A European Commission decision that Apple Inc. owed $14 billion in back taxes to Ireland was annulled by the European Union’s lower court last week. There are three things to understand about the ruling. First, the commission was right that Apple dodged its taxes. Second, the commission decision trying to collect that tax was wrong, so the court was right to annul it. Third, our broken international tax system is to blame.
The case was an appeal of a 2016 decision in which the commission determined that Ireland illegally subsidized Apple by allowing it to pay too little tax. At that time, Apple CEO Tim Cook called the decision “total political crap.” He had a point. The investigation followed on the heels of the 2008 financial crisis, a time when Europeans were fed up with corporate tax avoidance by U.S. companies. Responding in part to this dissatisfaction, the commission introduced a highly controversial legal theory that allowed it to pursue companies like Apple for back taxes.
The Apple case was part of a larger plan by the commission to become more involved in curbing corporate tax abuse. Along with the case against Apple, it opened other investigations of household-name U.S. multinationals, including Starbucks and Amazon. After sleeping through the corporate depredations of the turn of the century, EU bureaucrats had suddenly decided to take tax avoidance seriously, and Europe’s rules against subsidizing corporations seemed to be the handiest tool.
Source: The Hill (2020)