€13bn wings its way back to Apple after Euro court rules Irish tax deal wasn't 'state aid'

Vestager vexed

Apple has had a €13bn (£11.6bn) tax bill overturned after the EU's General Court ruled that the iGiant was not the recipient of unlawful state aid from the Republic of Ireland.

This is the latest in the ongoing feud between Apple and the European Commission, which in 2016 declared Apple had been the recipient of competition-harming "state aid" that allowed the business to avoid paying the huge sums of tax on EU profit. It asked Ireland to reclaim that money.

In setting aside the original decision, the EU's General Court argued the commission had failed to meet the burden of proof required to show the Irish state was at fault. The ruling stated that Ireland hadn't cut a special deal that "was a result of discretion exercised by the Irish tax authorities" with Apple, but rather was operating within the boundaries of Irish tax law.

This corresponded with Apple's previous protestations, where CEO Tim Cook said in a 2016 open letter: "We never asked for, nor did we receive, any special deals."

Apple paid the tax bill in 2018, with the money sitting in an escrow account managed by the Irish government, which reportedly cost €3.9m to establish.

It is believed that the money will remain in escrow until the case has exhausted its final appeal. The European Commission has the right to appeal to the European Court of Justice within 14 days, although it has not confirmed that it will do so.

Ireland has one of the lowest corporate tax rates in the European Union. Irish tax law previously permitted tax structures like the infamous "Double Irish", which allowed multinationals to further reduce their tax burden by incorporating in Ireland while declaring their profits in a tax haven like the Cayman Islands.

Apple's historic use of the Double Irish loophole* ultimately allowed it to pay an effective tax rate of 0.005 per cent in 2014, according to European Competition Commissioner Margrethe Vestager.

It's pertinent to note that it was Ireland that appealed the Apple tax ruling. The nation's permissive tax structure and anglophone status has allowed the country to attract high-technology and pharmaceutical companies, such as Medtronic, Google and, of course, Apple. In 2018, the International Monetary Fund attributed a quarter of Ireland's 2017 GDP growth of 7.8 per cent to Apple.

The country's position is probably that the jobs brought by these companies are more valuable than added taxation.

Applauding today's ruling, Apple said the 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. Apple has paid more than $100bn in corporate income taxes around the world in the last decade and tens of billions more in other taxes."

That said, surely it's important how much an organisation pays. Taxation underpins the social safety net, which has become increasingly threadbare since the late-2000s financial crisis. It pays for hospitals, teachers, and unemployment benefits. Firms already pay a much lower percentage of profits as taxes than their own employees do income tax. Ireland, which had a budget surplus in 2019, is forecasting a deficit of €30bn, or 10 per cent of its GDP, this year as the government commits money to help businesses and the health service in the wake of the pandemic.

This development represents a major setback for Vestager, who has made corporate tax avoidance a focus of her position. Last year, the Danish politician lost a case against Starbucks, which was accused of avoiding €30m in back taxes to the Dutch government. ®

* Ireland ended the tax scheme with legislation enacted 2015, although firms already using it were given until 2020 to phase out their use.

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