The smartphone maker, Apple would not need to pay a 15 billion in back taxes to the Irish government according to a judgment on Wednesday by Europe’s second-highest court based in Luxembourg.
The European Commission had accused Apple of benefiting from illegal state aid via two Irish tax rulings that artificially reduced its tax burden for over two decades, to as low as 0.005 percent in 2014. The commission has similar cases with Nike and Ikea over alleged ‘sweetheart’ deals granted by the Dutch government. Brussels also launched an investigation in March into the tax treatment granted by Luxembourg to the Finnish food packaging company Huhtamäki.
According to the Luxembourg-based court, the EU failed to substantiate that Apple benefited from an illegal arrangement with the Irish authorities. Analysts say the decision would have repercussions for plans by the EU to clamp down on tax avoidance.
“The General Court annuls the contested decision because the commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU1,” judges said, referring to EU competition rules.
The defeat for European Competition Commissioner, Margrethe Vestager could weaken or delay pending cases against Ikea’s and Nike’s (NKE.N) deals with the Netherlands, as well as Huhtamaki’s (HUH1V.HE) agreement with Luxembourg, according to Reuters.
Vestager, who has made the tax crackdown a centerpiece of her time in office, saw the same court in 2019 overturn her demand for Starbucks (SBUX.O) to pay up to 30 million Euros in Dutch back taxes.
In another case, the court also threw out her ruling against a Belgian tax scheme for 39 multinationals.
While 14 billion Euros, including interest, would have gone a long way to plugging the coronavirus-shaped hole in Ireland’s finances, Dublin appealed against the commission’s order alongside Apple because it wanted to protect a low tax regime that has attracted 250,000 multinational employees.
However, the government is likely to face strong criticism from opposition parties for not taking the cash, which could cover no less than half of a budget deficit forecast to balloon to as much as 10 per cent of GDP this year.
The defeated side can appeal on points of law to the EU Court of Justice, Europe’s highest court.