By Valentina Pop and Sam Schechner
Apple Inc. won a major battle with the European Union when the
bloc's second-highest court on Wednesday sided with the U.S.
company over a EUR13 billion ($14.8 billion) tax bill that EU
antitrust officials had said the company owed to Ireland.
The case stems from a 2016 decision by the European Commission,
the bloc's top antitrust enforcer, which said that Ireland must
recoup EUR13 billion in allegedly unpaid taxes between 2003 and
2014, money the commission said constituted an illegal subsidy
under the bloc's strict state-aid rules.
In a stinging rebuke to the commission, the General Court said
it annulled the decision because the commission had failed to meet
the legal standards in showing that Apple was illegally given
Margrethe Vestager, who is in charge of competition at the
commission, said she would "carefully study the judgement and
reflect on possible next steps" and vowed to continue
investigations into national tax deals with corporations to
establish whether they constitute illegal subsidies.
"The Commission stands fully behind the objective that all
companies should pay their fair share of tax," she said, adding
that if one EU government gives corporations tax benefits that
aren't available to their rivals, "this harms fair competition in
The 2016 decision against Apple earned Ms. Vestager the nickname
"tax lady" from President Trump. She recently launched two
antitrust probes into Apple, is now also responsible for tech
regulation and is considering imposing a digital tax on tech
The decision is a blow to Ms. Vestager, who is also currently
fighting Google in court over three separate antitrust decisions --
with fines totaling $9.4 billion -- that the commission has levied
under her watch against the Alphabet Inc.-owned search giant for
allegedly anticompetitive conduct.
In a September hearing at the General Court, Apple's lawyers
said the commission's decision to call for the payment "defied
reality and common sense" and Apple's CEO Tim Cook at the time
slammed the decision as "total political crap."
The company however had parked the sum in an escrow account,
pending adjudication in EU courts.
The commission can still challenge the Apple ruling at the
bloc's top court, the European Court of Justice. In recent
comments, however, Ms. Vestager pointed to the limitations of
state-aid law in enforcing what she describes as "paying your fair
share of tax."
Overturning the Apple decision, while a loss for the commission,
gives ammunition to tech-industry critics -- including Ms. Vestager
-- who say current tax and competition laws must be updated to curb
alleged abuses by large tech companies. European countries and the
U.S. are currently at an impasse in international talks over how
and whether to update the global tax system to make tech companies
pay more levies where their customers are based.
Several countries, including France, have unilaterally imposed
taxes on tech companies. EU leaders, including Ms. Vestager, have
said the EU will do the same if there isn't progress at an
international level by the end of this year.
Apple and Ireland on Wednesday applauded the annulment of the
tax case. Ireland reiterated that it gave no special treatment to
Apple, and said that the company had paid taxes according to
"normal Irish taxation rules."
Apple said that it supports international talks over how
countries should divide up taxation rights for multinational
companies. "This case was not about how much tax we pay, but where
we are required to pay it. We're proud to be the largest taxpayer
in the world as we know the important role tax payments play in
society," an Apple spokesperson said.
In a sign that this ruling may dent Ms. Vestager's reputation,
some of her former supporters in the European Parliament questioned
the level of preparation she put into this case.
"Sometimes, the Commissioner for Competition would be
well-advised to restrain her eagerness for catchy political
headlines and instead prepare her cases more thoroughly, so that
they can hold up in a court of law," said German center-right MEP
Markus Ferber who in 2016 backed the commission's decision against
Apple. "High-profile decisions like these being overturned is quite
the disservice to the cause of tax justice," he said in an
Advocates for fairer taxation were less critical of Ms.
Vestager. "Today's court decision illustrates how difficult it is
to use EU state-aid rules to collect tax," said Tove Maria Ryding
with the European Network on Debt and Development, a grouping of
nongovernmental organizations active in the field of debt and
finance. "If we had a proper corporate tax system, we wouldn't need
long court cases to find out whether it is legal for multinational
corporations to pay less than 1 per cent in taxes," she said by
The tax case overturned in Wednesday's ruling is based on a
quirk of EU law aimed at creating a level playing field for
companies across the bloc by forbidding governments from granting
companies some types of state-aid.
The case was Ms. Vestager's first major taxation case in a
series she brought against Amazon.com Inc., Starbucks Corp., Nike
Inc., Fiat Chrysler Automobiles NV and Engie SA of France.
So far, the General Court has sided with Starbucks in a taxation
case but with the commission in its case against Fiat. Amazon in
March had argued at the General Court that Ms. Vestager's 2017
order to pay Luxembourg $277 million in allegedly unpaid taxes was
riddled with legal and factual errors.
Commission lawyers refuted those allegations and said that
neither Amazon nor Luxembourg was able to prove that they didn't
get an unfair advantage from the tax deal.
A central issue in the Apple case was whether two Irish tax
rulings granted to Apple in 1991 and 2007 gave a form of special
treatment to the company, or whether they just reiterated an
interpretation of Irish tax law as it was applied more
Those rulings allowed two Irish-registered Apple units to
attribute only a small sliver of some $130 billion in profit to
Ireland in an 11-year period. The commission said all that revenue
should be attributed to Ireland, but the Irish government and Apple
say they split the profit reasonably, given that almost all of
Apple's intellectual property is developed in the U.S., not
In Wednesday's ruling, the General Court said that, despite the
gaps in the contested tax rulings, the commission hadn't proven the
Irish government granted a special advantage to Apple that was
unavailable to other companies in Ireland.
The commission had argued in its decision that the rulings gave
Apple a selective advantage because the iPhone maker and Ireland
offered no specific evidence to justify how the profit was
allocated. The EU also argued the rulings deviated from the
"arm's-length principle," a standard for setting commercial
conditions between units of the same company as if they were
Ireland contended however that its tax rulings "did not depart
from 'normal' taxation" because it had merely followed a portion of
Irish tax code that says nonresident companies shouldn't pay income
tax on profit that isn't generated in Ireland.
Write to Valentina Pop at firstname.lastname@example.org and Sam
Schechner at email@example.com
(END) Dow Jones Newswires
July 15, 2020 07:29 ET (11:29 GMT)
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