Ireland Wins Appeal of Apple Tax Case

Posted on July 15, 2020 by Paul Thurrott in Apple with 27 Comments

In a blow to EU regulators that had sought to paint Apple as corrupt, a lower court has ruled that Ireland’s tax deal with the firm was legal. Ireland had been ordered to collect $14.9 billion (€13 billion) in back taxes from Apple after the European Commission (EC) claimed that it had created an illegal tax shelter for the American corporation.

“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,” Clifford Chance tax lawyer Dan Neidle said in a prepared statement. “The court has, quite rightly, followed the law and not any wider political objectives.”

Apple CEO Tim Cook, normally a gentleman in public, had likewise referred the original ruling against Ireland as “political crap.” An earlier Apple statement said that the case “was not about how much tax we pay, but where we are required to pay it.”

What this case is really about, of course, is that Apple was able to find a legal workaround to paying taxes in the EU, and that the EC, rather than working to close those loopholes, also sought to retroactively punish the firm for its transgressions. In other words, yes, Apple skirt paying many billions of dollars in taxes in the EU, but it lapses in EU’s tax laws were what allowed that behavior.

“I cannot see how [Ireland] can be happy that [it] let a tech giant off the hook when we’re talking about paying €13 billion,” EU Competition Commissioner Margrethe Vestager said of the ruling. “[That money] will have to be coughed up by taxpayers now.”

The European Commission officially disagreed with the ruling as well, of course.

“In 2011, Apple’s Irish subsidiary recorded European profits of $22 billion (€16 billion), but under the terms of the tax ruling, only around €50 million were considered taxable in Ireland,” the Commission noted in a statement. “The Commission stands fully behind the objective that all companies should pay their fair share of tax. If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the EU. It also deprives the public purse and citizens of funds for much-needed investments, the need for which is even more acute during times of crisis.”

While the EU General Court’s ruling can still be appealed, it’s not clear yet if the EC plans to do so.

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Comments (28)

28 responses to “Ireland Wins Appeal of Apple Tax Case”

  1. Vladimir Carli

    This is very sad. If the law allows Apple to pay 10% of the taxes that any other legitimate business is supposed to pay, the law is wrong

    • crfonseca

      In reply to Vladimir:

      I think that's what the court said, but courts don't get to make laws, only to apply them.

    • lezmaka

      In reply to Vladimir:

      I contribute to a 401k and take the standard deduction when filing my tax return which means I end up paying a lot less in taxes than would be expected based on my yearly salary. It would be possible to choose to itemize deductions and simply claim no deductions. Is that wrong that I'm doing what the law allows, and in regards to 401k contributions, happens automatically?

      • wright_is

        In reply to lezmaka:

        No, but if the US Gov. made an exception for you, so that you paid 75% less taxes than everybody else, then the US Gov. would be in court, which is the situation here.

        Ireland offered Apple allegedly illegal conditions. The court says that Ireland doesn't have to retrieve the lost tax from Apple, although it (Ireland) is still, technically, liable for the "missing" money.

        • skolvikings

          In reply to wright_is:

          I admit I didn't read the actual ruling, but Paul's article said the court found the tax deal was legal. If that's true, why would Ireland have to come up with the missing money? Perhaps I don't fully understand how the system works in the EU.

          Also, if the US government made a tax exemption for me, they would not be in court. I know this because the government does this every day of the week. Special tax breaks are given to businesses at the local, state, and federal level all the time. I don't personally like it, but I get why it happens. The companies involved threaten to take their jobs elsewhere if they don't get the tax breaks, and without the jobs, the politicians worry they'll lose their next elections.

          • wright_is

            In reply to Skolvikings:

            It depends, Ireland is a member of the EU and there are some restrictions on what they can and can't do locally, that would negatively affect the whole EU.

            That is the point that has been going to-and-fro. Were the incentives too much under EU law? At the first instance, the EU won, now the Irish have one, prepare for round 3.

