The EU’s fight with Apple over the €14.3 billion tax payment comes to a head

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Good morning. Hungary is speeding up talks with Brussels to unblock a third of its EU funding frozen for various reasons chief negotiator told the Financial Times. And the European Parliament is proposing halving payments from a gold-plated pension scheme used by current and former MEPs, including Brexiter Nigel Farage and Marine Le Pen, the French far-right leader.

Today, our competition correspondent explains what’s at stake as the EU seeks to re-impose a €14.3bn tax claim on Apple, and I’ve got the latest from the Ukrainian F-16 talks.

Screw in a nail

The EU has been trying to crack down on EU countries for years by giving companies “sweetheart” tax deals, but its weapons don’t seem to be sharp enough. writes Javier Espinoza.

Background: As tax rules need to be changed with the unanimous support of EU members, the European Commission used existing state aid rules in its crackdown on preferential tax regimes, without much success. In 2020 the The EU’s general court struck down a commission injunction for Apple to refund €14.3 billion in taxes to Ireland.

EU competition chief Margrethe Vestager is now looking to reverse this monumental legal defeat and set a different precedent for future cases. Competition regulators appear before top EU judges in Luxembourg today to defend their order against Ireland and Apple.

At the heart of the case is whether Apple’s core design and development of products like the iPhone took place in Ireland.

EU officials are likely to argue that more of what was originally taxed in Ireland should have been accounted for there, and that not all profits from intellectual property used in Apple products should have been taxed elsewhere.

Apple and Ireland, who will also be present at the hearing, will likely say that only routine activities and no research and development have taken place in the country.

Insiders say the state aid toolbox is not the right one to eliminate tax benefits. “The EU resorts to the competition tool when it doesn’t find satisfaction, but it doesn’t work,” a person close to the discussions told the FT.

Vestager, however, remains defiant. In a conference earlier this year, he said: ‘In a nutshell, aggressive tax planning is still with us and, to the extent that selective tax subsidies distort the single market, it is within the scope of policy of state aid”.

While today’s hearing will give an idea of ​​what’s to come, a ruling from the European Court of Justice is only expected later this year or next.

The stakes are high. If Vestager loses the appeal, this could be the final nail in the coffin of antitrust enforcement of similar cases and could taint his legacy for years to come.

Chart du jour: attracting money

Germany received record levels of foreign direct investment last yearsupported by investment in chips AND battery production.

Free the F-16s

For months, Kiev has been told that the problem was the United States’ reluctance to approve F-16 transfers. Now it’s clearthe ball is in Europe’s court.

Context: US President Joe Biden agrees a last weekend’s G7 summit in Japan approve training of Ukrainian pilots on how to fly F-16s. US-designed fighter aircraft have been at the top Ukrainian President Volodymyr Zelenskyy’s wish listaiming for around 40-50 jets this year.

But Biden made it clear that while he was now in agreement for the training to start (and eventually the expeditions to follow), this was a European project.

The Netherlands, Denmark and Belgium are key. The Dutch, who have long made it clear that they are not against supplying jets to Ukraine, have about two dozen that will soon outnumber needs. Denmark and Belgium have another 70 or so.

“Today in Warsaw, I spoke with my colleagues from northern Europe about increasing Ukraine’s military strike power,” Dutch Defense Minister Kajsa Ollongren said. he wrote yesterday on Twitter after a meeting of 12 defense ministers in Poland. “In the coming weeks, the Netherlands will continue to work intensively with its partners on plans for training Ukrainian pilots on F-16 fighters.”

“Great support for the goal of training F-16 pilots for Ukraine. Important long-term strategic step. Denmark is ready to play a central role,” added his Danish counterpart Troels Lund Poulsen, adding that he sees “further interest in contributing”.

Poland has 48 F-16s but is unlikely to give any away without F-35 successors to replace them. Greece has more than 150, but is unlikely to part with its defense needs.

What to watch today

1. EU defense ministers meet in Brussels.

2. Dutch Foreign Minister Wopke Hoekstra on a two-day visit to China.

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