Apple won a court case Wednesday against the European Commission over a dispute concerning 13 billion euros ($14.9 billion) in Irish taxes.
In a highly-anticipated landmark decision, the EU’s general court decided that the European Commission did not succeed in proving that there was an advantage given by the Irish government to the U.S. tech giant.
The Commission, the executive arm of the EU, had concluded in August 2016 that the Irish government granted illegal benefits to Apple and ordered it to recover 13 billion euros in unpaid taxes.
At the time, the Commission said that Ireland had enabled Apple to pay “substantially less tax than other businesses over many years,” which meant that the U.S. firm was allowed to pay an effective corporate tax rate of 1% on its European profits in 2003, which fell to 0.005% in 2014.
The Irish government and Apple decided to appeal the Commission’s decision, with the latter arguing the order to repay taxes “defies reality and common sense.”
Ireland, Apple and the European Commission now have two months to decide if they want to appeal the latest court ruling and potentially take it to the EU’s highest tribunal.
In reaction to the court ruling, the Irish government said Wednesday that it has always been clear “that there was no special treatment provided to the two Apple companies” and that “the correct amount of Irish tax was charged taxation in line with normal Irish taxation rules.”
The European Commission said in a statement that it “will continue to look at aggressive tax planning measures under EU State aid rules to assess whether they result in illegal State aid.”
Apple was not immediately available for comment when contacted by CNBC Wednesday morning. Its shares were up around 1.2% in pre-market trade on the news.
Why it matters?
This case, involving a giant U.S. tech firm, is particularly important and a centerpiece of the EU’s crackdown on taxation in recent years. It could impact how the Brussels institution deals with other companies over taxation matters.
Taxation is taking an even more prominent role in the wake of the Covid-19 crisis. With many governments stepping up their spending, they will be looking for new sources of revenue in the form of taxation.
In this context, there’s an ongoing debate as to whether the European Union should have its own digital tax — a levy on big tech giants to ensure they pay a fairer share compared to more traditional businesses.
Arancha González, minister of foreign affairs for Spain, told CNBC’s “Squawk Box Wednesday”: “Whether the companies are American, whether they are Chinese, Japanese, Korean or European, this is about fairness of taxation systems.”
Plans by some European nations, including Spain, to tax the technology behemoths more have met opposition from the United States, which argues the levy is discriminatory toward its domestic firms.
“What we are saying is that fairness requires every economic activity, whether the economic activity is provided analogically or digitally to contribute with their fair share of taxes,” the Spanish minister added.