            • robsanders247

              In reply to wright_is:

              Taxation is one of the areas where member states still have full control. Every country can decide for itself how high tax rates should be, what to tax and what kind of exemptions to make. There are some rules on import/export taxes, which flow partly directly into the EU budget, but member states are keeping strong control over their internal tax system.

              Should harmonization occur? Personally I think it should (and even beyond that, allow the EU to invoke taxation themselves), even though a lot of my fellow Dutch are opposed to that idea. But until this gets through the Council, where every member state can veto that decision, Ireland is free to negotiate any tax deal with Apple. Or Google, or whatever other technical company that they have lured into their country over the past 15 years.

  2. DBSync

    Microsoft does the same thing with Luxembourg tax loopholes.

    All global companies do the exact same thing.

  3. skolvikings

    This would be like me taking advantage of a legal tax exemption for my mortgage, but then local politicians being upset that I had a $1 billion dollar house and trying to smear and punish me for back taxes I never owed in the first place. Good on Apple and it's lawyers and accountants for finding legal ways to pay the least amount of taxes as possible. That's the responsible thing to do for its shareholders. Unless you file the 1040-EZ and count no dependents or deductions, you do the same thing too.

    I agree with Paul that if the EU wants to change their tax laws to prevent this from happening going forward, they have legislative means by which to do so. That this was ever anything other than that is a classic example of what's wrong with our world. Punish and smear the smart and successful for being smart and successful. Sheesh.

    • wright_is

      In reply to Skolvikings:

      Not exactly. It is more like working in, say, Germany or France, but paying income tax in Ireland, because they yay you can pay just 5%.

      The probiert is, you should pay the tax in the country where you worked.

      This is why they are trying to change the tax laws, so that the companies pay where there customers are, where they actually do business, not some offshore tax paradise.

  4. brian_c

    An interesting one, but glad to see it was worked out correctly. I think the EU commission had a case, Ireland has been very lax about following up on corporations who are taking the p, but the commission overreached with it's claims of state aid and 0.005% rates.  The view of the authorities in Ireland was that these profits were not Ireland's to tax, and that we were not responsible for lapses in the tax laws of other countries. The profits were seen as being generated by Apple in the US, so the taxes were due to the US not here. The US of course didn't tax profits until they were repatriated so the money "was just resting in our account" to use a popular Irish phrase. All profits generated due to operations here were taxed here at the normal rate of corporation tax in Ireland.

    Apple is a significant employer in Cork, but the activities are mostly sales and after-sales support. On the back of every Apple device it says "Designed by Apple in California", not "Designed by Apple in Cork". The money was never Ireland's to tax.

  5. brettscoast

    The issue here is (as you pointed out) the loopholes need to be closed and laws tightened so that these huge companies like Apple pay their fare share of taxes.

  6. nbplopes


    “What this case is really about, of course, is that Apple was able to find a legal workaround to paying taxes in the EU, and that the EC, rather than working to close those loopholes, also sought to retroactively punish the firm for its transgressions. In other words, yes, Apple skirt paying many billions of dollars in taxes in the EU, but it lapses in EU’s tax laws were what allowed that behavior.”

    Thurrot, you seam to be driving conclusions with terms like loopholes, avoid paying EU taxes, so on and so forth without much know how on the subject. As well as assuming some kind of EU prosecution against Apple.

    The situation is very simple. Thera are no loopholes and Apple on any other company with dealings with the Ireland, an EU country, its paying their taxes. There are no EU taxes you see.

    As you know in EU there is free circulation of goods and services between members. Meaning, there is no import/export taxes between EU Countries, Income Tax is own to the supplier country, VAT is own to the buyer country. It has been like that for decades. Simple.

    This is not a legal matter, its an economical matter agreed between all member states, that benefitted many including the contestants, mainly, the power houses like Germany, as well as others. When Ireland buys goods from suppliers in Germany or France,, the suppliers Income tax stays therE ... there was never a problem was it?

