Apple’s ten-year legal struggle over a 13 billion euro tax obligation ends with the company losing an EU court case.
TakeAway Points:
- Apple was ordered to pay $14.4 billion in back taxes to Ireland after the European Court of Justice ruled against the company.
- This historic ruling may change tax laws throughout the European Union, reducing tax breaks and fostering public services-based competition.
- With a recent fine of 1.8 billion euros ($1.99 billion) for abusing its market dominance and ongoing investigations under the Digital Markets Act, Apple is still under regulatory scrutiny in the EU.
Apple Fails in EU Tax Case
Europe’s top court ruled against Apple on Tuesday in a significant decision regarding the tech giant’s tax affairs in Ireland. This ruling concludes a decade-long legal battle that began in 2014 when the European Commission, the EU’s executive arm, initiated an investigation into Apple’s tax payments in Ireland, where the company’s European headquarters are located. The Commission had ordered Dublin to recover up to 13 billion euros ($14.4 billion) in back taxes from Apple, claiming that the tech company had received “illegal” tax benefits over two decades.
In 2019, Apple and Ireland appealed the Commission’s decision, and in 2020, the EU General Court sided with Apple, annulling the Commission’s 2016 decision. The General Court stated that the Commission had not proven that the Irish government had given Apple a tax advantage. However, the Commission appealed this decision, leading to the recent ruling by the European Court of Justice (ECJ).
The case, which began under the tenure of outgoing competition chief Margrethe Vestager, underscores the ongoing conflict between U.S. tech giants and the EU, which has been addressing issues ranging from data protection to taxation and antitrust. This ruling is expected to have significant implications for how EU countries offer tax incentives to attract multinational companies.
Greater Consequences for Tax Laws
The ECJ’s decision is seen as a landmark ruling that could influence future tax arrangements between EU member states and large multinational corporations. Fiona Scott Morton, an economics professor at Yale University and a consultant at the Bruegel think tank in Brussels, commented on the broader implications of the case. She argued that tax competition among EU states has distorted the internal market and urged governments to compete based on public services rather than low taxes.
“What you’d like is for cities and member states to compete for corporations on the basis of schools, parks, public transit, and museums,” Morton said.
The ruling could prompt new legislation to prevent a “race to the bottom” on corporate taxation across the EU. Morton suggested that if society wants to control the situation, new laws would be necessary.
“If society wants to control that situation, then they have to pass a law,” she noted.
Apple scrutiny continued
This is not the first time Apple has faced scrutiny from the EU. In March, the European Commission fined the iPhone maker 1.8 billion euros ($1.99 billion) for abusing its dominant position in the market for the distribution of music streaming apps. Additionally, the EU’s sweeping Digital Markets Act (DMA) has forced companies to change some of their practices in Europe. The Commission has opened various investigations under the DMA into tech giants, including Apple, Alphabet, and Meta.
The ongoing legal and regulatory challenges highlight the EU’s commitment to addressing what it sees as unfair practices by large multinational corporations. The Commission’s efforts to tackle issues related to taxation, antitrust, and data protection are part of a broader strategy to ensure a level playing field within the EU’s single market.
