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Blow for EU as Apple wins fight against $15 billion tax order

Stock MarketsJul 15, 2020 01:40PM ET
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2/2 © Reuters. The Apple Inc. logo is seen hanging at the entrance to the Apple store on 5th Avenue in New York 2/2

By Foo Yun Chee and Padraic Halpin

LUXEMBOURG/DUBLIN (Reuters) - Apple (NASDAQ:AAPL) scored a major win on Wednesday as Europe's second-highest court rejected an EU order for the iPhone maker to pay 13 billion euros ($15 billion) in Irish back taxes, dealing a blow to the bloc's attempts to crack down on sweetheart tax deals.

In its order four years ago, the European Commission said Apple benefited from illegal state aid via two Irish tax rulings that artificially reduced its tax burden for over two decades - to as low as 0.005% in 2014.

"The General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU1," judges said, referring to EU competition rules.

They said the EU executive was wrong to say Apple's two Irish subsidiaries - Apple Sales International (ASI) and Apple Operations Europe (AOE) - had been granted a selective economic advantage and, by extension, state aid.

Apple welcomed the ruling, saying the case was not about how much tax it pays, but where it is required to pay it.

Ireland - which had appealed against the Commission's decision alongside Apple - said it had always been clear it had not given special treatment to the U.S. company.

The defeat for European Competition Commissioner Margrethe Vestager could weaken or delay pending cases against Ikea's and Nike (NYSE:NKE)'s deals with the Netherlands, as well as Huhtamaki's agreement with Luxembourg.

Vestager, who has made the tax crackdown a centrepiece of her time in office, saw the same court last year overturn her demand for Starbucks (NASDAQ:SBUX) to pay up to 30 million euros in Dutch back taxes. In another case, the court also threw out her ruling against a Belgian tax scheme for 39 multinationals.

Vestager said she would study the court's judgment and reflect on possible next steps. The Commission can appeal on points of law to the EU Court of Justice, Europe's top court.

The Commission, which was ordered by the court to pay Apple's and Ireland's legal costs, could still salvage its case, said Dimitrios Kyriazis, Head of Law Faculty at the New College of Humanities in London.

"Its defeat is very similar to its defeat in the Starbucks cases, that is it won on matters of legal principle and lost due to the allocation of evidentiary onus," he said.

"It is more likely that the Commission will re-adopt a decision against Ireland and Apple and try to show exactly how the tax rulings granted AOE and ASI a selective advantage," he said.

IRELAND IN SPOTLIGHT

The European Network on Debt and Development (Eurodad) said the judgment showed the need for corporate tax reform in Europe.

"Today's court decision illustrates how difficult it is to use EU state aid rules to collect tax. If we had a proper corporate tax system, we wouldn’t need long court cases to find out whether it is legal for multinational corporations to pay less than 1 percent in taxes," its tax justice coordinator Tove Maria Ryding said.

The ruling puts Ireland's tax regime back in the spotlight at a delicate juncture. With attempts to get a global agreement on taxing multinationals buckling, plans for an EU tax could be revived, putting Dublin's low rates in the firing line.

Multinationals, attracted by Ireland's low taxes, employ around 250,000 people in the country, accounting for one in ten workers at the end of last year.

However, the government has faced heavy criticism from opposition parties for fighting against a tax windfall that would have amounted to 14 billion euros, including interest, and could have covered at least half of a budget deficit forecast to balloon to as much as 10% of GDP this year.

"This is a bad day for the taxpayer," said Pearse Doherty, the finance spokesman for the main opposition Sinn Fein party.

"While the Department of Finance might be thinking this is a good day for themselves, morally this is a terrible day."

