On Tuesday, September 10th, Apple lost a legal battle with the European Union that had been ongoing for several years. The EU court ruled that Apple had improperly benefited from a tax loophole in Ireland and must pay €13 billion ($14.4 billion) in back taxes to the country. This is part of the EU's crackdown on "sweetheart tax deals."

Apple expressed disappointment with the outcome, but it is a final ruling with no possibility for appeal. Apple stated, "The European Commission is trying to retroactively change the rules, but they overlook one crucial point: under international tax law, our profits have already been taxed in the United States."

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The Irish government said that the European Court of Justice's ruling on Ireland's illegal state aid to Apple through tax policy is "now only of historical significance," as Ireland's tax system has since changed.

In 2016, EU Competition Commissioner Margrethe Vestager accused Ireland of providing illegal tax benefits to Apple, leading to unfair investment diversion from other countries to Ireland. At that time, Ireland attracted large technology companies to establish their European headquarters there due to its low tax rates.

What is the "Double Irish" tax avoidance scheme?

Ireland's success in attracting tech giants was partly due to its old tax system. Under this system, multinational corporations could reduce their overseas tax liabilities to single digits.

Multinational companies could transfer untaxed income to a subsidiary in Ireland, which would then pay the funds to another company registered in Ireland but taxed elsewhere (such as in a tax haven like Bermuda).

Since both companies are Irish, this is referred to as the "Double Irish" tax avoidance scheme.

Apple had been using this scheme until 2014, when under continuous pressure from the EU and the United States, Ireland closed this loophole.

Ireland says the EU court's ruling on Apple is "only of historical significance."For a long time, Ireland has been opposing the European Commission's ruling made in 2016, which stated that Apple has been benefiting from two Irish tax schemes over the past 20 years, and that Ireland had artificially lowered its tax burden to 0.005% in 2014.

The Irish government stated that since the EU issued its order in 2016, Ireland has amended regulations concerning the corporate tax residency and the attribution of profits to non-resident company branches, and adjusted its tax rules in accordance with international agreements. Therefore, the EU court's ruling on Apple is "merely of historical significance." The statement also read:

"The European Court of Justice found the taxes paid to be insufficient and demanded the recovery of more taxes. Ireland's consistent position has been that it has not granted any preferential tax treatment to any company or taxpayer."

The Irish government did not mention in the statement how it would use the large sum of taxes returned by Apple. However, it is very likely that they will invest this fund into the new sovereign wealth fund established last year, to invest in the growing corporate tax revenues, which have made Ireland one of the few countries in Europe with a budget surplus.