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Apple Ordered to Pay 13 Billion Euros by the European Union

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September 27, 2024

Apple Ordered to Pay 13 Billion Euros by the EU: Behind a Historic Decision

This ruling marks the end of a legal battle that lasted ten years. It’s a historic decision that has the effect of a bombshell. The European Court of Justice, the EU’s highest court, confirmed on Tuesday, September 10, that Apple will indeed have to pay its tax arrears in Ireland amounting to 13 billion euros. This decision puts an end to a legal battle that lasted ten years. Here’s everything you need to know.

It all began in 2014 when the European Commission started investigating Apple’s tax payments in Ireland. In 2016, Margrethe Vestager, European Commissioner for Competition, concluded that the Cupertino company had benefited from unfair tax advantages from the Irish government from 1991 to 2014 (1% in 2004 and 0.005% in 2014). In other words, a tax rate significantly lower than that of other companies.

Usually discreet, the tech giant reacted very quickly this time. Scathingly, Tim Cook called this accusation “total political nonsense,” adding that his company and Ireland had only “followed the rules”.

apple ordered to pay 13 billion euros by the european union tim cook - Apple Ordered to Pay 13 Billion Euros by the European Union

Scathingly, Tim Cook called this accusation “total political nonsense,” adding that his company and Ireland had only “followed the rules”.

What followed was a succession of appeals and recourses. Apple and the Irish government even won their case in 2020 when the EU General Court overturned the decision. But, and this is now final, the European Court of Justice has just annulled the verdict of this lower court: the company with the apple logo will indeed have to pay.

What are the reactions? Margrethe Vestager, who has followed this case over time, triumphs. Quoted by Les Échos, the leader comments:

“Today marks a step forward. It is not possible for some Member States to allow special agreements to attract certain companies by offering effectively low corporate tax rates, while in other countries, all companies pay their taxes.”

On the other hand, it’s a bitter pill to swallow for Apple. The Cupertino company replies: “We are disappointed by today’s decision, as the Court has already examined the facts and categorically annulled this case.” They believe that the Commission has “retroactively changed the rules” and ignored “as required by international tax law” that its revenues are “already subject to tax in the United States”.

apple ordered to pay 13 billion euros by the european union answer - Apple Ordered to Pay 13 Billion Euros by the European Union

The Cupertino company replies: “We are disappointed by today’s decision, as the Court has already examined the facts and categorically annulled this case.”

Progress remains to be made

The European Commissioner added that work against “aggressive tax planning” was still necessary. Thus, “In 2022, the global profits of multinationals amounted to about 16,000 billion US dollars. 2,800 billion dollars of these profits were made outside their headquarters. And about half of this amount was transferred to low-tax countries – including EU countries. The cost is high for European citizens.”

This should encourage the EU and especially governments to do more.

The European Court of Justice’s ruling requiring Apple to pay 13 billion euros in back taxes to Ireland has several significant implications:

Financial Impact: Apple faces a substantial tax bill of 13 billion euros plus interest. This represents a major financial hit for the company, though it has the resources to pay.
Tax Policy and Corporate Practices: The ruling affirms the European Commission’s efforts to crack down on what it views as unfair tax arrangements between multinational corporations and EU member states. It may discourage other companies from seeking similar tax deals with EU countries, potentially impacting corporate tax strategies across Europe. The decision could lead to increased scrutiny of tax arrangements between large tech companies and EU nations.
Political and Economic Implications: The ruling represents a significant victory for the EU in its efforts to prevent large corporations from exploiting tax rules.
Legal Precedent: This case sets an important legal precedent for future tax disputes between the EU and multinational corporations. It demonstrates the EU’s authority to regulate state aid and challenge tax arrangements it deems unfair, even when opposed by both the company and the member state involved.
International Tax Relations: The ruling highlights ongoing tensions between EU tax policies and those of other nations, particularly the United States.
It may accelerate discussions on global tax reform and international tax cooperation.

apple ordered to pay 13 billion euros by the european union points - Apple Ordered to Pay 13 Billion Euros by the European Union

The European Court of Justice’s ruling requiring Apple to pay 13 billion euros in back taxes to Ireland has several significant implications.

This ruling is likely to have several significant implications for future EU tax policies:

Increased enforcement of state aid rules: The decision affirms the European Commission’s authority to challenge tax arrangements between member states and multinational corporations. This may lead to more aggressive enforcement of state aid rules related to taxation.
Push for tax harmonization: The ruling could accelerate efforts to harmonize corporate tax policies across EU member states to prevent “sweetheart deals” between countries and large companies.
Focus on tax fairness: There will likely be a greater emphasis on ensuring all companies, regardless of size, pay their “fair share” of taxes in the EU.
Shift towards destination-based taxation: To address challenges of globalization and mobile tax bases, the EU may move further towards destination-based taxes like VAT rather than relying heavily on corporate income taxes.
Enhanced transparency: The ruling may lead to calls for increased tax transparency from multinational corporations operating in the EU.
Potential for new EU-wide taxes: The decision could bolster arguments for introducing new EU-level taxes to fund the bloc’s budget and reduce reliance on member state contributions.
Closer scrutiny of tax incentives: Member states may need to be more cautious about offering tax incentives to attract investment, as these could be challenged as illegal state aid.
International tax cooperation: The ruling may accelerate discussions on global tax reform and increase pressure for international cooperation on taxation issues.
Digital economy focus: Given the prominence of tech companies in these disputes, there may be renewed efforts to address taxation of the digital economy.
Balancing competitiveness and fairness: EU policymakers will need to carefully balance the desire for tax fairness with maintaining the EU’s economic competitiveness on the global stage.