The European Commission received a heavy blow in its fight against EU Member States’ tax treaties for multinational companies after the bloc’s court ruled that Apple would not tax the Irish € 13 billion (11.7 GBP billion) government has to pay.
The Luxembourg-based court found that the EU executive had failed to prove that the iPhone maker had benefited from an illegal agreement with the Irish authorities, which had a major impact on the block̵
The Commission has ongoing proceedings against Ikea and Nike over alleged treasury deals granted by the Dutch government. Brussels launched an investigation into the tax treatment granted by Luxembourg to the Finnish food packaging company Huhtamäki in March.
The Irish government, which tried to protect its low-tax regime, immediately welcomed the decision of the EU court.
“Ireland has always been clear that there was no special treatment,” the government said in a statement. “Ireland appealed the Commission’s decision because Ireland had not granted any State aid and today’s decision by the General Court supports this view.”
Four years ago, the Commission instructed Apple to pay for gross underpayment of profit tax across the European bloc over an eleven-year period between 2003 and 2014.
The multinational corporation, headquartered in Cupertino, California, could, with the approval of the local tax authorities, use two Shell companies registered in Ireland to report Europe-wide profits at effective rates well below 1%, a low of 0.005% in 2014.
However, the Luxembourg-based court said on Wednesday that the Commission had failed to demonstrate the necessary legal standard that there was an advantage.
A statement said that “the Commission wrongly stated” that Apple “had been granted a selective economic advantage, which included state aid.”
Tove Maria Ryding, tax justice coordinator at the European Debt and Development Network, said the decision underscores the inadequacy of EU instruments to combat corporate tax avoidance.
She said: “Today’s court decision shows how difficult it is to apply EU state aid rules to raise taxes.
“If we had a proper corporate tax system, we would not need long legal proceedings to find out whether it is legal for multinational companies to pay less than 1% tax.
“This case has been going on for more than six years, and if appealed against today’s judgment, it will obviously take even longer. It shouldn’t take more than half a decade to decide what a multinational company should pay in taxes. This case shows that our corporate tax system is a mess and not for the purpose. “
The ruling is just the latest blow to Margrethe Vestager, who pioneered US corporate tax evasion while serving as a commissioner.
The EU court overturned the Commission’s request that Starbucks repay up to EUR 30 million in taxes to the Dutch authorities. In another case, the court ruled out a Commission decision against a Belgian tax system for 39 multinational companies.
Ireland loses its € 13 billion tax rebate right in times of economic recession, but offers greater opportunities in the long term.
Multinational companies like Facebook and Google account for one in ten jobs in Ireland. In 2019, 13,867 net roles were added, just below the record 14,000 job gains of such companies in 2018.