Vestager vows ‘aggressive’ tax moves despite Apple loss

EU antitrust boss Margrethe Vestager has vowed to continue her fight against tax measures used by multinational companies despite the huge setback delivered by Europe’s second-top court which scrapped her €13 billion tax order on Apple.

The Commission can appeal the Apple decision on points of law to the EU Court of Justice, Europe’s top court.

The judgment by the General Court annulled the Commission’s August 2016 decision that Ireland granted illegal state aid to Apple through selective tax breaks.

“We will carefully study the judgment and reflect on possible next steps ..” said Vestager.

“The Commission will continue to look at aggressive tax planning measures under EU State aid rules to assess whether they result in illegal State aid.”

Apple won a major victory this week when the court rejected an EU order for the iPhone maker to pay €13 billion in Irish back taxes, dealing a blow to the EU’s efforts to crack down on lenient tax arrangements.

Ireland had appealed against the Commission’s decision alongside Apple, arguing it had not given special treatment to the company.

The judges said the EU executive was wrong to say Apple’s two Irish subsidiaries — Apple Sales International (ASI) and Apple Operations Europe (AOE) — had been granted a selective economic advantage and therefore had received state aid by extension. 

Dimitrios Kyriazis, Head of Law Faculty at the New College of Humanities in London, told Reuters the Commission could still salvage its case.

“Its defeat is very similar to its defeat in the Starbucks cases, that is it won on matters of legal principle and lost due to the allocation of evidentiary onus,” said Kyriazis. 

“It is more likely that the Commission will re-adopt a decision against Ireland and Apple and try to show exactly how the tax rulings granted AOE and ASI a selective advantage.”

Vestager added: “The Commission’s decision concerned two tax rulings issued by Ireland to Apple, which determined the taxable profit of two Irish Apple subsidiaries in Ireland between 1991 and 2015.

“As a result of the rulings, in 2011, for example, Apple’s Irish subsidiary recorded European profits of US$22 billion (c.a. €16 billion) but under the terms of the tax ruling only around €50 million were considered taxable in Ireland.

“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.

“In previous judgments on the tax treatment of Fiat in Luxembourg and Starbucks in the Netherlands, the General Court confirmed that, while Member States have exclusive competence in determining their laws concerning direct taxation, they must do so in respect of EU law, including State aid rules.

“Furthermore, the General Court also confirmed the Commission’s approach to assess whether a measure is selective and whether transactions between group companies give rise to an advantage under EU State aid rules based on the so-called ‘arm’s length principle’.

“The Commission will continue to look at aggressive tax planning measures under EU State aid rules to assess whether they result in illegal State aid.

“At the same time, State aid enforcement needs to go hand in hand with a change in corporate philosophies and the right legislation to address loopholes and ensure transparency.

“We have made a lot of progress already at national, European and global levels, and we need to continue to work together to succeed.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.