The European Union’s highest court is set to hold a hearing at the end of May on the European Commission’s last-ditch bid to make Apple pay the Republic more than €13 billion of taxes, which would pave way for a final ruling on the world’s biggest-ever antitrust case.
The Court of Justice of the European Union (ECJ) has set May 23rd for a hearing of the commission’s high-stakes appeal against a lower-court ruling almost three years ago that the tax was not owed. A spokesman for the Department of Finance confirmed that it has been notified of the date.
The commission, which began investigating Apple’s tax affairs in Ireland a decade ago, concluded in August 2016 that the maker of the iPhone and Mac computers owed the State €13.1 billion of alleged back taxes as a result of illegal state aid. Adding interest, it put the total bill at €14.3 billion. Apple and successive Irish governments have consistently said that the tax was not due.
The EU General Court ruled in July 2020 to quash the commission’s decision after hearing an appeal taken by Apple and Ireland, with the union’s second-highest court saying Brussels “did not succeed in showing to the requisite legal standard” that Apple received tax advantages from the Republic. The commission moved in September 2020 to appeal that ruling to the ECJ.
Paul Gallagher, SC, who retired as attorney general late last year after a second time in the role, will lead the Government’s response to the appeal. He was also the Irish legal lead at the General Court hearing in late 2019.
“One of the elements for a valid finding of state aid is that a state body must be shown to have granted a selective advantage to one or more companies – in other words, that Apple was singled out for preferential treatment,” said Marco Hickey, a partner with law firm LK Shields, where he heads up the practice’s EU, competition and regulated markets team. “The General Court held that selective advantage had not been established.”
Commission vice-president and competition chief Margrethe Vestager has had a series of legal setbacks in taking high-profile tax cases against large multinationals.
The ECJ moved last November to overturn a 2019 General Court ruling that the commission had been correct in ordering Fiat Chrysler four years earlier to pay Luxembourg €30 billion in back taxes.
In May 2021, the General Court overruled a commission finding that Luxembourg had granted €250 million of illegal tax benefits to Amazon. The commission subsequently appealed that decision to the ECJ.
An order by the commission in 2015 that coffee chain Starbucks pay the Netherlands up to €30 million of taxes was also quashed by the lower EU court in 2019. Ms Vestager’s officials decided against appealing that decision.
The commission has claimed in its Apple case appeal that the General Court made “several errors of law” in its 2020 ruling. The Department of Finance spokesman declined to comment on any elements of the State’s response pending the hearing in May.
Mr Hickey said that the Irish Government will have been encouraged by the outcome of the Fiat Chrysler case at the ECJ in November in particular.
“Ireland had joined the Fiat appeal as an intervener, presumably given the similarity of the issues raised in this and Ireland’s Apple case,” he noted.
In its 2016 finding the commission claimed two Irish tax rulings had, for more than two decades, artificially reduced Apple’s tax burden, which in 2014 was as low as 0.005 per cent.
The State set up an escrow account in 2018 to hold the €14.3 billion pending the final outcome of the case.
As of the end of 2021, the funds in the account had fallen to €13.6 billion. This was driven by Apple transferring €454 million from the account to pay tax elsewhere, as it is allowed to do under the terms of the escrow account.
The underlying value of investments in the fund, mainly made up of euro-zone government bonds, had also been hit from the time of its establishment by a pervasive negative rates environment that existed before the European Central Bank started to hike interest rates last year.
