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Apple Does Not Owe Ireland Nearly $15 Billion In Back Taxes, Court Rules

People enter an Apple Store at  in Glendale, Calif., on June 23.The second-highest court in the European Union says Ireland's tax break for Apple did not represent an unfair advantage.
Robyn Beck
AFP via Getty Images
People enter an Apple Store at in Glendale, Calif., on June 23.The second-highest court in the European Union says Ireland's tax break for Apple did not represent an unfair advantage.

Apple landed a major victory on Wednesday when the second-highest court in the European Union declaredthat the tech giant does not have to pay $14.8 billion in taxes to Ireland that regulators in Europe claim the company owes.

The ruling overturns a 2016 European Commission decision that Ireland, where Apple is based in Europe, essentially handed out tax breaks to the company that were illegal under European law.

Regulators said Apple routed profits from around the world through Irish shell companies to take advantage of low tax rates. Authorities said Apple's tax maneuvering gave it an effective tax rate of about 0.05% on its European profits.

The Commission said those deals with the Irish government were illegal, ordering that the country should recover billions of dollars in back taxes from Apple spanning 11 years, from 2003 to 2014. But Wednesday's reversal takes the Cupertino, Calif., company off the hook, for now.

In shooting the ruling down, the General Court said government regulators did not clear the legal hurdle necessary to show that Apple was receiving a "selective advantage" over other companies in Europe by receiving government tax breaks.

"The Commission erred, in its primary line of reasoning, in its assessment of the provisions of Irish tax law relating to the taxation of the profits of companies that are not resident in Ireland but which carry on a trade there through a branch," the court wrote.

Margrethe Vestager, a top antitrust regulator who led the action against Apple, said in a statement that the Commission stands by its position that all companies should pay their fair share of taxes and that Apple was given tax advantages its rivals did not enjoy.

In light of the court rejecting that argument, Vestager said: "We will carefully study the judgment and reflect on possible next steps."

President Trump has dubbed Vestager "tax lady" in slamming European regulators for attempting to clamp down on Apple, one of the most valuable companies in the world.

She has recently launched antitrust probes into Apple, including over its app store rules. Some developers say a 30% commission on each sale stifles competition and enriches Apple's bottom line.

European regulators are also considering ways to clamp down on Apple and other tech giants, including via a digital tax on advertising and subscription revenue.

The Trump administration has promised to retaliate if Europe takes these steps, yet the Department of Justice has opened an antitrust investigation of Big Tech companies, including Apple.

Later this month, Apple CEO Tim Cook will be joined by the chief executives of Facebook, Google and Amazon in testifying before congressional lawmakers who are also examining the tech firms for possible antitrust violations.

Apple, in a statement, celebrated the court's decision, pointing out that since its products are made in America, its largest tax burden is in the U.S.

Still, Apple said it has paid more than $100 billion in corporate income taxes around the world in the last decade.

"This case was not about how much tax we pay, but where we are required to pay it," said Apple spokesman Josh Rosenstock. "We're proud to be the largest taxpayer in the world as we know the important role tax payments play in society."

The ruling can still be appealed to Europe's highest court.

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Bobby Allyn is a business reporter at NPR based in San Francisco. He covers technology and how Silicon Valley's largest companies are transforming how we live and reshaping society.