Margrethe Vestager’s tax battle against Apple and Ireland is starting to look time-consuming and futile. Europe’s antitrust tsar said on Friday she will appeal a court ruling that overturned her decision that the technology giant’s fiscal deal with the Emerald Isle breached European Union rules. With Covid-19 starving governments of revenue, it’s time for the European Commission to open up a new front.
The Dane has for years pursued cosy tax arrangements between countries and multinationals, but her track record is patchy. Europe’s second-highest court in 2019 agreed that a deal between Luxembourg and Fiat Chrysler Automobiles represented unlawful state aid. But Vestager lost two other cases that year. In July, the court sided against her again by annulling a demand that Apple pays Ireland 13 billion euros in back taxes plus interest. It said the commission “did not succeed in showing to the requisite legal standard” that Apple received an unfair advantage.
Vestager clearly disagrees. The commission’s numbers show the iPhone maker’s Irish subsidiary recorded 16 billion euros of European profit in 2011, but only 50 million euros were considered taxable because of government concessions. Still, Vestager’s repeated court losses show how high the legal bar is for proving that tax deals amount to unfair state aid. Even if Vestager wins this and other cases on appeal, the ramifications would be limited to individual sweetheart deals. Ireland’s ultra-low 12.5% corporate tax rate, for example, would be unchanged.
The prospect of countries competing to offer the lowest corporate taxes is increasingly hard to abide at a time when the fight against Covid-19 is inflating government deficits. In a session with the European Parliament on Thursday, Economy Commissioner Paolo Gentiloni cited estimates suggesting that EU governments lose between 50 billion euros and 190 billion euros each year to aggressive corporate tax planning.
Vestager and Gentiloni have other options. An obscure article of the Lisbon Treaty effectively allows the commission to remove individual countries’ veto power over EU tax measures. The Financial Times reported on Thursday that commissioners are preparing to use it to force the Netherlands, Ireland, Luxembourg and others to alter their corporate tax regimes. The threat has been made before, but never put into action. A costly pandemic should give the fight renewed vigour.