In 2016, the European Commission ruled that Ireland should collect approximately €13 billion plus interest from Apple to make up for what the Commission considered to be illegal tax advantages provided to the corporation. The Commission’s decision was appealed to the EU court by Ireland and Apple, and there is a significant likelihood that today’s court ruling will also be appealed – this time by the European Commission. Meanwhile, the COVID-19 crisis is increasing the pressure on public budgets, and the concerns about highly profitable multinational corporations paying ultra-low tax rates are as relevant as ever.

In response to the court’s ruling, Tove Maria Ryding, Tax Justice Coordinator at the European Network on Debt and Development (Eurodad), said:

“Today’s court decision illustrates how difficult it is to use EU state aid rules to collect tax. If we had a proper corporate tax system, we wouldn’t need long court cases to find out whether it is legal for multinational corporations to pay less than 1 per cent in taxes.

“This case has been going on for more than six years and if today’s ruling is appealed it’s obviously going to continue even longer. It shouldn’t take over half a decade to decide what a multinational corporation should pay in tax. This case illustrates that our corporate tax system is a mess and not fit for purpose.

“This was never just about one bad apple - our entire corporate tax system is rotten to the core. Across a broad range of sectors, we’ve seen large and highly profitable corporations pay ultra-low tax rates. This is a problem that is costing our societies billions of Euros in lost tax income every year. In light of the Covid-19 crisis, we obviously cannot afford to let this continue.”

The case of Apple’s tax payments in Ireland is an example of how the global corporate tax rules are failing.

Ryding added: “In the midst of the discussion about why Ireland collected so little tax from Apple’s billions of Euros worth of profits, we’re forgetting to ask why all those profits were registered in Ireland to begin with. The Commission has highlighted that Apple actually generated them through business activities in a number of countries in Europe, Africa, the Middle East and India. What we need is a transparent corporate tax system that ensures that taxes get paid in the countries where the business activity of the corporation is taking place.”

While the failure of the global tax rules has been widely recognised, intergovernmental negotiations to improve the system have struggled to make progress.

“For the last four years, EU governments have been stuck in a discussion about whether to introduce the basic transparency that would allow citizens to see how much tax multinational corporations pay in the countries where they do business. But despite one tax scandal after the other, and even though the European Parliament has kept pushing for progress, the EU Member States haven’t been able to reach an agreement.”

Meanwhile, at the OECD level, a process to rewrite the global tax rules has also been put on hold.

“The broken global tax system has to a large extent been developed by the OECD, and despite several rounds of intergovernmental discussions, it’s not been possible to find the political will to carry out a fundamental reform. The lack of ambition is linked to the fact that the decision-making happens behind closed doors, which makes it difficult for citizens to hold governments to account. Furthermore, ambitious reform proposals put forward by developing countries have been marginalised in the negotiations, which are dominated by the interests of large OECD countries. Most recently, the United States have asked that the OECD-led process be put on hold. This provides a good opportunity to rethink the way that global tax rules are being set. What we need is an ambitious and transparent reform process to take place at the United Nations, where all countries, including developing countries, can participate on a truly equal footing.”

ENDS

Tove Ryding is available for comment.

Media contact: Julia Ravenscroft, Communications Manager, Eurodad: +32 486356814

Notes to editor

The General Court of European Union today issued a judgement in the joint cases Ireland v Commission (case T-778/16) and Apple v Commission (T 892/16 case). The applicants sought to annul the 2016 European Commission decision that Ireland’s tax treatment of Apple, enabled by two tax agreements, provided a selective advantage amounting to state aid. This decision included an order for Ireland to recover approx. €13 billion.