Apple wins tax battle with EU as court annuls order to pay $15 billion

The decision is a setback for European efforts to clamp down on what the authorities believe is anti-competitive behaviour

Apple won its court fight over a record $14.9 billion Irish tax bill in a crushing blow to European Union Competition Commissioner Margrethe Vestager’s crackdown on preferential fiscal deals for companies.

The judgment by the EU’s lower court on Wednesday vindicates Apple Chief Executive Officer Tim Cook’s challenge against a decision he labelled as “political crap”.

While the EU General Court’s ruling can still be appealed, judges delivered a stinging attack on the European Commission for failing to show “to the requisite legal standard” that Ireland’s tax deal broke state-aid law by giving Apple an unfair advantage. 

“The commission’s intent seemed to be a political one: to punish Apple for its overall tax planning, rather than to reach a result that accorded with the legal or economic position,” Dan Neidle, a tax lawyer with Clifford Chance said in a statement. “The court has, quite rightly, followed the law and not any wider political objectives.”

Hallmark case

The Apple case is the hallmark of Vestager’s five-year campaign to get rid of allegedly unfair tax deals that some EU governments dole out to favored multinationals including the likes of Amazon.com Apple’s fury at its 2016 tax bill led Cook to blast the EU move. The EU will consider its next steps after studying the Luxembourg-based court’s judgment, Vestager said in a statement.

“If member states give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the EU,” she said, adding that the EU’s executive arm “will continue to look at aggressive tax planning measures under EU state aid rules to assess whether they result in illegal State aid.” Apple said the case “was not about how much tax we pay, but where we are required to pay it.” The firm “has paid more than $100 billion in corporate income taxes around the world in the last decade and tens of billions more in other taxes.”

Apple shares rose 2 per cent to $396 in pre-market trading.

The Cupertino, California-based company had argued the EU wrongly targeted profits that should be taxed in the US and “retroactively changed the rules” on how global authorities calculate what’s owed to them.

‘Always clear’

The Irish finance ministry said the nation “has always been clear that there was no special treatment provided to the two Apple” units in the EU’s state-aid case. Apple’s huge sales — like those of other US tech giants — have attracted particular scrutiny in Europe, focusing on complicated company structures for transferring profits generated from intellectual property.

The case comes as Apple is getting close to overtaking Saudi Arabia’s state-owned oil company in market valuation, a milestone that would make the technology giant the world’s largest company by that measure. Its shares have rallied about 30 per cent this year on broad optimism about its businesses.

Before today Vestager already had a mixed record in the court cases that followed her tax orders. The Dane suffered a setback last year when judges faulted a decision targeting Starbucks Corp. over its tax deals with the Netherlands. But the tribunal upheld the EU’s decision concerning Fiat Chrysler Automobiles NV’s tax affairs in Luxembourg.