In a recent development, a legal adviser to the European Court of Justice has argued that the ruling allowing Apple to avoid paying €13bn in back taxes should be overturned. This move further escalates the long-standing dispute between the EU, Apple, and the Irish government. While this legal opinion is not the final verdict, the Court of Justice often aligns with such recommendations in the majority of cases.
The case revolves around a ruling made in 2016 by the European Commission, which found that Apple had received unfair preferential treatment from the Irish government, enabling them to pay a significantly lower tax rate compared to other companies. Subsequently, the Commission deemed this as illegal aid provided to Apple by the Irish state. This decision was seen as an important milestone in the Commission’s ongoing efforts to combat what it perceives as substantial tax avoidance by multinational corporations.
However, Apple appealed against the ruling, and three years ago, the Court of Justice overturned the Commission’s decision on the grounds of various legal errors. Advocate General Giovanni Pitruzzella now contends that these errors were not properly considered, and thus, calls for a reevaluation of the case. His argument highlights the failure “to assess correctly the substance and consequences of certain methodological errors that, according to the Commission decision, vitiated the tax rulings.” Although this legal opinion does not provide a final judgment, it strongly suggests a potential revision of the previous ruling.
The Irish government, in defense of its partnership with Apple, opposes the repayment of the back taxes on the grounds that it perceives the benefits received by attracting large companies as more valuable than the financial loss incurred. Ireland, with one of the lowest corporate tax rates in the EU, is currently the base for Apple’s operations in Europe, the Middle East, and Africa.
This case poses broader implications for the EU’s jurisdiction. While the EU cannot directly set national corporate tax rates, it does possess significant authority in regulating state aid. Based on this premise, the EU argued that by granting Apple very low tax rates, Ireland granted an unfair subsidy, thereby infringing upon the principles of fair competition. This dispute demonstrates the EU’s determination to address what it perceives to be unfair practices in taxation and provides valuable insight into the ongoing efforts to combat multinational tax avoidance.
The potential impact of this case extends beyond the tax dispute. It holds significance for both Apple and the Irish government. For Apple, if the ruling is upheld, it will impose a substantial financial burden, requiring the payment of €13bn in back taxes. Moreover, it could prompt a reassessment of their international tax strategies and potentially result in increased tax liability in other jurisdictions. On the other hand, the Irish government’s reputation as an attractive destination for global companies may be at stake. If the ruling is overturned, Ireland would be able to maintain its low-tax environment, reinforcing its position as a preferred base for multinational corporations.
The implications of this case are not limited to Apple and Ireland. It sets a crucial precedent in the ongoing battle against large corporations’ aggressive tax planning, and sends a message to other multinational companies that the European Union is determined to tackle tax avoidance practices. Moreover, it underscores the importance of fair competition amongst member states within the EU, as state aid regulations play a vital role in ensuring a level playing field for companies operating within the single market.
It is worth noting that the Court of Justice often aligns with the opinions of its legal advisers, making it highly likely that there will be a revision of the previous ruling against Apple. However, until the final verdict is reached, this case will continue to attract attention from both financial and legal perspectives.