Blow for EU as Apple wins fight against $15 billion tax order
 

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Comments (10)
Chris Sundo
Chris Sundo Jul 15, 2020 1:54PM ET
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It's too bad that Margrethe Vestager's staff didn't do their home work before making a big fuss. And, like the trump loser who doesnt get the message, this lady keeps losing repetitively thus costing serious resources. "Its defeat is very similar to its defeat in the Starbucks cases"
Kaveh Sun
Kaveh Sun Jul 15, 2020 10:02AM ET
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Until now if eu members/countries decide to give incentives it is still legal. Eu is trying to prevent countries to do that. If eu cant get its house in order, it cant say ‘unfair’ n penalise companies.
Kaveh Sun
Kaveh Sun Jul 15, 2020 9:18AM ET
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Eu had no law fobid its countries to give incentives to companies. Eu just # to extract money. No law was broken. Eu think they can just extract money from companies anytime it wants too.
Paul Dunne
Paul Dunne Jul 15, 2020 9:18AM ET
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But no entity should be immune from taxation. If you owed the IRS $15 and refused to pay it you'd end up in jail!
Kaveh Sun
Kaveh Sun Jul 15, 2020 9:18AM ET
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Paul Dunne they owe no tax. Ireland gave incentives. Eu sees that as unfair to other members.
Kaveh Sun
Kaveh Sun Jul 15, 2020 9:18AM ET
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Paul Dunne eu dont forbid countries to give incentives. Ireland gives incentives to get jobs.
Kaveh Sun
Kaveh Sun Jul 15, 2020 9:18AM ET
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Paul Dunne if i pay 100 tax to ireland and ireland gives back 50 in ‘incentives’ for jobs i create. What law did i break? Eu bs
Klaus Weyers
Klaus Weyers Jul 15, 2020 8:19AM ET
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fire vestager and abolish her Job
Geffory OSullivan
Geffory OSullivan Jul 15, 2020 6:11AM ET
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Ireland should not receive EU financial aid to the amount of 14 Billion and the money should be diverted to develop the Greek economy.
Shakil Zaman
Shakil Zaman Jul 15, 2020 6:11AM ET
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Lol, give money to the Greeks? They put themselves in the bad position they are in and they should get out of it on their own.
Paolo Sarvia
Paolo Sarvia Jul 15, 2020 6:11AM ET
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Shakil Zaman Have you ever got out of your country?
Kaveh Sun
Kaveh Sun Jul 15, 2020 6:11AM ET
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Ireland got no bailout. They already paid their 2010-13 Eu, imf loan in full. They still own some Money to England.
Vv Pp
Vv Pp Jul 15, 2020 5:39AM ET
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and some still believe that Huawei is the "bad" guy, haha.. money can buy everything in this world after all
Show previous replies (2)
Paolo Sarvia
Paolo Sarvia Jul 15, 2020 5:39AM ET
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Huawei is the bad guy same as Saddam Hussein when the USA administration had proof of chemical weapons. Just a matter of economic convenience.
Gigi Baum
Gigi Baum Jul 15, 2020 5:39AM ET
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you are correct about Google, Facebook, and Apple! And that includes AT&T where monopolizing is concerned! These Companies have far too much power!
Vv Pp
Vv Pp Jul 15, 2020 5:39AM ET
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lol sure, like Iran too right? and what about Yugoslavia? Iraq? South America maybe? good to know basic chapters of history
Kaveh Sun
Kaveh Sun Jul 15, 2020 5:39AM ET
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It shows u dont know #. They didnt have law to forbid its member to give incentives. Eu cant make up ‘unfair’ law and fine companies.
GJ DJT
GJDJT Jul 15, 2020 5:39AM ET
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USA can't let China to have technological superiority.
Bruce Wayne
Bruce Wayne Jul 15, 2020 5:37AM ET
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As usual, Apple paying their way through.
Tor Larsen
Tor Larsen Jul 15, 2020 5:37AM ET
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I didn't understand why they didn't make Apple pay those Irish taxes?
Tre Hsi
Tre Hsi Jul 15, 2020 5:37AM ET
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Tor Larsen  who is "they"?  The Irish govt?  These are preferential tax treatment Irish govt gave to international tech firms back in the 80's and 90's to get them to invest in the country....which turns out to be quite beneficial for Ireland
Kaveh Sun
Kaveh Sun Jul 15, 2020 5:37AM ET
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Tor Larsen Irish gave incentives to Apple for jobs. People pay yax. It is a win for Ireland but a lost for Eu members. Eu sees it as unfair n try to make it fair. Eu didnt forbid its members to give incentives. Eu bs
Bubba Born
Bubba Born Jul 15, 2020 5:31AM ET
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Amazing what Apple's money will buy! And they probably got a tax write-off too!
Tor Larsen
Tor Larsen Jul 15, 2020 5:31AM ET
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What?! Why didn't they make apple pay the irish taxes?
Kaveh Sun
Kaveh Sun Jul 15, 2020 5:31AM ET
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Tor Larsen Irish gave apple tax break to have jobs. Eu sees it as unfair for its members, except Eu didnt have law about it.
Alexandru Miron
Alexandru Miron Jul 15, 2020 5:30AM ET
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???
Mehdi Salahi
Mehdi Salahi Jul 15, 2020 5:27AM ET
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hi tank mersi
 
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