    Now countries like Ireland with small population and short in land ... are not able to compete with these power houses in production capacity. So they simply analyzed their financial needs and natural resources and met a multinational company that sells and produces loads so much so that a smaller percentage on Income Tax and import Tax is enough to “feed” their economical needs. So their used their size as a competitive advantages much as Germany, France or any other country does.

    Now, this infuriated the power houses as they see the the approach as an “illegal” form of encomic competition because they cannot compete in the same way as they lack the resource (Population, natural resources) configuration. Which is nothing but a bullshit stance. This is not about equal terms of competition, because if that was the case, let’s than review the ownership of natural resources shall we?

    So unless, the EU agrees with a common tax policy, which will never happen alone, what is really at stake here is that the EU (Germany and Co) are pursuing illegal measures to stop the competition. Yes, not only Ireland business with Apple is legal, but also what EU (Germany and co) perused to force Ireland to do its Illegal.

    I bet Ireland will counter sue. This is no way the same as the Canaries tax havens (which German’s Business love, go there is mobbed with Germans) ... Also this was not about EU going after Apple. Was actually a number of countries trying to get financial control over others because they cannot compete in a certain way, so wanted to change the rules they once benefited from.

    That is what it was all about.

    • RobertJasiek

      In reply to nbplopes:

      Much of what you say is right but, in the EU Commission's understanding, there are limits to how low a country may set taxes so that fair competition persists. I agree though that the courts cannot solve everything that EU legislation has failed to regulate. If minimum tax is a political aim, it must be codified in law. Nevertheless, a high court might judge that 0.005% tax p. a. was not just and reasonable.

    • kevinbouwman

      In reply to nbplopes:

      Thank you for writing this. I am no fan of Apple but I get tired of corporations being vilified for following the law and for choosing a location to do business that most suits their needs. Like you said, there are no loopholes here, there are no avoided taxes. Ireland was able of offer Apple what it needed and in exchange got additional revenue for the government. The fact that Germany could not, or did not want to, offer Apple the same value is not unfair to is just how capitalism works. The relationships and services that offer the best mutual benefit to both parties are the ones most likely to happen. If my competitors offer a better value than I do to my customers, I will lose them.

      • nbplopes

        In reply to kevinbouwman:

        The EU is financially not United. Even values seam to be taking a hit.

        At the moment the two things that keep the thing running is the Euro and the Free Trade.

        There is a strong grioup in the North systematically disrespecting the Irish and British as well as southern countries.

        UK is already out, had enough.

        The all thing started with the shit show pulled by big American rog traders backed by major American financial companies that lead to distrust in the market at many levels. None of those American companies and traders were bring into justice by the FDA. They totally deceived the market with toxic CDOs purposely classified as AAA yet were worth shit People and organizations and countries lost billions. Meanwhile, the same companies that said shit was worth GOLD after the American scam, which was a scam, they pulled another one to distract the market, by classifying entire EU countries as Shit Here one for an insane market. The same companies that scam the world market have the power to classify entire countries.. EU panicked. There is nothing as good to distract people from a crisis than creating new one abroad. US applies this tactic systematically without any scruples.

        That is why when some American come with a sophistic moral stance on regulation and capitalism as if regulation is a socialistic idea, I find It it to be nothing but a form a manipulation, typical of a con. Because it distracts the discussion from the actual problem, legalized ... bad stuff ... because th aim of Capitalism is nothing other than ... make money. At its extream, all values are eschewed into this sole principle. At its purest form as nothing todo do with democracy.

        At the same level as the bombs never found in Iraq used to start a major war, now the crisis in WHO that Trump started, the guilty China on COVID all to justify its incapacity and bring back Americans to work in the factories with little to no protection . ... nothing like ... so on and so forth.

    • glenn8878

      In reply to nbplopes:

      In other words, Apple leveraged the free trade agreements between member countries to avoid paying taxes beyond the goods and services it provides to Ireland. Absolutely brilliant. There's nothing the EC can do about it short of dissolving the EU.

      • nbplopes

        In reply to glenn8878:

        You can say the same about Ireland.

        Apple or any other company Multi national company is doing this.

