The European Union received two positive rulings from its top court in two competition cases against US tech giants Apple and Google’s parent company Alphabet, now forced to pay billions of euros in back-end taxes and fines.
The Court of Justice of the European Union (ECJ) confirmed the 2016 ruling by the European Commission against Apple that ordered them to pay 13 billion euros in back taxes in Ireland and the 2017 decision against Alphabet for anti-competitive practices that carried a 2.42 billion euro fine.
The decisions vindicated the policy of the EU antitrust chief Margrethe Vestager, who during her two terms on the role has been pushing against tech giants over their low tax payments and anti-competition practices. Vestager, who will leave her role in November when the new Commission is set to start its mandate, cheered on the decisions by the ECJ, calling them “a big win for European citizens and for tax justice” in a press statement.
She added that the ruling, in particular the one against Apple, are above all about fairness between small and big companies, between EU member states and within European society. Vestager also pointed at the successes of her tenure as the EU antitrust head, with tax policies changes in the Netherlands, Ireland, Cyprus and Luxembourg, all EU countries that faced criticism for lax taxation rules.
Apple complained about the ruling, which is not up for appeal, saying that “the European Commission is trying to retroactively change the rules.” Also, Google commented negatively on its ruling, with a spokesperson saying that “we made changes back in 2017 to comply with the European Commission’s decision.”
In Apple’s case, the ECJ confirmed that “Ireland granted Apple unlawful aid which Ireland is required to recover.” During the period covered in the investigation between 2003 and 2014 the US company received favourable tax treatment compared to local Irish businesses. According to Apple, they paid $577 million equal to 12.5% of profit generated in Ireland.
However, Vestager in her statement following the ruling said that most of Apple’s taxable profits were linked to stateless subsidiaries and thus the profits were not taxed. She mentioned that in 2011 one of the two Apple’s Irish unit reported profits of around 16 billion euros but ended up paying less than 10 million euros in taxes in Ireland, roughly equal to 0.05% of its total profits.
Despite being the beneficiary of the fines, Ireland is siding with Apple on the case and defended its treatment of intellectual property transactions. Ireland has become a hub for tech companies in recent years due to its low taxation. Recently, the country ended up dropping its opposition to a global corporate tax rule that made Ireland raise its corporate tax rate.
Google’s case is only the first of three major proceedings that the company is having from the European Commission. The company is awaiting judgments on two other cases. The one that was ruled unfavourably to them involves unfair advantage that the search engine had against smaller European rivals over its price comparison shopping service Google Shopping.
Vestager hailed the ruling against Google as a “landmark in the history of regulatory actions against big tech companies,” as it is one of the first antitrust case against a major digital company. In her opinion it will help future cases and will bring a new approach in regulating big tech.
