European Commission

European Commission to appeal Apple €13bn tax ruling

Brussels seeks to overturn decision over alleged unpaid taxes to Irish government.

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The European commission is to appeal a court ruling that said Apple did not have to pay €13bn (£11.9bn) in alleged back taxes to the Irish government, reopening a landmark battle in the EU’s campaign to stop sweetheart deals for multinationals.

The bloc’s competition chief, Margrethe Vestager, said on Friday she would appeal to the EU court of justice to try to oblige Ireland to collect the alleged unpaid taxes and interest from the tech giant.

“The Commission has decided to appeal before the European Court of Justice the General Court’s judgment of July 2020 on the Apple State aid case in Ireland, which annulled the Commission’s decision of August 2016 finding that Ireland granted illegal State aid to Apple through selective tax breaks”, Vestager said in a statement Friday.

Vestager said that the General Court raised “important legal issues” in its ruling, but added that “the Commission also respectfully considers that in its judgment the General Court has made a number of errors of law.

She highlighted that the same court had previously stated that EU member nations needed to respect European treaties, despite being able to set up their own taxation laws.

We have to continue to use all tools at our disposal to ensure companies pay their fair share of tax. Otherwise, the public purse and citizens are deprived of funds for much needed investments – the need for which is even more acute now to support Europe’s economic recovery. We need to continue our efforts to put in place the right legislation to address loopholes and ensure transparency. So, there’s more work ahead – including to make sure that all businesses, including digital ones, pay their fair share of tax where it is rightfully due.”

In 2016 the commission ordered Apple to pay for gross underpayment of tax on profits across the European bloc between 2003 and 2014. It said the iPhone maker had used two shell companies incorporated in Ireland, with the agreement of tax authorities in Dublin, to report Europe-wide profits at effective rates well under 1%.

Apple and the Irish government rejected the claim, saying no state aid had been paid, and successfully challenged the order in the bloc’s Luxembourg-based general court. It ruled in July that the EU’s executive body had failed to prove Apple benefited from an allegedly illegal arrangement. The decision had wider repercussions for the commission’s plans to clamp down on tax avoidance in member states.

The deadline to appeal was midnight on Friday. The appeal means the €13bn – plus €1.3bn in interest – stays in an escrow account until the court of justice ruling, which could take two years.

Apple played down the appeal’s chance of success and said it had abided by Irish law.

“The General Court categorically annulled the Commission’s case in July and the facts have not changed since then. This case has never been about how much tax we pay, rather where we are required to pay it.

“We will review the Commission’s appeal when we receive it, however it will not alter the factual conclusions of the General Court, which prove that we have always abided by the law in Ireland, as we do everywhere we operate.”

Paschal Donohoe, Irish finance minister, noted Ms Vestager’s decision to appeal and insisted it had always been clear that the correct amount of tax was paid and that no state aid was given to Apple. 

“Ireland has not yet been served with formal notice of the appeal. When it is received, the government will need to take some time to consider, in detail, the legal grounds set out in the appeal and to consult with the government’s legal advisers, in responding to this appeal,” said Mr Donohoe.

Some opposition politicians want Ireland to tap the escrow account to fund pandemic-related spending. The government has refused, saying the money is contested and that Ireland must protect its foreign investment strategy.

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