A European court will decide Wednesday whether Apple must obey an EU order that the iPhone-maker reimburse Ireland EUR 13 billion (roughly Rs. 1.11 lakh crores) in back taxes.
Reversing the decision would be a painful setback for the European Commission, the EU’s executive arm, in its campaign to stymie profit-shifting by multinationals and limit the power of US big tech.
No matter the outcome, the decision by the EU’s general court will be open to a further appeal for a final ruling no earlier than 2021.
“Tomorrow’s judgement is unlikely to put an end to the story,” said Alfonso Lamadrid, a competition lawyer at the firm Garrigues.
The commission’s historic ruling against Apple was delivered in August 2016 by Competition Commissioner Margrethe Vestager in a shock decision that put Europe on the map as a scourge of Silicon Valley.
The EU accused Ireland of allowing Apple to park revenue earned in Europe, Africa, the Middle East, and India and sparing it almost any taxation.
Brussels said this gave Apple an advantage over other companies, allowing it to avoid Irish taxes between 2003 and 2014 of around 13 billion euros (roughly Rs. 1.11 lakh crores).
EU officials argued that constituted illegal “state aid” by Ireland.
Apple CEO Tim Cook slammed the accusation at the time as “total political crap” and an attempt by Europe to disrupt the way multinationals pay tax.
Apple says the profits in question were always intended to go to the United States where they were eventually transferred after a tax reform there.
Ireland called it an “astonishing” interpretation of tax law.
The EU’s competition supremo, Vestager, has been accused by US President Donald Trump of “hating” the US. He has slammed her as the “tax lady” because of the Apple case as well as the heavy antitrust fines imposed on Google.
Some observers have expressed doubts on the Apple case, wondering whether the EU was using antitrust law to crack down on tax optimisation strategies by multinationals.
Global system stalled
In similar cases, the same EU court struck down an order by Brussels that Starbucks pay EUR 30 million (roughly Rs. 257 crores) in back taxes to the Netherlands.
In a separate decision, however, it said Fiat must pay roughly the same amount to Luxembourg.
It will be up to the court to decide “whether the commission did enough work to show that Apple received an advantage, and to quantity the amount of that advantage,” said Lamadrid of Garrigues.
The case comes as the EU is trying to come up with ways to better ensnare digital giants to pay taxes where they do business, though this has been opposed by some European capitals.
“Having a tax system that’s full of loopholes and then cleaning up afterwards using the state aid rules is not efficient at all,” Tove Ryding, tax expert at the European Network on Debt and Development.
“The elephant in the room is that we have so many EU member states that have offered multinational corporations all these tax loopholes,” she said.
The Netherlands, Cyprus, Malta, and Luxembourg have adopted similar aggressive tax policies to Ireland’s, Ryding said.
Talks to come up with a new global tax system at the OECD have been stalled due to opposition by the US.