Apple won a landmark court case Wednesday against the European Commission over a dispute concerning 13 billion euros ($14.9 billion) in Irish taxes. The EU’s general court decided that the European Commission did not prove that the Irish government had given the U.S. tech giant a tax advantage.

The commission, the executive arm of the EU, had concluded in August 2016 that the Irish government granted illegal benefits to Apple and ordered it to recover 13 billion euros in unpaid taxes. At the time, the commission said Ireland had enabled Apple to pay “substantially less tax than other businesses over many years,” which meant that the U.S. firm was allowed to pay an effective corporate tax rate of 1% on its European profits in 2003, which fell to 0.005% in 2014.

The Irish government and Apple decided to appeal the commission’s decision, with the company arguing the order to repay taxes “defies reality and common sense.” Ireland, Apple and the European Commission now have two months to decide if they want to appeal the latest ruling and potentially take it to the EU’s highest tribunal. In reaction to the court ruling, the Irish government said it has always been clear “that there was no special treatment provided to the two Apple companies” and that “the correct amount of Irish tax was charged taxation in line with normal Irish taxation rules.”

One rather curious feature of this case is that if the ruling had gone the other way, and Ireland had been on the losing side, its “punishment” for breaching EU law would have been to receive a large amount of money: taxes the Commission said were owed by Apple. That did not happen, so the ruling – subject to any appeal – means Apple doesn’t in law owe the money, so Ireland won’t get it.

In some quarters of Ireland, there will be relief that an agreement that helped encourage Apple to invest has not been overturned after the event. But the sentiment is far from universal. A Sinn Féin spokesman called it a bad day for the Irish taxpayer that would draw negative attention to the country’s international tax reputation.

Todd Horwitz Chief Strategist BubbaTrading.com
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