Blow for EU as Apple wins fight against $15 billion tax
order
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[July 15, 2020] By
Foo Yun Chee and Padraic Halpin
LUXEMBOURG/DUBLIN (Reuters) - Apple scored
a major win on Wednesday as Europe's second-highest court rejected an EU
order for the iPhone maker to pay 13 billion euros ($15 billion) in
Irish back taxes, dealing a blow to the bloc's attempts to crack down on
sweetheart tax deals.
In its order four years ago, the European Commission said Apple
benefited from illegal state aid via two Irish tax rulings that
artificially reduced its tax burden for over two decades - to as low as
0.005% in 2014.
"The General Court annuls the contested decision because the Commission
did not succeed in showing to the requisite legal standard that there
was an advantage for the purposes of Article 107(1) TFEU1," judges said,
referring to EU competition rules.
They said the EU executive was wrong to say Apple's two Irish
subsidiaries - Apple Sales International (ASI) and Apple Operations
Europe (AOE) - had been granted a selective economic advantage and, by
extension, state aid.
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Apple welcomed the ruling, saying the case was not about how much tax it
pays, but where it is required to pay it.
Ireland - which had appealed against the Commission's decision alongside
Apple - said it had always been clear it had not given special treatment
to the U.S. company.
The defeat for European Competition Commissioner Margrethe Vestager
could weaken or delay pending cases against Ikea's and Nike's deals with
the Netherlands, as well as Huhtamaki's agreement with Luxembourg.
Vestager, who has made the tax crackdown a centrepiece of her time in
office, saw the same court last year overturn her demand for Starbucks
to pay up to 30 million euros in Dutch back taxes. In another case, the
court also threw out her ruling against a Belgian tax scheme for 39
multinationals.
Vestager said she would study the court's judgment and reflect on
possible next steps. The Commission can appeal on points of law to the
EU Court of Justice, Europe's top court.
The Commission, which was ordered by the court to pay Apple's and
Ireland's legal costs, could still salvage its case, said Dimitrios
Kyriazis, Head of Law Faculty at the New College of Humanities in
London.
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The Apple Inc. logo is seen hanging at the entrance to the Apple
store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019.
REUTERS/Mike Segar
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"Its defeat is very similar to its defeat in the Starbucks cases, that is it won
on matters of legal principle and lost due to the allocation of evidentiary
onus," he said.
"It is more likely that the Commission will re-adopt a decision against Ireland
and Apple and try to show exactly how the tax rulings granted AOE and ASI a
selective advantage," he said.
IRELAND IN SPOTLIGHT
The European Network on Debt and Development (Eurodad) said the judgment showed
the need for corporate tax reform in Europe.
"Today's court decision illustrates how difficult it is to use EU state aid
rules to collect tax. 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 percent in taxes," its tax justice coordinator Tove Maria
Ryding said.
The ruling puts Ireland's tax regime back in the spotlight at a delicate
juncture. With attempts to get a global agreement on taxing multinationals
buckling, plans for an EU tax could be revived, putting Dublin's low rates in
the firing line.
Multinationals, attracted by Ireland's low taxes, employ around 250,000 people
in the country, accounting for one in ten workers at the end of last year.
However, the government has faced heavy criticism from opposition parties for
fighting against a tax windfall that would have amounted to 14 billion euros,
including interest, and could have covered at least half of a budget deficit
forecast to balloon to as much as 10% of GDP this year.
"This is a bad day for the taxpayer," said Pearse Doherty, the finance spokesman
for the main opposition Sinn Fein party.
"While the Department of Finance might be thinking this is a good day for
themselves, morally this is a terrible day."
(Reporting by Foo Yun Chee; Editing by Mark Potter)
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