ANGELINE WANG | LEGAL JARGON WRITER
On Wednesday, 15 July, Apple won a critical fight against the European Union when EU judges decided to overturn a European Commission order for Apple to pay back €13bn in taxes to Ireland. The European Court of Justice’s General Court handed the legal success to Apple by saying that Brussels had not shown to the “requisite legal standard” that the tech giant had received an illegal economic advantage over its taxes.
Where does this case originate from?
In 2016, the European Commission announced that Ireland must recoup allegedly unpaid taxes from Apple between 2003 and 2014. The Commission had said that the money constituted an illegal subsidy under the EU’s strict state-aide rules.
What does this ruling mean for Ireland?
The Irish finance ministry reiterated that it did not provide an unfair advantage for Apple. Ireland celebrated the ruling because it enjoys status as a low-tax regime (12.5% corporate tax rate), attracting hundreds of multinationals. Thus, if Apple was to have been fined, other companies may have been inclined to leave the country.
What does this ruling mean for the European competition commissioner?
This was a major setback for Margrethe Vestager, as she has been on a five-year campaign to rein in alleged abuses by tech giants including Apple, Alphabet Inc.’s Google and Amazon.com Inc. This ruling will cast doubts on the validity of other cases.
What does this ruling mean for the future of big tech?
Discussions over how much tax big tech companies should pay and where they should pay it have been tense. European countries and the United States are at an impasse in international talks on the topic, so this ruling may actually prove to strengthen Ms. Vestager and other EU leaders’ demand for new regulations on tech companies since existing regulations are not enough to catch them out.
What are the overall commercial implications?
It is important to note that the commission still holds the power to raise an appeal against the General Court’s judgement. Moreover, experts at Pinsent Masons predicted that “businesses can expect the European Commission to continue to vigorously pursue the payment of taxes on corporate profits in the EU despite a new court ruling making it more difficult to do so on the basis of the EU state aid regime.” This means that the judgement does not prevent the Commission from undergoing other state aid investigations highlighting the tax arrangements of member states with certain multinationals.
What are the long-term legal outcomes of the ruling?
This decision has meant that the Commission’s right to investigate national tax measures for compliance with state aid rules has been confirmed. Furthermore, it has re-affirmed the Commission’s right to analyse the state aid compliance of national tax measures by reference to the arm’s length principle. These outcomes are impactful because these rights have been aggressively disputed by a number of member states and by alleged beneficiaries of state aid. Unfortunately for the Commission, the court has also made the confirmation that the evidential burden necessary to demonstrate that a tax measure breaches state aid rules is high.
Angeline is a Canadian living in London and a prospective Law student at LSE. She was a member of the Welsh National Debate Team and worked with the Liberal Party of Canada.
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