The European Union’s top court has dealt a blow to Apple’s hopes of overturning a €14.3bn tax bill in Ireland, as an adviser to the court said that a previous ruling that annulled the EU’s order for the funds should be set aside.
The advocate general, Juliane Kokott, issued an opinion on Wednesday that supported the EU’s position that Apple had received illegal state aid from Ireland through tax rulings that allowed the company to pay very low taxes on its profits in the country. The opinion is not binding, but it is usually followed by the court in its final judgment.
The opinion said that the General Court, which is the lower branch of the EU’s Court of Justice, had made several errors of law and assessment when it quashed the EU’s order for Apple to pay back €14.3bn in unpaid taxes and interest to Ireland in 2016. The General Court had ruled in 2020 that the EU had failed to prove that Apple had gained an unfair advantage over its competitors.
The advocate general said that the General Court had wrongly dismissed the EU’s method of calculating Apple’s taxable income in Ireland, and had failed to take into account the economic reality of the company’s operations. She also said that the General Court had wrongly required the EU to show that Apple’s tax arrangements were inconsistent with the arm’s length principle, which is a standard for determining fair market prices between related parties.
The opinion said that the EU’s order was based on the finding that Ireland had granted Apple a selective advantage by allowing it to allocate almost all of its profits from sales in the EU to two Irish subsidiaries that were not subject to tax in Ireland or anywhere else. This resulted in an effective tax rate of 0.005% in 2014, according to the EU.
Apple and Ireland reject the opinion
Apple and Ireland both rejected the opinion and said they would await the final judgment of the court, which is expected in the coming months. Apple said that it had paid all the taxes it owed in Ireland and around the world, and that the case was not about how much tax it paid, but where it paid it.
“We will review the opinion of the advocate general and look forward to the final judgment of the Court of Justice of the EU. The General Court categorically annulled the Commission’s case in July 2020 and the facts have not changed since then,” Apple said in a statement.
Ireland’s finance ministry said that it had always been clear that there was no special treatment given to Apple, and that the correct amount of Irish tax was charged in line with normal Irish taxation rules.
“Ireland appealed the Commission decision on the basis that Ireland granted no state aid and the decision today from the court is part of the process of the annulment of that decision,” the ministry said in a statement.
Implications for the EU’s crackdown on tax avoidance
The opinion is a boost for the EU’s efforts to crack down on tax avoidance by multinational companies, especially in the tech sector, which has been accused of shifting profits to low-tax jurisdictions. The EU has also launched similar investigations into the tax arrangements of other companies, such as Amazon, Starbucks, and Fiat.
The opinion also comes at a time when the global tax system is undergoing a major overhaul, as more than 130 countries have agreed to adopt a minimum corporate tax rate of 15% and new rules for allocating taxing rights among countries. The deal, which was brokered by the Organisation for Economic Co-operation and Development (OECD), aims to ensure that large companies pay their fair share of tax wherever they operate.
The EU has said that it supports the OECD agreement, but it also wants to introduce its own digital levy, which would target the revenues of online companies that benefit from the EU’s single market. However, the US has warned that such a levy could undermine the global tax deal and trigger retaliatory tariffs.
