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Apple wins victory against E.U. as court rules it does not have to pay back-tax fine

E.U. Competition Commissioner Margrethe Vestager holds a news conference to order Apple to pay 13 billion euros in back taxes, in Brussels in 2016. (John Thys/AFP/Getty Images)
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BRUSSELS — Apple won a major victory Wednesday against European efforts to force it to pay higher taxes, after a European Union appeals court overturned a massive judgment against the tech giant and said that E.U. antitrust regulators erred in imposing a 13 billion euro ($14.8 billion) bill for back taxes.

The ruling, which is likely to be appealed by the European Commission, was a major boost to Apple and the Irish government. Both said they did nothing wrong and have denied the E.U. allegations that Apple received preferential tax treatment from the Irish government.

For now, the ruling is a major blow to E.U. antitrust regulators’ efforts to police individual countries that lure companies to their territories with low tax rates. E.U. antitrust chief Margrethe Vestager has built an international reputation for her aggressive moves against the business practices of tech giants, many of which have set up their European operations in low-tax nations such as Ireland and Luxembourg.

“We will carefully study the judgment and reflect on possible next steps,” Vestager said in a statement. “All companies should pay their fair share of tax.”

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The European Commission issued the back-tax fine in 2016, saying that Ireland gave Apple unfair advantages and violated E.U. state-aid rules when it offered the tax arrangement to Apple between 2003 and 2015. The agreement, the antitrust officials said, allowed Apple to pay a tax rate of less than 1 percent.

The General Court said the European Commission failed to meet legal standards to support its charge that Apple was granted illegal subsidies.

Apple CEO Tim Cook said at the time that the collection effort was “total political crap,” and it drew frustration from Dublin and Washington as well. Even some U.S. skeptics of Apple’s tax-reduction efforts said the money should be going to the U.S. government, not Ireland’s.

The 2016 tax ruling was Vestager’s first banner tax case against a global corporation, and she followed it with action against Amazon, Starbucks and others. Her aggressive enforcement efforts earned her the moniker “tax lady” from President Trump, as he complained about E.U. policies toward U.S. businesses.

If the European Commission decides to challenge the ruling, the case will be heard by the top E.U. court, the European Court of Justice. The process could take three or four years.

The Irish Department of Finance said Wednesday that it welcomed the appeals court’s decision.

Separately, the European Commission planned Wednesday to announce a new strategy to fight “race to the bottom” efforts among E.U. countries to draw business by lowering corporate tax rates. The court ruling may crimp some of those plans.

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