European Commission will appeal Apple Irish tax decision

The EU’s highest court is being asked to decide whether Ireland gave Apple Inc. billions in selective tax breaks constituting prohibited state aid.
European Commission will appeal Apple Irish tax decision

The European Commission is appealing an EU court’s 15 July 2020 decision that vindicated Ireland of the charge that it provided Apple Inc. prohibited state aid through tax agreements.

The case involves whether Ireland granted Apple selective tax breaks worth more than €13 billion ($15 billion) in the form of unduly favourable advance pricing agreements, in violation of EU state aid rules.

The decision to appeal the EU General Court’s ruling, which had spared Apple from having to pay billions in Irish back taxes, was announced by the European Commission’s top competition regulator, Margrethe Vestager. “We have to continue to use all tools at our disposal to ensure companies pay their fair share of tax,” Vestager said in a 25 September statement. “If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the European Union in breach of state aid rules.”

The case involving Silicon Valley-based Apple is one of numerous cases that the European Commission has brought to fight what it considers aggressive tax planning by multinationals.

Ireland denies that it provided Apple prohibited state aid, even though, if a violation is ultimately found to have occurred, the technology company will have to pay Ireland billions of euros in back taxes. In a 25 September statement responding to Vestager’s announcement of lodging an appeal, Ireland Minister for Finance Paschal Donohoe said, “Ireland has always been clear that the correct amount of Irish tax was paid and that Ireland provided no state aid to Apple.” Ireland insists that the advance pricing agreements (APAs) in question complied with EU law.

The Apple Irish tax case arises at a time when governments worldwide are engaged in a broader discussion about what can be done to prevent tax avoidance by multinational enterprises. In particular, the Organisation for Economic Co-operation and Development (OECD) is seeking to create a global framework that will deter base erosion and profit shifting.

Alleged selective tax breaks

The European Commission’s case against Ireland and Apple that is now heading on appeal to the EU’s highest court, the Court of Justice, rests on competition law, not a violation of tax rules, per se. The key question is whether Ireland, where Apple’s European operations are based, provided the tech company a tax break that distorted or threatened to distort competition.

The Commission found in 2016 that Ireland improperly provided state aid to Apple in the form of selective tax breaks by agreeing to the company’s taxpayer-favourable APAs. Under the APAs, Apple paid billions less in Irish corporate taxes than it otherwise would have. The Commission said Ireland must recover the back taxes from Apple, but the EU General Court disagreed in its decision handed down 15 July 2020 (Ireland v. European Commission, No. T‑778/16 (EU Gen. Ct. 7/15/20)). This is the decision that is being appealed to the EU Court of Justice.

Specifically, the 2016 European Commission ruling had found that Ireland conferred selective state aid upon Apple’s Irish subsidiaries in violation of Article 107(1) of the Treaty on the Functioning of the European Union. That provision states: “[A]ny aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings … [is] incompatible with the internal market”, with certain exceptions.

In its 15 July ruling this year, the EU General Court annulled the Commission’s 2016 decision, releasing Apple from having to pay billions in Irish back taxes. In announcing that the Commission would be filing an appeal of this court ruling with the EU Court of Justice, Vestager said in her statement that, in the Commission’s judgement, “the General Court has made a number of errors of law”, but she did not set out what those errors were.

Dave Strausfeld, J.D., ( is an FM magazine senior editor.