The European Court of Justice (ECJ) is set to deliver a pivotal ruling on whether the European Commission was justified in demanding that Apple repay €13 billion in what it deems “illegal” tax breaks. This decision will conclude a long-running legal battle that started in 2016 when Margrethe Vestager, the EU’s competition chief, determined that Apple had received unfair tax advantages from Ireland.
These tax breaks reportedly allowed Apple to pay an effective tax rate of just 0.005% in 2014, prompting the Commission to order Ireland to recover the substantial amount plus interest.
In 2020, the European General Court overturned the Commission’s decision, ruling in favor of Apple and Ireland. The General Court found that the EU had failed to demonstrate that Apple had gained a competitive edge from these tax rulings.
Margrethe Vestager, who had previously made a name for herself by challenging other multinational companies like Fiat and Amazon over tax issues, appealed this decision. She now awaits the ECJ’s judgment, which will determine whether the General Court’s ruling will be upheld or revised.
European Court of Justice to Rule on Apple’s €13 Billion Tax Dispute with the EU
Vestager’s career has been marked by high-profile confrontations with major corporations over their tax practices, but not all her decisions have been upheld. For example, in 2022, the court ruled against the Commission in a case involving Fiat Chrysler and Luxembourg, and in 2023, the ECJ sided with Amazon, overturning a previous order for the company to repay €250 million to Luxembourg.
Despite these setbacks, Vestager has maintained her stance against what she describes as “selective tax subsidies” and the distortive effects they have on the EU’s single market.
Recent developments offer a glimmer of hope for the Commission. Last autumn, Giovanni Pitruzzella, a senior lawyer at the ECJ, recommended that the 2020 Apple case be referred back to the lower court for reconsideration.
This non-binding opinion suggests that the General Court may have erred in its previous decision. The ECJ typically follows the advice of its advocates in general, making it likely that this case could be revisited or resolved with a definitive judgment.
The outcome of this case will have significant implications for how EU countries grant tax incentives to multinational companies. Fiona Scott Morton, an economist at Yale University and Bruegel think tank, has highlighted the broader issue of unfair competition due to tax breaks, suggesting that countries should focus on improving public services rather than engaging in a “race to the bottom” with tax policies.
If the Commission’s appeal is unsuccessful, it may prompt new legislation to address the issue and prevent further tax-related disputes in the future.
