One of Europe’s highest courts may have canceled the $15 billion back-tax bill she forced on Apple, but Competition Commissioner Margrethe Vestager is not giving up.
There’s too much at stake, not just in this specific case, but also in the European Commission’s wider quest to stop multinationals from enjoying specially advantageous tax deals—such as the one it claims was struck between Apple and Ireland, the base for Apple’s international operations outside of the Americas.
So, on Friday, Vestager announced her antitrust department’s appeal against the July ruling by the EU’s General Court, which said the Commission had failed to sufficiently demonstrate Ireland had given Apple special treatment—an action that would have meant Ireland had effectively granted Apple illegal state aid.
“The General Court judgment raises important legal issues that are of relevance to the Commission in its application of state-aid rules to tax planning cases,” Vestager said in a statement. “The Commission also respectfully considers that in its judgment the General Court has made a number of errors of law. For this reason, the Commission is bringing this matter before the European Court of Justice.”
The European Court of Justice (ECJ) is the EU’s highest judicial authority and has the last word on the interpretation of EU law.
The General Court, which together with the ECJ forms the Court of Justice of the EU—yes, the naming is confusing—is largely there to hear actions taken against EU institutions such as the Commission; in this case, it was Apple’s appeal against the Commission’s Irish tax decision.
Appeals against General Court rulings can be taken up to the ECJ only on points of law, rather than in an argument over the facts of the case.
The Commission’s problem here is that the General Court’s July ruling was mostly about the facts of the Apple-Ireland case.
Rather than saying the Commission made a wrong call in interpreting the law, it said the Commission had messed up because it couldn’t back up its claim that the revenues of Apple’s Irish subsidiaries—which handle the manufacture and distribution of Apple products around the world—were largely down to the activities of those subsidiaries themselves, rather than being derived from U.S. intellectual property, as Apple and the Irish government have argued from the beginning.
Friday was the deadline for Vestager to launch her appeal, and her brief statement on the matter did not make clear what legal errors the General Court supposedly made. She did, however, suggest that the judgment’s reasoning had an impact on the Commission’s strategy of tackling tax issues via the state-aid route.
The same court had already reversed a similar tax decision of hers, regarding Starbucks’ treatment by Dutch tax authorities, on similar grounds—but that was small potatoes compared with the flagship Apple-Ireland case. Vestager’s defeat on this case was seen in Brussels as a major embarrassment for the Danish politician, who is currently in her second term as the EU’s antitrust chief.
More generally, though, it was a major setback for the Commission in its quest to get Big Tech firms to pay more taxes in European countries, on revenues coming from their operations in those countries.
There’s still a push in Europe to introduce “digital taxes” on the local revenues of large tech multinationals. And on Thursday, the Financial Times reported that the Commission was preparing an assault on “structures that facilitate aggressive tax planning,” with the coronavirus pandemic’s draining of public coffers proving an extra impetus. Ireland, the Netherlands, Luxembourg, and Hungary are likely targets here.
