Apple owes $14.4 billion in Irish taxes, EU court rules

BRUSSELS (CN) — Apple must pay 13 billion euros ($14.4 billion) in back taxes to Ireland as part of a broader crackdown against sweetheart deals for multinationals, the European Union’s highest court ruled on Tuesday.

The case stems from 2016, when the European Commission’s antitrust boss, Margrethe Vestager, accused Ireland of having granted Apple illegal tax breaks, unfairly diverting investment away from other countries to keep the iPhone maker and other multinationals headquartered in the country.

The Court of Justice of the European Union on Tuesday sided with the EU executive, agreeing that the company had benefitted from unfair preferential treatment in Ireland’s tax regime.

“The Court of Justice gives final judgment in the matter and confirms the European Commission’s 2016 decision: Ireland granted Apple unlawful aid, which Ireland is required to recover,” the justices said, announcing the huge bill for one of the world’s richest companies.

The case wound its way through the courts for years, with the EU’s second-highest court initially ruling that Apple had to pay. Apple and Ireland successfully challenged the EU ruling in 2020, but in November 2023, a legal adviser to the court said that the lower court ruling exempting the company from paying taxes in Ireland on worldwide profits was flawed.

The decision covered the period from 1991 to 2014 and related to how profits generated by two Apple subsidiaries were treated beneficially for tax purposes.

Ireland, home to a series of multinationals, has one of the lowest corporate tax rates in the European Union.

According to EU officials, the commission’s case against Apple benefitted from access to documents in which Irish officials laid out the tax deals made relatively openly with the iPhone maker. The decision is final and cannot be appealed.

“It was a win that made me cry because it is very important,” Vestager told reporters in Brussels. “It’s very important to show European taxpayers that once in a while, tax justice can be done.”

Apple ‘disappointed,’ Dublin says it will comply

Apple itself, which has been based in the Irish city of Cork since 1980, expressed unhappiness with the ruling.

“We are disappointed with today’s decision as previously the General Court reviewed the facts and categorically annulled this case,” an Apple representative said.

“The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the U.S.,” the company said.

The EU judgment comes a day after the tech giant released its new iPhone 16 products.

The Irish government confirmed it would begin the process of releasing assets from an escrow fund, whose revenue was estimated at $15 billion (13 billion euros) at the end of 2023.

“The CJEU has found that the tax paid was insufficient and that a greater amount of taxation was required to be recovered,” the Irish government said in a statement.

“The Irish position has always been that Ireland does not give preferential tax treatment to any companies or taxpayers,” the officials added.

Dublin also played down the importance of the ruling, saying the step would be an issue “now of historical relevance only” due to previous changes in the country’s national tax system.

Since the initial EU spat in 2016, Ireland has changed rules around corporate residence and the attribution of profits to branches of non-resident companies operating in the state. It has also adapted its tax rules in line with international agreements, according to the statement.

Wider crackdown expected

The Apple case had been one of the most significant legal battles between the commission and Big Tech in the past years, over which Brussels initiated a series of investigations into sweetheart tax arrangements between multinationals and several EU member states.

The judgment presents a significant win for the European Commission after losing previous cases against Amazon and Starbucks. It could also be seen as a de facto  recognition that Ireland is an EU tax haven for U.S. Big Tech.

A separate ruling on Tuesday furthermore closed a long-running case with Alphabet’s Google, with the company ordered to pay a fine of  $2.7 billion for market dominance abuse.

Brussels will continue its work against harmful tax competition and aggressive tax planning by EU member states and multinationals through future legislative proposals and enforcement, Vestager told reporters.

“Our investigations have decisively contributed to a mind shift, a change of attitude among member states. They have helped to trigger and accelerate regulatory and legislative reform,” Vestager said.

Vestager, who will stand down by the end of this year after two terms as the EU’s antitrust enforcer, is widely seen as having strengthened the bloc’s muscle against multinationals — a strength likely to carry over to her successor.

The European Parliament’s subcommittee on tax matters called for the EU’s executive to propose a ban on tax avoidance in the next term.

“We now expect the future European Commission to propose legislation that bans all forms of tax avoidance and competitive advantages for tech giants and large corporations within the European Union,” committee chair Pasquale Tridico said.

“Our fight for tax justice will go on, stronger than ever,” he added.