Apple's minor triumph serves as a setback in their extensive tax avoidance scheme.
Historically Long Antitrust Battle Concludes in Apple's Defeat at EU's Hands. The Real Victory: EU's Ability to Challenge Corporate Tax Evasion.
Margrethe Vestager, the EU Competition Commissioner, who retires at the end of November, can celebrate a significant achievement. The European Court of Justice (ECJ) judgments on Google and Apple cases reinforces Vestager's long-fought campaign against major tech companies and international corporations' market dominance and tax evasion. The Apple decision, specifically, serves as Vestager's stunning victory before her retirement.
It marks the culmination of nearly a decade-long battle against the world's heaviest and wealthiest corporation. In 2016, Vestager deemed Ireland's secret tax agreements with Apple illegal state aid, causing Apple to pay back 13 billion euros. Nullifying Apple's noteworthy appeal at a lower court, ECJ ultimately upheld Vestager's decision: the Irish government's exaggerated tax benefits to Apple - i.e., paying less than 1% tax on profits between 2003 and 2014 - contravened fair competition.
This wraps up the longest antitrust dispute in history. On Twitter, Vestager hailed it as "a great victory for Europe's citizens and tax justice." Legally, it's final. For Vestager, it's a fitting send-off. But for the EU, it's merely a stepping stone. Brussels' failure to combat Apple's tax schemes illustrates that effective governmental action against Internet giants is necessary to combat self-enrichment. Regrettably, governments sometimes lack the fortitude to act. Consequently, tech giants have since shifted their focus to alternative tax havens.
Apple: A Prominent and Unremarkable Taxpayer (in EU)
It's no surprise that Apple expresses disappointment with the decision. It reaffirms that Apple pays all due taxes, wherever it operates. "This case was never about how much tax we paid, but to which government we paid it," the company stated.
It's a truthful statement, but also the crux of the issue: Although Apple is among the US's largest taxpayers, it almost entirely escaped paying taxes on its EU profits due to intricate accounting tactics in Ireland. In 2013, a US Senate report exposed Apple's financial maneuvers, which reportedly costed non-US taxpayers billions. Despite masses of iPhone and app sales across Europe from Stockholm to Barcelona, Apple funneled its profits through patent bookings to Irish shell companies. Then, these profits, largely tax-free, moved to offshore Caribbean tax havens.
Since Apple's official headquarters were in Ireland, it wasn't taxed in the US. Moreover, since the "US-managed Irish virtual headquarters" of Apple's tech patents was supposed to be operating from the US, it paid almost no tax in Ireland due to a unique legal loophole present from 2003 to 2015: companies could legally avoid Irish taxation if managed and controlled elsewhere.
Apple's Wealthy Yearnings
To gain such financial leverage, Apple took advantage of a peculiar Irish tax law loophole, trying to collect a meager portion of tech giants' international tax revenues in the global tax competition among governments. Not merely Apple, but almost all international corporations exploited this trick to store billions in Caribbean tax havens. The International Monetary Fund (IMF) estimated that around 40% of global investments served solely for tax evasion, rather than actual, productive investment.
Tax Relocations Abound
Ironically, both Apple and Ireland resisted for years to collect the demanded taxes from Brussels. This suggests that the issue was primarily political, with Vestager's back-tax ruling serving as a check against years of political inaction by EU member states on tax evasion. Vestager aimed to promote competition policy where governments fell short.
Ultimately, it wasn't court rulings that brought about change; Ireland abolished the "Double Irish" in 2015 under global pressure, due to Vestager’s announcement to target Apple. Governments like Ireland, Malta, Cyprus, the Netherlands, and Luxembourg had previously hindered stricter, unified regulations, preferring the status quo.
In 2021, nearly 140 countries agreed on a global minimum tax of 15% for multinational corporations, including tax-friendly EU countries like Ireland, Hungary, and Estonia. Laureate Joseph Stiglitz worried in a year-end report, however, that this landmark agreement was rendered largely ineffective due to loopholes and special rules, yielding less than 5% of multinational corporations' global tax revenues. "We must ensure that those at the top of the income ladder meet their tax obligations," Stiglitz emphasized.
After securing a significant victory against Apple in the EU's antitrust battle, Margrethe Vestager celebrated the European Court of Justice's upholding of her decision, stating it as a great victory for European citizens and tax justice. The EU's ability to challenge Apple's tax evasion tactics marks a prominent step towards ensuring that tech giants pay their fair share of taxes.
The historic Apple decision serves as a stark reminder of the need for effective governmental action against corporate tax evasion. Although Apple pays taxes wherever it operates, its use of intricate accounting tactics to avoid paying taxes on EU profits highlights the need for stricter regulations to prevent such practices.
