Robert HARNEIS -TDO- (FRANCE)- The European Union's General Court has overturned the European Commission (EC) August 2016 ruling which found Apple had been granted illegal tax breaks by the Irish government.

'We will carefully study the judgment and reflect on possible next steps,' the EC said in a statement.

The French financial newspaper Les Echos described the decision as ‘a thunder clap that continues to echo round Brussels’.

The result, if the EC does not appeal, is that the tech giant does not need to pay Ireland 13 billion euros in back taxes.

The EC said it will continue to look at aggressive tax planning measures under EU State aid rules to assess whether they are illegal.

This is the second such case that the EC has lost. In 2019 the European Court overturned a ruling involving several million euros against the Coffee bar chain Starbucks. The EC’s problem is that it is attempting to use rules against illegal state aid to attack favorable tax regimes within the EU of which it disapproves. It does this because it has very little control over the tax regimes of the various member states.

The reality now is that unless the member states are unanimously prepared to change the treaties to forbid governments from fiscal competition, there is little the EC can do. This is unlikely to happen because certain member states such as Ireland and Luxembourg use favorable tax regimes to attract companies. Ireland has been very successful in this respect with great benefit to its economy.

The case could have implications for Brexit and on the attitude of the British government to its tax policy. If the EU allows cut throat tax competition amongst its own members, how can it object if the UK follows the same route? Needless to say tax competition from Ireland is relatively minor but from the world financial center that is the City of London it could have serious effects in attracting businesses out of the EU and into the UK.

The case comes at a difficult time for the EU and runs counter to the demands of France and Germany that action is taken to protect strategically important companies from unwelcome take overs from outside, notably China and the USA.

It has not gone unnoticed that Apple is an important US company and that the US government took a close interest in the case. It is also the true that although Apple pays little tax in Ireland, they pay a lot in the US and for overseas activities.

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