With the ruling on September 10, 2024, case C-465/20 P, the Court of Justice of the EU confirmed that Ireland granted unlawful tax advantages to Apple, in violation of European state aid rules. The case revolves around the tax agreements granted by Ireland between 1991 and 2014 which allegedly permitted to the big tech to pay a significantly lower amount of taxes in comparison to the other companies.

But what is the back story behind this annual feud between the EU executive and Apple?

I.   How it all started: the 2014 EU Commission investigation and the 2016 decision.

In 2014, the European Commission started to investigate the tax agreements between the Irish Government and Apple, suspecting illegal State Aid to the tech company. This investigation was concluded two years later, in 2016, with the EU executive decision which condemned the Cupertino company to pay € 13 billion in back taxes to Ireland.

In particular, according to the Commission the two European subsidiaries of Apple – Apple Operations Europe (AOE) and Apple Sales International (ASI) –  had taken advantage of two separate fiscal rulings over a span of more than twenty years (from 1991 to 2014), which had slightly reduced – year after year – their taxes burden, bringing it in 2014 to the negligible rate of 0.005%

A mere crumb, considering that the Californian company reported revenues of $37.4 billion in the same year.

That said, someone might ask “what is a fiscal ruling”?

Simply speaking, a fiscal ruling is a practice that allows a State to make arrangements with a single company to establish a special tax regime, thereby attracting it to the country.

It is safe to say that Ireland is quite popular for these practices and, as a result, has become a Mecca for big companies. In fact, during the period contested by the European Commission (i.e. 1991 – 2014), the Irish income tax decreased from 24% to 20% in 2000, to 16% in 2002, and to 12.5% in 2003. As a result, over 24 years, Apple would have accumulated € 13 billion in taxes to be paid in Ireland, even after adjusting the rulings deemed incompatible with market rules

II.   The response from Apple and Ireland: the Appeal to the General Court of the European Union.

In 2016, Apple challenged the European Commission’s decision by appealing to the General Court of the European Union. Ireland, despite being required by the Commission to collect the money, sided with Apple, arguing that the company’s tax treatment was in accordance with Irish laws and that the Commission was interfering with the country’s fiscal sovereignty.

The appeal process, which unfolded over a four-year trial, scrutinized the Commission’s findings and the validity of its claim. Ultimately, in 2020, the General Court ruled in favour of Apple and Ireland, emphasizing that the Commission did not sufficiently demonstrate that the favourable tax treatment granted to Apple provided it with a selective advantage that was inconsistent with EU state aid rules.

III.    A second grade: The Commission appeal to the Court of Justice of the European Union.

The aforementioned landmark decision represented a significant setback for the European Commission’s efforts to regulate tax practices among multinational corporations within the EU.

For these reasons the EU executive challenged the judgment before the Court of Justice of the European Union starting an eight – year new trial, which has recently ended with a clamorous victory.

In fact, this September the Court of Justice of the European Union (CJEU) confirmed the 2016 Commission’s decision, overturning the General Court’s earlier ruling.

Let’s find out the key reasons behind the CJEU’s confirmation:

1.    State Aid Rules: The CJEU determined that the tax advantages given to Apple by Ireland constituted illegal state aid under EU law. This aid was deemed to distort competition and affect trade between EU member states.

2.    Favorable Tax Treatment: The court found that the tax rulings provided to Apple allowed the company to pay significantly less tax than other companies operating in Ireland, which was considered a selective advantage. This selective treatment was inconsistent with EU state aid rules.

3.    Proof of Advantage: The CJEU ruled that the Commission had sufficiently demonstrated that Apple received a benefit from the tax arrangements that was not available to other companies, which breached the principle of fair competition within the EU.

4.    Compliance with EU Law: The CJEU confirmed that the Commission’s decision to demand the repayment of the unpaid taxes was in line with EU regulations regarding state aid. The decision emphasized that member states must ensure their tax policies do not unfairly favor specific companies over others

IV.  Conclusion: A milestone for fairness and equity in the European market.

In essence, the CJEU’s confirmation of the Commission’s decision reinforced the application of EU state aid rules and affirmed the need for fair competition within the internal market by ensuring that all companies are subject to similar tax conditions.

It has become clear that, although fiscal rulings are perfectly legal under European legislation, their misuse can lead to significant distortions of competition, favouring big companies in the global market and disadvantaging smaller ones.

In the long term, this could also act as a disincentive for the creation of new businesses, contrary to the principles of free and fair market competition that have been foundational to the European Union since its inception.

After all, as ancient Romans said: ‘dura lex, sed lex’ (‘the law is harsh, but it is still the law’), and it is reassuring to think that, sometimes, this principle applies even to those  companies considered almost untouchable in the collective imagination.