The European Union wants the $15.8 billion in back taxes it says Apple owes and is appealing a July 2020 court ruling that let the tech giant off scot-free, Bloomberg reported on Monday.
Last year, EU competition commissioner Margrethe Vestager lost a major case demanding Apple pay nearly $16 billion in taxes on income it had routed through its units based in Ireland. At the time, the EU General Court found authorities had failed to meet “the requisite legal standard” to show Ireland or Apple were in violation of international law. The ruling was a hammer blow to Vestager’s campaign to hold massive tech companies accountable for alleged monopolistic or unfair business practices—and it set a precedent that let Apple continue to route nearly all non-American revenue through Ireland, a tax haven.
EU competition officials argued the Irish government had offered an illegal sweetheart deal to Apple that gave it an unfair advantage over other companies, and so Irish tax authorities were obligated to collect about $15.8 billion in back taxes. Ireland was thus placed in the strange position of arguing it should be allowed to leave a fortune on the table, with both Ireland and Apple maintaining that the arrangement was in perfect alignment with the letter of the law.
That position was backed by the U.S. Treasury, which has two dueling incentives against Ireland collecting that tax revenue. The first is that the U.S. government was attempting to convince the Cupertino, California-based company to repatriate its offshore accounts stateside; Europe getting its slice would reduce the eventual revenue collected by the IRS. The second is that the U.S. government aimed to shield Apple from consequences because its status as one of the most lucrative companies in the world cements the U.S. as the dominant country in the consumer tech space.
Extremely powerful corporate lobbies also vociferously rallied against the EU’s tax probe of Apple and for revised U.S. tax law that would make it easier for them to return foreign profits to the U.S. while still enjoying cut-rate tax bills. For all the talk of collecting taxes on Apple profits repatriated to the states, U.S. legislators have been happy to slash corporate tax rates in recent years in a manner that ultimately ensures corporate giants pay a relative pittances.
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According to Bloomberg, in a summary of their appeal, the European Commission characterized the General Court ruling as not seriously engaging with its legal arguments about Apple’s Irish units, containing “contradictory reasoning,” and incorrectly associating the issue of Apple not employing staff at two of the Irish units with unrelated intellectual property issues. Nicole Robins, a partner at Brussels-based economics firm Oxera, told Bloomberg that losing this last appeal would be a “major setback” for EU authorities and “adopt a far higher standard of evidence in order to demonstrate that such tax rulings confer an economic advantage to the multinational in question and therefore constitute illegal state aid.”
If the EU can’t make progress against tax havens through the courts, that may reinvigorate efforts to pass an EU-wide law requiring tech firms and other digital companies be taxed on revenue at the point of sale, not profits. While U.S. opposition tanked that effort, some countries including France and the UK are simply passing their own taxes on digital services. Donald Trump’s administration responded indignantly by having the Office of the U.S. Trade Representative declare those laws discriminatory, but it will ultimately be up to Joe Biden’s White House whether to follow through with retaliatory trade tariffs.
Apple CEO Tim Cook has signaled support for a group of 137 countries, spearheaded by the Organization for Economic Cooperation and Development, negotiating uniform international tax rules for tech companies. But he’d obviously prefer that any reform be on terms favorable for Apple. Last month, Cook told reporters “I think logically everybody knows it needs to be rehauled, I would certainly be the last person to say that the current system or the past system was the perfect system. I’m hopeful and optimistic that they (the OECD) will find something.”
“It’s very complex to know how to tax a multinational,” Cook added. “...We desperately want it to be fair.”
Apple told Bloomberg in a statement that the General Court “categorically annulled the commission’s case in July and the facts have not changed since then. After a thorough review of the facts and the commission’s claims, [the court was] clear in their determination that Apple has always abided by the law in Ireland, as we do everywhere we operate.”