Apple faces setback in EU’s $14 billion tax order battle.
By Foo Yun Chee and Bart H. Meijer
November 9, 2023 – 4:42 PM UTC
LUXEMBOURG (Reuters) – An EU tribunal made legal errors when it ruled in favour of Apple over a 13-billion-euro ($14 billion) tax order and should review the case again, an adviser to Europe’s top court said on Thursday, in a potential setback for the iPhone maker.
The tax case against Apple was part of EU antitrust chief Margrethe Vestager’s crackdown against deals between multinationals and EU countries that regulators saw as unfair state aid.
The European Commission in its 2016 decision said Apple benefited from two Irish tax rulings for more than two decades that artificially reduced its tax burden to as low as 0.005% in 2014.
The European Union’s General Court in 2020 upheld Apple’s challenge, saying that regulators had not met the legal standard to show Apple had enjoyed an unfair advantage.
But advocate General Giovanni Pitruzzella at the EU Court of Justice (CJEU) disagreed, saying CJEU judges should set aside the General Court ruling and refer the case back to the lower tribunal.
“The judgment of the General Court on ‘tax rulings’ adopted by Ireland in relation to Apple should be set aside,” he said in a non-binding opinion.
He said the General Court committed a series of errors in law and had also failed “to assess correctly the substance and consequences of certain methodological errors that, according to the Commission decision, vitiated the tax rulings”.
“It is therefore necessary for the General Court to carry out a new assessment,” Pitruzzella said.
The CJEU, which will rule in the coming months, follows around four in five such recommendations.
Ireland reiterated that it had not provided any state aid to Apple.
“It is important to bear in mind that this opinion does not form part of the Court of Justice of the European Union judgment but is considered by the Court when arriving at its final ruling,” Michael McGrath said in a statement.
“It has always been, and remains, Ireland’s position that the correct amount of Irish tax was paid and that Ireland provided no state aid to Apple.”
While Apple and Dublin appealed against the tax order, Apple nevertheless had to hand over the full amount, which Ireland has been holding in an escrow account.
The Irish government has long said that even if it loses the its appeal and gets to keep the money, other EU member states will make claims that they are owed some of the back taxes.
“We thank the court for its time and ongoing consideration in this case. The General Court’s ruling was very clear that Apple received no selective advantage and no state aid, and we believe that should be upheld,” an Apple spokesperson said.
Vestager has had a mixed record defending her tax cases in court, with judges backing challenges by automaker Stellantis (STLAM.MI), Amazon (AMZN.O) and Starbucks (SBUX.O).
Her biggest legal victory to date came in September when the General Court upheld her decision against a 700-million-euro Belgian tax scheme for 55 multinationals. Her tax crackdown has forced EU countries to scrap such sweetheart deals.
Vestager is currently investigating IKEA brand owner Inter IKEA’s Dutch tax arrangement in a case dating from 2017, Nike’s (NKE.N) Dutch tax rulings and Finnish food and drink packaging company Huhtamaki’s (HUH1V.HE) tax rulings granted by Luxembourg.
The Apple case is C-465/20 P Commission v Ireland and Others.
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How would a ruling in favor of the advocate general’s opinion reinforce the European Union’s position as a regulator against unfair tax practices by multinational companies?
Not yet commented on the advocate general’s opinion, but the European Commission has previously stated that it would consider an appeal if the General Court’s ruling was overturned.
The outcome of this case is significant for both Apple and the European Union. If the CJEU upholds the advocate general’s opinion and refers the case back to the General Court, it could potentially have far-reaching implications for Apple’s tax practices in Europe. It could also provide further guidance on the EU’s stance on tax rulings and state aid, setting a precedent for future cases involving multinational corporations.
For the European Union, a ruling in favor of the advocate general’s opinion would be a victory in its efforts to crack down on what it sees as unfair tax practices by multinational companies. It would reinforce the EU’s position as a regulator that is committed to ensuring fair competition and preventing member states from providing preferential treatment to certain companies through tax rulings.
However, it is important to note that the advocate general’s opinion is non-binding, and the CJEU may reach a different conclusion when it issues its final ruling in the coming months. Nevertheless, this opinion signals a potential setback for Apple, and the outcome of the case will be closely watched by both the tech industry and tax authorities in Europe.
In conclusion, the advocate general’s opinion that the EU tribunal made legal errors in ruling in favor of Apple over a 13-billion-euro tax order highlights the complexity and importance of tax cases involving multinational corporations. The CJEU’s final ruling will have significant implications for both Apple and the European Union, shaping the future landscape of tax practices and state aid regulations in Europe.
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