Apple decision a “big win” for Europe, says Vestager

Europe’s highest court ruled today that the company must pay the Irish government €13bn in taxes.

“The Court of Justice confirmed the decision from 2016 by the European Commission,” said Ms Vestager, who is due to step down from her role later this year.

The €13bn Apple tax money was set aside after the European Commission concluded in 2016, following an investigation, that Apple had enjoyed “selective” advantages over other Irish-based companies for decades.

The money is the Commission’s estimate of back taxes Apple should have paid to the Irish government.

“Ireland granted Apple unlawful aid, which Ireland now has to recover,” she said, adding that the decision made today was final.

“They had artificially lowered taxes paid by Apple in Ireland since 1991. The Commission considered this to be a misapplication of Irish tax rules and ordered Ireland to recover up to €13bn from Apple. These tax rulings attributed the bulk of taxable profits of two Irish subsidiaries of Apple to what was a state-less head office.”

She said the head offices “existed only on paper”.

The ECJ said today that the General Court had erred when it ruled that the Commission had not proved sufficiently that the intellectual property licences held by two companies in the Apple Group – Apple Sales International (ASI) and Apple Operations Europe (AOE) – and related profits generated by sales of Apple products outside the United States, should have been allocated, for tax purposes, to the Irish branches.

“As one example, in 2011 one of Apple’s Irish subsidiaries recorded profits of approximately €16bn. Of these, thanks to the tax rulings, only €50m were taxable in Ireland so the subsidiary paid less than €10m of taxes in Ireland in 2011, an effective tax rate of 0.05pc of these overall annual profits,” Ms Vestager said.

She pointed out that the Apple situation could no longer arise today. “Ireland changed corporate tax-resident rules to prevent Irish incorporated companies from being state-less for tax purposes,” she said.

A positive change was that Ireland has become “much more diligent in auditing” tech companies.

“The next thing that will have to happen is that the unpaid taxes that have been in this escrow account will have to be released to the Irish state,” she concluded. “What they will do with it, of course, is completely up to them.”