Apple wins court battle over €13 billion tax bill in victory against EU competition watchdogs

Apple today declared victory in its tax fight with European Commission chiefs in a move dealing a serious blow to the EU's efforts to crack down on tech giants' use of low-tax structures.

The European Commission's Margrethe Vestager had ruled in 2016 that the US tech giant underpaid €13 billion of taxes to Ireland, where it bases its European operations. Vestager ruled that Apple had been given a cheap deal by the Irish government in return for securing jobs in the country and that the money now had to be paid.

However, the European Union General Court today ruled the iPhone and iPads giant had been unfairly dealt with. It disagreed that Vestager's investigation had found evidence of illegal state aid.

The move is a bitter blow to her efforts to rid the trading bloc of unfair tax deals done by some members with US tech giants.

Apple chief executive Tim Cook had railed against her ruling as "total political crap" and today the company declared the case "was not about how much tax we pay, but where we are required to pay it."

Apple had argued that the EU had unfairly targeted tax due in the US and "retroactively changed the rules" on how taxes are levied on multinationals.

Figures for Apple's UK operation Apple Retail UK today showed paid barely any taxes here despite making sales of £1.4 billion.

Today's ruling is also a victory for Ireland, which has set itself up as a low tax environment when it pitches for foreign direct investment.

The case dates back to what the European Commission had deemed was a sweetheart deal made in 1991 between Apple and the Irish government. The California company set up an Irish subsidiary called Apple Sales International which records the profits made in the whole of Europe, the Middle East, Africa and India. As part of the structure, if a British shopper buys an iPhone in London, the profit on her purchase will be recorded in Ireland, not the UK. Under an agreement with Ireland, ASI paid a tax rate of between 0.005 and 1% in Ireland until 2014, according to the EU.

The EU deemed it a competition matter because such structures are not available to smaller companies who tend to only have the option of paying tax in the countries in which they sell their goods. Insead Knowledge points out that it has tried to get a harmonised tax rate off the ground but had little success as member states' tax rates vary greatly.