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In a dramatic twist to the long-standing dispute over Apple’s back taxes, the European Commission has taken the matter to the Court of Justice of the European Union, seeking to overturn a lower tribunal’s decision that favored the tech giant. If successful, this move could result in Apple being held accountable for a staggering sum of 13 billion euros ($14.3 billion) in taxes owed to Ireland.
The contentious saga dates back to 2016 when the European Commission ruled that Ireland had granted Apple preferential tax treatment, specifically tailored to the company’s advantage. Apple, which has its European headquarters in Ireland, naturally appealed the decision, and the Irish government joined forces with the tech giant in contesting the ruling. As part of the legal process, Apple paid the outstanding 13.1 billion euros, along with an additional 1.2 billion euros in interest, into an escrow account controlled by the Irish government.
In July 2020, the European Union’s second-highest court handed down a verdict in favor of Apple and Ireland, stating that the Irish government had not unlawfully aided Apple in reducing its tax obligations. However, the European Commission vehemently disagreed with the ruling, deeming it “legally flawed.” Paul-John Lowenthal, a lawyer representing the Commission, emphasized the significance of the case, explaining that its outcome would shape the future of multinational corporations’ access to substantial tax breaks in exchange for job creation and investments.
Apple’s defense remains firm. Daniel Beard, representing the tech giant, maintains that the company has dutifully fulfilled its tax obligations. According to Beard, Apple has paid its fair share of taxes, as the profits in question were already “subject to the U.S. tax regime.” Beard further emphasized that Apple had set aside reserves to cover the taxes owed and had paid approximately 20 billion euros in taxes to the United States on the very same profits that the European Commission insists should have been taxed by Ireland.
The landscape of taxation has significantly transformed since the onset of this dispute, with Ireland no longer enjoying its previous status as a tax haven. The country has become part of an Organization for Economic Cooperation and Development (OECD) tax agreement, which has curtailed the preferential tax treatment it once provided.
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Amidst the legal battle, Apple’s Irish headquarters continues to thrive financially. Apple Operations International reported a notable increase of 5.5% in annual sales, reaching an impressive $222.75 billion by September 2022. While the precise amount paid to Ireland remains undisclosed, Apple paid a total of $7.69 billion in corporation tax across its global operations, indicating a substantial 73% year-on-year increase.
The eagerly awaited opinion on this matter is slated to be announced on November 9, 2023. As the European Commission takes on Apple in the highest court in Europe, the implications for multinational corporations and their tax obligations loom large. The outcome of this legal showdown will undoubtedly reverberate throughout the tech and business worlds, potentially reshaping the future of international taxation.
