Apple Ordered to Pay $14.4 Billion in Back Taxes Following EU Court Ruling
Apple faces a significant financial hit after the European Union’s top court rejected its appeal, mandating the company to pay $14.4 billion in back taxes to the Irish government. This ruling stems from a landmark 2016 decision that Apple CEO Tim Cook previously denounced as “total political crap.” Apple announced it would record a one-time income tax charge of up to $10 billion in its upcoming fiscal fourth quarter ending Sept. 28, in response to the ruling.
Apple’s Stock and Reaction
Following the court’s decision, Apple shares dropped less than 1% after the opening bell, reflecting the market’s reaction to the tech giant’s financial news. Despite the setback, Apple expressed disappointment with the ruling, stating, “This case has never been about how much tax we pay, but which government we are required to pay it to.”
The European Commission’s Findings
The legal dispute began in 2016 when the European Commission found that Apple had benefited from special tax deals with Ireland. The commission accused Ireland of allowing Apple to locate its “head office” in Cork, despite the office existing only on paper, with no employees or operations. The arrangement enabled Apple to pay an effective tax rate as low as 0.005% on its European profits during some years. The commission demanded Ireland recover unpaid taxes from Apple from 2003 to 2014.
Both Ireland and Apple appealed the decision. In a previous ruling, the General Court of the European Union annulled the commission’s decision, citing insufficient evidence of special treatment. However, the European Court of Justice (ECJ) in Luxembourg reversed that ruling, stating that the lower court had erred in its reasoning.
A Win for Tax Justice
EU competition chief Margrethe Vestager praised the court’s decision: “Today is a big win for European citizens and tax justice.” The ruling comes as part of Vestager’s broader effort to hold tech giants accountable for their practices within Europe.
Apple emphasized that it has always paid the taxes it owes and that no special deal was involved. The company also highlighted that the case focused on which government should receive the taxes rather than the amount owed.
Impact on Ireland’s Business Climate
Ireland, known for its business-friendly policies and low corporate tax rates, has attracted numerous tech companies, including Google, Meta, and Microsoft. Following the court ruling, Irish officials said they would begin transferring the $14.4 billion, which has been held in an escrow account, into government coffers. While denying any particular tax treatment to companies, Ireland expressed its commitment to respecting the court’s decision.
Google Also Faces a Blow
In a related ruling, the EU’s top court upheld a $2.67 billion fine imposed on Google for anti-competitive practices in its comparison-shopping service. The fine was levied initially in 2017 after the European Commission found that Google had abused its market dominance by promoting its service in search results while demoting competitors. Google expressed disappointment with the ruling, noting that it had made changes to comply with the commission’s decision.
The decision against Apple and Google is a victory for Vestager and the European Commission, signaling their resolve to rein in tech giants’ power through regulatory action and legal challenges. The ruling reinforces the EU’s stance on tax justice and competition, setting a precedent for future cases involving large multinational corporations.