The EU’s top court ruled against Apple and Ireland on Tuesday in the iPhone maker’s 10-year battle with the European Commission over its tax affairs in the Republic.
The European Court of Justice (ECJ) in a surprise final ruling on the matter confirmed the European Commission’s decision in 2016 that Apple pay €13 billion of illegal state aid, plus interest, to the Irish Government.
Minister for Finance Jack Chambers said an escrow account set up in 2018 to collect and hold the money pending the outcome of the legal dispute amounts to about €14 billion. He added that he expects most of the funds — mainly held by way of European government bonds, rather than cash — to end up with the exchequer, though some may go elsewhere to settle potential claims from other countries.
The Government consistently said since Brussels started investigating Apple’s Irish tax matters a decade ago that it does not give preferential tax treatment to any companies or taxpayers.
The ECJ, whose ruling is final, said the second-highest EU court, the General Court, had “erred” in 2020 when it said the commission had not proved its case sufficiently.
EU commissioner for competition Margrethe Vestager said in Brussels that the judgment was a “big win” for the commission and “tax justice” and said the escrow account “must be released to the Irish State”. Apple has had a presence in the Republic since 1980 and employs more than 6,000 in Cork.
The Danish politician said the Apple case showed how some countries relied on loopholes and differences between tax regimes to become a “more attractive destination” to corporations.
Despite international tax reforms in recent times, she said that aggressive tax planning by corporations was still “widespread”, and singled out Ireland, the Netherlands and Luxembourg as three countries that remain “central” to profit shifting by multinationals.
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The judgment marks a rare court victory for Ms Vestager in her otherwise failed bid to use state-aid rules over the past decade to make multinational companies Fiat, Amazon and Starbucks pay allegedly uncollected taxes in various EU countries.
The commission’s 2016 Apple decision centred on two tax opinions, or “rulings” as they are referred to, handed out by Revenue in 1991 and 2007 to subsidiaries of the tech giant in Ireland.
The main thrust of the commission’s case was that alleged sweetheart deals gave the US technology giant an unfair and select advantage over other corporate taxpayers, as it allowed the group to channel most European sales through employee-less “head office” parts of two Cork-based subsidiaries, Apple Sales International (ASI) and Apple Operations Europe (AOE), which were non-resident for tax purposes.
Only the activities of Irish “branches” within the same units were subject to tax in the State.
The commission claimed that valuable intellectual property (IP) behind Apple products lay inside the Irish branches of ASI and AOE, meaning that most of the profits were taxable by Revenue in Dublin. Apple, on the other hand, argued it was held outside the branches — and ultimately controlled from group headquarters, in Cupertino, California.
A legal appeal by Ireland and Apple against the commission’s decision resulted in a ruling by the General Court in 2020 that Ms Vestager’s officials fell short of showing “the requisite legal standard” that Apple had received illegal State aid. The ECJ disagreed.