In 2016, Apple was ordered to pay 13 billion euros to Ireland as repayment for back taxes at a rate that the EU deemed was illegal. Both Apple and Ireland appealed the judgement.
Four years on, the first round of legal battles have come to a conclusion today: the EU court rejected the ruling which essentially means Ireland and Apple won. However, the EU commission will almost certainly appeal. A final decision on a corporate judgement of this scale will take many, many, years to resolve.
The European Union order was based on the premise that Apple’s low tax rate deal with Ireland was ‘selective’ and not offered to other companies, giving Apple an unfair advantage.
Today’s ruling said that the commission had failed to show that Apple had been granted an economic advantage. Remember, this case is about back-taxes and the low tax rate deal between Apple and Ireland was agreed more than twenty years ago, when Apple was a much smaller company.
Whilst Apple will be happy with the victory, Ireland faces political contention. In the midst of economic recession, critics of the government in Ireland believe the country should be wanting the tax windfall, which would give a sharp boost to the country’s revenue.
Apple and other big tech firms have been widely criticized for using complicated business structures to achieve very low tax rates in certain regions. For instance, almost all of Apple’s European operations funnel through Ireland. This means that Apple pays almost no tax in individual European countries, like the UK. Apple’s worldwide effective tax rate is around 20%.
There are ongoing conversations between countries and governments as to how to redistribute the tax, so multinational corporations like Apple pay roughly equal proportions of tax in every country where they operate.
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