        What you are missing is that for instance for Apple to open an Apple Store in a country it needs a registered business in that country. As such sales at least through their stores in a country pay Income Tax. The exception are sales done through the digital stores ...

        Also Apple distribution center need a open business in that country, as such, pay income tax in that country on the business conducted by those distribution centers which is distribution, not selling devices.

        So it’s not that Apple only pays income tax to the Irish. They pay ion EU countries they directory operate as per services or product provided.

        So yes, there is a lot people don’t know about how this is done. Indeed most of it is fake information and people like you that desperately need to justify their dislike of this company.

        Ireland is hosting Microsoft (the main center in EU), Google and Amazon.

        Its a brilliant play by the Irish.

  7. Stooks

    All companies do it. It is, at the time, not illegal. Yes there are loop holes and yes those companies find them and use them.

    Ireland is happy because it brings jobs and money to Ireland (contracts etc). It is the only reason that most of these companies are there. You change those rules and they will stop coming.

    Same thing happens in the US. Heck Amazon advertised the fact it was looking a for a second HQ site. Why? To get the best offer, which is usually NO TAXES for a specific amount of time. The state/local governments do this to bring in $$$$. Local companies build the buildings. Local people are hired to work in those places...etc...etc.

  8. toukale

    I am not a lawyer and I thought EU going after Apple like this was crap. I agree with the EU that Apple is not paying its fair share of taxes but their approach to this was completely mismanaged. The EU spent 2-3 years putting this case together, then another 4 years to get this verdict. That's about 6-7 years of time and money wasted, you can add another couple years to this when all it said and done.

    By the end of this, 10 years would have passed. Can you imagine how much progress the EU could have done had they gone about this another way. How about spending those years putting in place incentives that would encourage those countries to slowly move in their directions? That's the problem we currently have with third world countries that are trying to improve their economy.

    • ebraiter

      In reply to toukale:

      Apple appealed the ruling which adds lawyer fees and at the same time [if they lose and they did] additional taxes and interest to the original amount. Apple could of negotiated with Ireland [or maybe they tried to] but negotiations failed.

      • toukale

        In reply to ebraiter:

        The finding and accusation was not by a court of law, the court of law in this case found no laws were broken. This whole thing was politically motivated and the court of law rule correctly. You may not like the fact Apple is not paying its fair share of taxes, but as long as they are not breaking the law doing it, I take no issue with it. It's not up to me, you or Apple to morally pay more taxes than we have to, its up to the law makers to make sure the laws on the books are working, if not change them.

  9. crfonseca

    To be fair, there are lots of issues with how the EU regulates taxation, like, for example, in how they allow some EU countries to be tax havens, and so they to some extent live off of other countries tax payers.

    That's why Ireland doesn't have a problem not collecting the €13 billion from Apple.

    The issue the Commission has with Ireland, unlike, say, Luxemburg or Netherlands, which are also tax havens for giant multinational corporations, is that Ireland instead of having an extremely low tax rate on profits, actually only considers some of Apple's profits taxable, and that is what the Commission argues creates unfair competition.

    Now, there's nothing inherently wrong with each country setting its own tax rates, but the problem is that many European companies then create shadow headquarters in those countries, often they're literally just an office that handles mail, just so they can avoid paying taxes in the countries where they actually do business (these companies will claim that no, they actually pay tons of taxes in their "home" countries, the vast majority of this is the VAT, a tax that is ultimately paid by the final consumer of a good or service).

  10. jchampeau

    It's interesting to me that companies that follow the tax laws are sometimes vilified for doing so. The problem is the laws and the way those laws are created and the lawmakers themselves are influenced, at least in the US, by legalized bribery we call "lobbying" and "fundraising." That Apple paid very little tax on the money they made in the EU is ludicrous, but it isn't Apple's fault; they were following both the applicable laws (as this ruling seems to affirm) and the fiduciary responsibility they have to shareholders.

    I agree with the EC's statement that "all companies should pay their fair share of tax." Of course they should. So fix the laws.

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