EU Court upholds EU cases against Apple, Google
(LUXEMBOURG) - The European Court of Justice upheld Tuesday two EU Commission decisions, against Apple, that Ireland granted it unlawful aid, and against Google in its 'Google Shopping' antitrust case.
The Apple case concerned a Commission decision in 2016 that Ireland granted Apple unlawful aid which Ireland now has to recover.
This case was brought at a time when corporate tax avoidance was in the spotlight, and multinationals were under pressure to explain their hidden tax arrangements. Some corporations paid almost no tax in Europe, by abusing loopholes and asymmetries between different tax systems. Some EU Member States were relying on tax rulings and aggressive tax planning arrangements to become a more attractive destination for multinational investments.
In its 2016 decision, the Commission concluded that two Irish tax rulings constituted illegal State aid. They had artificially lowered taxes paid by Apple in Ireland since 1991. The Commission considered this to be a misapplication of Irish tax rules and ordered Ireland to recover up to 13 billion euros from Apple.
The tax rulings attributed the bulk of taxable profits - of two Irish subsidiaries of Apple - to stateless 'head offices', which in fact existed only on paper. The profits were not taxed. As an example, in 2011, one of Apple's Irish subsidiaries recorded profits of approximately 16 billion euros. Of these, thanks to the tax rulings, only around 50 million euros were taxable in Ireland. So, this subsidiary paid less than 10 million euros of taxes in Ireland in 2011 - an effective tax rate of about 0.05% of these overall annual profits. 0.05%.
The Commission welcomed the Court of Justice decision, which was "a big win for European citizens and for tax justice," said EC vice-president Margrethe Vestager. "The Commission will continue its work on harmful tax competition and aggressive tax planning. Both in terms of legislative proposals and enforcement," she said.
The Commission added that it confirmed its approach that the intellectual property licences held by Apple's Irish subsidiaries and related profits should have been allocated to the Irish branches. And that Apple should have paid taxes worth 13 billion euros on all related profits in Ireland.
The recovered taxes - held in an escrow account in Ireland during the ongoing court proceedings - now must be released to the Irish State.
The second case won by the Commission was the Google Shopping judgment. In the Google Shopping Decision, the Commission found that Google favoured, within its general search results, its own comparison-shopping "Google Shopping" service over those services provided by its rivals.
The Google Shopping case is a landmark in the history of regulatory actions against big tech companies. It was one of the first significant antitrust cases brought by a competition agency against a major digital company. And I think this case marked a pivotal shift in how digital companies were regulated and also perceived.
The Commission's decision to investigate and subsequently fine Google for abusing its market dominance in the comparison-shopping service sector challenged the notion that digital companies should be left to operate freely, as innovators driving positive change and growth.
Judgment of the Court of Justice in Case C-465/20 - Commission v Ireland and Others