European Union Court Overturns 2016 Decision Against Apple

The European Union overturned a 2016 decision that ordered Apple to make good on $14.9 billion in unpaid taxes to Ireland. Apple selecting Ireland as its European base to avoid taxation was the genesis that eventually led to the decision. The European Commission’s top antitrust regulator Margrethe Vestager accused the arrangement of being an illegal subsidy not available to Apple’s rivals and demanded that Ireland recover 10 years of back taxes. Amazon and Google have pending court appeals to overturn similar EU decisions.

The New York Times notes that, “the decision, which can be appealed to the European Union’s top court, is a setback for the region’s efforts to clamp down on what the authorities there believe is anticompetitive behavior by the world’s largest technology companies.” Apple and Ireland “appealed the [2016] judgment, arguing that the structures were consistent with tax laws.”

NYT notes that, “the appeal has put Ireland in the unusual position of opposing the collection of billions in taxes when its government is facing a budget deficit, a result of emergency spending to respond to the pandemic.” Its appeal, it originally argued, was “a defense of Ireland’s independence.”

The overturning of the 2016 decision “centered on tax law and what constitutes illegal state aid,” with the court stating that, “the European Commission’s argument was flawed and that regulators were ‘wrong’ to conclude Apple had been granted ‘selective economic advantage’.” In Brussels, Cleary Gottlieb Steen & Hamilton attorney François-Charles Laprévote said that the European Commission would have a “difficult but not impossible” job to win an appeal.

Apple lauded the overturn of the 2016 decision and Ireland’s Department of Finance stated that, “the correct amount of Irish tax was charged in line with normal Irish taxation rules.” Apple took the position that, “because its products and services are made in the United States, that is where it books much of its taxable income.”

Apple first chose Cork, Ireland as its European center in 1980, and employs 6,000 people there working in logistics, distribution and customer support. Facebook, Google and Twitter followed Apple in setting up bases in Ireland. Google is now “appealing three antitrust decisions brought by Vestager that amount to fines of about €8.2 billion, worth $9.4 billion.” Amazon is fighting against a 2017 judgment that it owes Luxembourg €250 million in unpaid taxes.

Vestager, meanwhile, said she would “carefully study the judgment and reflect on possible next steps.” “The commission stands fully behind the objective that all companies should pay their fair share of tax,” she said. Vestager has “made targeting what she considers unfair tax deals a central part of her leadership of the European Commission’s competition office.”

A court overturned an earlier ruling “that Starbucks must repay €30 million to the Netherlands, and the Commission didn’t appeal.” France is leading several European countries interested in levying “digital services taxes that would hit companies including Amazon, Apple, Facebook and Google,” but President Trump has threatened retaliation. The Organization for Economic Cooperation and Development is attempting to negotiate a compromise.