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Europe’s top court backs tough action against Apple and Google | Tax news
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Europe’s top court backs tough action against Apple and Google | Tax news

The European Commission has ordered Apple to pay billions in back taxes; the decision was confirmed by the EU’s highest court.

EU Antitrust Commissioner Margrethe Vestager has achieved two important successes: Europe’s highest court supported her actions in two groundbreaking cases against Apple’s Irish tax agreement and Google’s anti-competitive practices.

Vestager, whose term ends in November, has made a name for herself by denouncing big tech companies’ tax deals with some EU countries and their attempts to suppress smaller rivals. The court victories announced on Tuesday could encourage her successor to follow a similar course.

The head of the Federal Cartel Office welcomed the rulings. “Today is a great victory for European citizens and tax justice,” she said of the Apple ruling, while praising the Google ruling as a great victory for digital justice.

In 2016, the European Commission ordered Apple to pay 13 billion euros ($14.4 billion) in taxes to Ireland. The company said the iPhone maker had benefited from two Irish tax assessments over two decades that had artificially reduced its tax burden to as little as 0.005 percent in 2014.

The EU Court of Justice, based in Luxembourg, sided with Vestager.

“The Court of Justice gives its final judgment in the case and confirms the European Commission’s 2016 decision: Ireland has granted Apple unlawful aid which Ireland must recover,” the judges said.

They said Apple’s two Irish-registered subsidiaries enjoyed more favourable tax treatment than Irish-taxed resident companies, which could not benefit from such rulings by the Irish tax authorities.

Apple said it paid $577 million in taxes during the period 2003-2014, which was the subject of the EU investigation, or 12.5 percent of the profits it generated in the country. The company was disappointed by the decision.

“The European Commission is trying to change the rules retroactively, ignoring the fact that our income was already subject to tax in the United States, as required by international tax law,” Apple said.

Separately, Apple said in a regulatory filing that the company expects a one-time income tax charge of up to $10 billion in the fourth quarter ending Sept. 28.

Ireland, whose low tax rates attracted large technology companies to set up their European headquarters there, had also challenged the EU decision, saying its tax treatment of intellectual property transactions was in line with that of other countries in the Organisation for Economic Co-operation and Development (OECD).

Yet Ireland has helped overhaul global corporate tax rules and done what was once unthinkable: it has abandoned its opposition to the abolition of the coveted 12.5 percent corporate tax rate. Yet tax revenues from multinational companies have actually increased since then.

Google’s anti-competitive practices

The court also dismissed Alphabet subsidiary Google’s appeal against a 2.42 billion euro ($2.67 billion) fine imposed by Vestager seven years ago. It was the first of three large fines imposed on the company for anti-competitive practices.

“Given the characteristics of the market and the specific circumstances of the case, Google’s conduct was discriminatory and did not fall within the scope of competition on the merits,” the judges explained.

Google expressed its disappointment with the ruling.

“This ruling relates to a very specific set of facts. We already made changes in 2017 to comply with the European Commission’s decision,” a spokesman said.

The Commission fined the world’s most popular internet search engine in 2017 for using Google’s own price comparison service to gain an unfair advantage over smaller European competitors.

Google has amassed €8.25 billion ($9.11 billion) in EU antitrust fines over the past decade. The company has appealed two rulings affecting its Android mobile operating system and its AdSense advertising service and is now awaiting the verdicts.

The group is also battling EU antitrust complaints filed last year that could force it to sell part of its lucrative ad tech business after regulators accused it of favoring its own advertising services.

Both judgments are final and cannot be appealed.

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