EU scores 'big win' in court against Apple, Google
Brussels (Belgium) (AFP) – On Tuesday, the EU's top court delivered two major victories in the bloc's battle to rein in tech giants by ruling against Apple and Google in separate legal sagas with billions of euros at play. On September 10, 2024
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On September 10, 2024, the EU's top court is set to issue crucial rulings in two major cases involving Apple and Google. These cases have significant financial implications and could shape the future of Big Tech's interactions with European regulators.
1.
Apple's Tax Case: The court will decide on a 13-billion-euro tax dispute involving Apple and Ireland. The European Commission previously argued that Ireland granted Apple unfair tax benefits, but Apple won an appeal in 2020. However, a court advisor recommended overturning that victory, and now the European Court of Justice (ECJ) will determine whether Apple may have to pay the taxes.
2.
Google's Antitrust Fines: Google faces another key ruling regarding a 2.4-billion-euro fine for favouring its shopping service in search engine results. The European Commission imposed this fine in 2017 as part of broader antitrust actions. In various cases, Google has faced fines totalling around 8 billion euros for abusing its dominant market position, including its Android system.
These rulings mark a critical moment for the EU's outgoing competition chief, Margrethe Vestager, who has led the charge against Big Tech but has faced several setbacks in recent years.
EU scores 'big win' in court against Apple, Google
Q1. Why did Ireland give Apple unfair tax breaks?
A1. Ireland has maintained a low corporate tax rate to attract foreign companies for many years, providing a favourable tax system, especially for large companies. The tax breaks for Apple allowed Ireland to significantly reduce taxes on multinational companies, promoting job creation and economic growth.
Specifically, Ireland allowed Apple to apply a meagre tax rate on most of its profits in Europe, a practice the European Commission argued in 2016 was an unfair "selective preference" and infringed EU competition law. This meant other companies could not compete on the same terms, undermining fair competition.
Q2. Why are only big IT companies targeted when there must be other companies, nobles, and organizations that are given preferential treatment and receive tax exemptions or reductions through tax haven islands?
A2. There are several reasons why regulators particularly target big IT companies.
1. Overwhelming influence in the market
Big IT companies such as Apple and Google greatly influence the global economy. These companies occupy a dominant position in specific markets, making it difficult for other companies to compete. For example, Google dominates the search engine and digital advertising markets, and Apple dominates the smartphone and app stores. Competition authorities in the EU and elsewhere are trying to strictly regulate this kind of market dominance, judging that it stifles competition and harms consumers.
2. The growth of the digital economy and the difficulty of taxation
Digital companies have fewer physical presences, making it easier for them to evade taxes than traditional companies. For example, these companies minimize taxation by transferring profits to tax havens or specific low-tax countries. The European Commission argues that this practice undermines tax fairness and reduces essential tax revenues for national governments.
Because digital businesses are conducted across borders, it is often unclear where companies are making profits. In response, the EU is paying particular attention to large IT companies to ensure that corporate profits are taxed relatively where they are generated.
3. Social responsibility and public pressure
Because of their size and influence, big IT companies are under intense pressure to be socially responsible. These companies provide services to users around the world and have become an essential part of everyday life, so their actions are particularly scrutinized. In particular, they have come under increasing criticism for not paying taxes properly, and governments and international organizations have acted accordingly.
On the other hand, some other companies and organizations use tax havens. Still, they do not necessarily have the same size or influence and receive different levels of attention. Also, nobles and other organizations may receive similar tax exemptions. Still, their activities are less likely to directly impact competition and tax revenues in the international technology market. Hence, they are less subject to the same level of scrutiny as IT companies.
4. Pioneers of digital economy regulation
The tightening of regulations on IT companies is also an early attempt at the digital economy. While many regulations have already been established in traditional industries, the digital economy is a relatively new field, and new tax and competition law rules are required. As a result, governments and regulators are using IT companies as model cases for new regulations.
Large IT companies are mainly targeted because of their market dominance, unique position in the digital economy, and strong social responsibility.
Q3. Are there no problems with the many super-rich who use tax havens? Aren't they the ones who are benefiting from their successors?
A3. Even though the super-rich who use tax havens make a lot of profits, they may not be subject to as much regulation and scrutiny as the big IT companies. This is due to several factors.
1. Lack of transparency
Using tax havens is legal but done through a highly complex system, so it is often difficult to know who is making how much profit. The super-rich use financial institutions and legal experts to manage their assets and minimize their tax burden. This is legal, so on the surface, it often seems fine.
However, these actions are criticized because they negatively impact the tax revenue of the entire country and are said to undermine social fairness. For example, there is growing criticism that it is unfair for the super-rich to use tax havens to avoid taxes while ordinary citizens pay the appropriate taxes.
2. Difficulty in international enforcement
Tax havens used by the super-rich often operate through complex financial systems that exploit gaps in international law. These countries and regions have strict secrecy protection laws, making it difficult for tax authorities in other countries to monitor the transactions and assets of individual wealthy individuals. This makes international enforcement and regulation difficult.
However, international pressure has increased in recent years, and global efforts are underway to improve the transparency of tax havens. For example, the introduction of the **Automatic Exchange of Information (CRS)** led by the G20 and OECD is an attempt to make it easier for countries to share financial information and monitor the assets of the wealthy.
3. Historical accumulation of assets
As you pointed out, the super-rich often inherit assets from generation to generation and further expand their profits. Families, royal families, and aristocrats who have accumulated assets historically have usually managed their assets legally for a long time and developed mechanisms for tax avoidance. Therefore, their assets have been protected within existing laws and systems.
For example, many royal families and aristocrats have spread their assets across multiple countries and used complex trust and corporate structures to minimize their tax burden. This has often been criticized in society and, in some cases, led to assets hidden in tax havens coming to light (for example, the Panama Papers and Paradise Papers).
4. Prominence and political influence
Giant IT companies are particularly noteworthy because they are highly influential in the new digital economy. On the other hand, traditional super-rich people are often part of politics and the economy, and their regulation may be delayed. In many cases, they exercise political influence through powerful lobbying, which makes them less noticeable as targets for regulation.
However, international pressure will continue to increase, and more vital efforts may be made to crack down on tax evasion by the super-rich.
