The European Court of Justice (ECJ) has ruled against Apple and Google in two separate cases, resulting in massive financial penalties for both tech giants.
Apple has been ordered to pay €13bn in back taxes to Ireland, after the ECJ upheld the European Commission’s 2016 decision. The court found that Ireland had granted Apple unlawful state aid, which must now be recovered.
The ruling given to the world’s most valuable company just a day after the iPhone maker unveiled a host of product upgrades to boost sales, on Tuesday stated:
“In 2016, the European Commission decided that companies belonging to the Apple Group had, from 1991 to 2014, received tax advantages that constituted State aid granted by Ireland.
“That aid related to the tax treatment of profits generated by Apple’s activities outside the United States. In 2020, the General Court annulled the Commission’s decision, holding that the Commission had not sufficiently established that those companies enjoyed a selective
advantage.
“On appeal, the Court of Justice sets aside the judgment of the General Court and gives final judgment in the matter, conversely confirming the Commission’s decision.”
According to estimates by the EU’s executive arm, Ireland had given Apple “illegal tax benefits” worth €13bn.
Alex Haffner, a competition partner at London-based law firm Fladgate stated that Apple will now have to “forgo” €13bn that had been kept in an escrow account pending the outcome of the case.
“Perhaps of more relevance will be the sense that, again, the EU authorities and courts are prepared to flex their… muscles to bring Big Tech to heel where necessary,” he added.
In a separate ruling, the ECJ upheld a €2.4bn antitrust fine against Google. The company was found to have “abused its dominant position in online search by favouring its own price comparison shopping service over those of competitors”.
After the General Court essentially upheld that decision and maintained that fine, Google and Alphabet lodged an appeal before the Court of Justice, which dismisses that appeal and thus upholds the judgment of the General Court.
Both Apple and Google will have to pay the amounts, as the ECJ rulings are final and cannot be appealed.
These decisions demonstrate the European Union’s tough stance on Big Tech companies and their tax practices.
Apple shares have fallen over 1 percent in premarket trading while Google shares were unchanged after the ruling.
The European Commission has welcomed the rulings, with Competition Commissioner Margrethe Vestager stating, “Today is a huge win for European citizens and tax justice. The Commission will continue its work on harmful tax competition and aggressive tax planning.”
Vestager also said that the case against Google was a “catalyst for change”, challenging the notion that “digital companies should be left to operate freely”.
“It demonstrated that even the most powerful tech companies could be held accountable,” she added.
Apple has expressed disappointment with the decision, stating, “We always pay all the taxes we owe wherever we operate and there has never been a special deal.”
Apple said it had paid more than $20bn in tax in the United States on the same profits that the Commission argued should have been taxed in Ireland.
Google has also expressed disappointment and pointed to changes it made to shopping ads in Europe in 2017 to comply with the Commission’s decision.
“We are disappointed with the decision of the Court, billions of clicks for more than 800 comparison shopping services,” a Google spokesperson said.
In a statement on the ruling, the Irish government said: “The Irish position has always been that Ireland does not give preferential tax treatment to any companies or taxpayers.”