10-year legal battle lost! Apple ordered to pay $14.4 billion in taxes to Ireland

On Tuesday, September 10th, Apple lost a legal battle with the European Union that had lasted for several years. The EU court ruled that Apple had improperly benefited from a tax loophole in Ireland and had to pay €13 billion (US$14.4 billion) in back taxes to Ireland. This is part of the EU's crackdown on "preferential tax agreements".

Apple expressed disappointment with the outcome, but it is a final ruling with no possibility of appeal. Apple stated, "The European Commission is trying to retroactively change the rules, but they overlook one thing: under international tax law, our income has already been taxed in the United States."

The Irish government stated that the European Court of Justice's ruling on Ireland providing illegal aid to Apple through tax policies is now "a matter of historical significance" as Ireland's tax system has since changed.

In 2016, the EU's Competition Commissioner, Margrethe Vestager, accused Ireland of providing illegal tax benefits to Apple, leading to unfair diversion of investments from other countries to Ireland. At that time, Ireland attracted large tech companies to establish their European headquarters with its low tax rates.

What is the "Double Irish" Tax Avoidance Scheme?

Ireland's success in attracting tech giants is partly attributed to its old tax system. Under this system, multinational companies could reduce their overseas tax burden to single digits.

Multinational companies could shift untaxed income to an Irish subsidiary, which would then transfer funds to another company registered in Ireland but taxed elsewhere (such as the tax haven Bermuda).

Since both companies are Irish, it is called the "Double Irish" tax avoidance scheme.

Apple had been using this scheme until Ireland closed the loophole in 2014 under continued pressure from the EU and the US.

Ireland calls the EU Court's ruling on Apple "only of historical significance"

For a long time, Ireland has opposed the EU Commission's 2016 ruling, which stated that Apple had benefited from two Irish tax rulings over more than 20 years, with Ireland artificially lowering its tax burden to 0.005% in 2014.

In a statement, the Irish government pointed out that since the EU's order in 2016, Ireland has amended provisions regarding corporate tax residence, the attribution of profits to non-resident company branches, and adjusted its tax rules according to international agreements. Therefore, the EU Court's ruling on Apple is "only of historical significance". The statement also said:

"The EU Court considers the taxes paid insufficient and demands more taxes to be recovered. Ireland's longstanding position has been that Ireland has not provided any company or taxpayer with preferential tax treatment."

The Irish government did not mention how they would use the large sum of taxes returned by Apple in the statement. However, they are likely to invest this fund in the new sovereign wealth fund established last year, to invest in the growing corporate tax revenues that have made Ireland one of the few European countries with a budget surplus