On Wednesday, in a significant development, Europe’s second-highest court rejected an EU order directing Apple to pay $15 billion (13 billion euros) in Irish back taxes, in what is a setback to the bloc’s attempts to crackdown on sweetheart tax deals.
Four years ago, in an order the European Commission had noted that Apple had benefited from illegal state aid via two Irish tax rulings because of which its tax liability had been artificially reduced, for more than decades, to just 0.005% in 2014.
“The General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU1,” said judges in reference to EU competition rules.
The development is likely to weaken if not delay pending cases against Nike’s and Ikea’s deal with the Netherlands, as well as Huhtamaki’s agreement with Luxembourg.
European Competition Commissioner Margrethe Vestager had made the tax crackdown a centerpiece of her time in office.
In 2019, the same court had overturned her demand for Starbucks to pay, up to 30 million euros in Dutch back taxes. In another instance, the same court had also thrown out her ruling against a Belgian tax scheme for 39 multinationals.
While 14 billion euros – including interest – would have gone a long way to plugging the coronavirus-shaped hole in Ireland’s finances, Dublin appealed against the Commission’s order alongside Apple because it wanted to protect a low tax regime that has attracted 250,000 multinational employees.
However, the government is likely to face strong criticism from opposition parties for not taking the cash, which could cover at least half of a budget deficit forecast to balloon to as much as 10% of GDP this year.
The European Commission is likely to appeal the verdict in Europe’s highest court – the EU Court of Justice.