EU will reflect on next steps after Apple ruling

A European Union court on Wednesday delivered a hammer blow to the bloc’s attempts to rein in multinationals' ability to strike special tax deals with individual EU countries when it ruled that Apple does not have to pay 13 billion euros (15 billion US dollars) in back taxes to Ireland.

The EU Commission had claimed in 2016 that Apple had struck an illegal tax deal with Irish authorities that allowed it to pay extremely low rates. But the EU's General Court said Wednesday that ”the Commission did not succeed in showing to the requisite legal standard that there was an advantage.”

"The Commission was wrong to declare” that Apple “had been granted a selective economic advantage and, by extension, state aid,” said the Luxembourg-based court, which is the second-highest in the EU.

The EU Commission had ordered Apple to pay for gross underpayment of tax on profits across the European bloc from 2003 to 2014. The commission said Apple used two shell companies in Ireland to report its Europe-wide profits at effective rates well under 1%.

In many cases, multinationals can pay taxes on the bulk of their revenue across the EU's 27 countries in the one EU country where they have their regional headquarters. For Apple and many other big tech companies, that is Ireland. For small EU countries like Ireland, that helps attract international business and even a small amount of tax revenue is helpful for them. The net result, however, is that the companies often end up paying very low tax.

The ruling can only be appealed on points of law and the Commission Vice President Margrethe Vestager said she will "reflect on possible next steps.”

The ruling is an especially stinging defeat for Vestager, who has campaigned for years to root out special tax deals and better regulate the power of the big U.S. tech companies, including Google, Amazon and Facebook.

The ruling comes at a time when tax income for EU nations is taking a hit because of the recession triggered by the coronavirus pandemic. With households under financial pressure, the EU wants to make sure multinationals making profits on the continent pay their fair share, too.

(Image Credit Pixabay)