internal market and urged governments to compete on the basis of public services rather than low taxes.

“We would like to see cities and states compete for corporations by relying on schools, parks, public transport and museums,” Morton said.

The ruling could prompt new rules to prevent a “race to the bottom” in corporate taxation across the EU. Morton suggested that if society wants to control the situation, new rules will be necessary.

“If society wants to control this situation, it needs to pass a law,” she noted.

Apple’s control continues

This isn’t the first time Apple has come under EU scrutiny. In March, the European Commission fined the iPhone maker €1.8 billion ($1.99 billion) for abusing its dominant position in the distribution of music streaming apps. In addition, the EU’s sweeping Digital Markets Act (DMA) has forced companies to change some of their practices in Europe. The commission has opened various DMA investigations into tech giants, including Apple, Alphabet and Meta.

Ongoing legal and regulatory challenges underline the EU’s commitment to tackling what it sees as unfair practices by large multinationals. The Commission’s actions to address taxation, antitrust and data protection concerns are part of a broader strategy to ensure a level playing field in the EU’s single market.