#12DaysofChristmas: Apple decision showed EU willing to take on Silicon Valley

In another of our '12 Days of Christmas’ series, we look back at some of the main news items of 2016. On 30 August, Competition Commissioner Margrethe Vestager announced that Ireland had given unfair tax advantages to Apple, writes Catherine Feore.

The Commission estimated that Apple should repay €13 billion in unpaid tax to the Irish government. Both Ireland and Apple stridently rejected the Commission’s findings and will appeal; the US Treasury even threatened retaliatory action aimed at European business.

The Commission’s investigation into Apple’s tax arrangements was prompted by the company’s testimony to the US Senate in March 2013. The Commission found that Ireland had granted illegal tax benefits to Apple, which meant that it had paid substantially less tax than other businesses over many years.

Bearing in mind that the official corporate tax rate for every other company operating in Ireland is 12.5% – already one of the lowest in Europe – Apple’s effective corporate tax rate was much less than the amount paid by other businesses. For example, in 2014 one Apple subsidiary paid an effective rate of only 0.005%. Commissioner Vestager put this into context – for every million euro in profits, Apple paid just €50 in taxes.

The legal arguments surrounding the case are well-trodden; the scale, the long period involved (tax rulings in 1991 and 2007) and the high-profile beneficiary resulted in a flurry of interest in the normally prosaic field of European state aid law.

Silicon Valley

Silicon Valley sees this decision and others as an attack on its legitimate success. It is clear that Europe takes a much tougher view than the US government on questions such as unfair taxation, abuse of a dominant position, data protection and copyright.

Next year, these struggles will continue in the form of further decisions (Google/Android), legal challenges (Apple, Uber, Privacy Shield) and the adoption of laws related to the EU’s Digital Single Market.

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