Apple told to pay Ireland €13bn in tax by EU

The European Union’s highest court has ruled that Apple must pay Ireland €13 billion ($14 billion) in unpaid taxes, concluding an eight-year legal battle. This decision marks the end of a protracted dispute that began in 2016 when the European Commission accused Ireland of granting Apple illegal tax benefits. Despite Ireland’s persistent opposition to the tax recovery, the government has now pledged to comply with the ruling.

Apple expressed disappointment with the decision, arguing that the European Commission is unfairly retroactively altering tax rules. The company claimed that the dispute centers not on the amount of tax paid but on which government should collect it. Apple has maintained that it pays all the taxes owed in every country where it operates and that its income was taxed appropriately in the U.S.

The European Court of Justice (ECJ) affirmed the Commission’s 2016 decision, which stated that Ireland had provided Apple with unlawful aid by offering disproportionately favorable tax arrangements. These arrangements, which were valid from 1991 to 2014, allowed two Apple subsidiaries in Ireland to enjoy tax benefits not available to other companies, which was deemed unfair. The Commission’s goal was to crack down on multinational corporations exploiting financial loopholes to minimize tax liabilities.

This decision overturned a 2020 ruling by a lower ECJ court that had annulled the original verdict. The higher court’s latest judgment corrected legal errors in the earlier decision, reaffirming the Commission’s stance. Apple criticized the ruling, asserting that the European Commission’s actions amounted to a retroactive modification of tax rules and disregarded international tax laws under which the company had already paid taxes in the U.S.

The ruling came shortly after Apple unveiled its new iPhone 16 range, adding to the company’s challenges. The decision requires Ireland to reclaim the back taxes from Apple, an outcome Dublin has long sought to avoid. The Irish government has argued that the tax revenue loss was a strategic trade-off to make Ireland a favorable location for multinational corporations. Ireland, with one of the lowest corporate tax rates in the EU, serves as Apple’s hub for Europe, the Middle East, and Africa.

Although the EU cannot dictate national tax rates, it does regulate state aid, which is the basis for this case. The Commission contended that Ireland’s low tax rates constituted an unfair subsidy to Apple, giving it an undue advantage over competitors.

The ruling represents a significant victory for the European Commission in its efforts to ensure that large companies pay their fair share of taxes. The Irish government has stated that the Apple case is now of “historical relevance only” and that it will proceed with recovering the taxes from Apple.

Tove Maria Ryding from the European Network on Debt and Development welcomed the ECJ’s decision but highlighted that it underscores broader issues within the corporate tax system. She pointed out that the case exemplifies the need for comprehensive reform to create a fair, transparent, and predictable tax system.

In another significant development, the ECJ also ruled against Google, ordering the company to pay a €2.4 billion fine for abusing its market dominance through its shopping comparison service. This fine, initially imposed by the European Commission in 2017, has been upheld despite Google’s appeal. Google expressed disappointment, noting that it had made changes in 2017 to align with the Commission’s decision. The fine is notable for being the largest penalty ever issued by the Commission at that time, though it was later surpassed by a €4.3 billion fine against Google for unfair practices related to its Android software.

Both rulings reflect ongoing EU efforts to enforce antitrust regulations and ensure fair competition within the market, sending a clear message to multinational corporations about the importance of adhering to tax and competition laws.