With $231B in cash, Apple's $14.5B EU tax hit doesn't concern Wall Street

Posted:
in AAPL Investors edited August 2016
While a $14.5 billion payment of back taxes could bankrupt many major corporations, it's pocket change for a company as cash flush as Apple. As a result, analysts surveyed by AppleInsider on Tuesday said they aren't concerned about the European Commission's decision, regardless of how an appeal ultimately plays out.




Apple will appeal the ruling, and CEO Tim Cook has expressed confidence that his company will win that appeal. But in the interim, market watchers mostly shrugged off the news --?shares were down less than one percent in morning trading.
"Ultimately, we think today's result should have a minimal impact on AAPL's EU operations" - Amit Daryanani, RBC Capital Markets
Gene Munster of Piper Jaffray noted that if Apple were to pay the back taxes in full, it would amount to 10 percent of the company's net cash balance, or about $2.65 per share. The firm maintained its "overweight" rating, and noted that investors are more focused on next week's anticipated "iPhone 7" unveiling.

Similarly, Rod Hall of J.P. Morgan declared the ruling "largely irrelevant" to Apple's stock price. He did caution that higher taxes going forward could have an impact, but if Apple were to pay the full $14.5 billion, it would have just a 2.5 percent negative impact on earnings.

Steven Milunovich of UBS estimated that taking the back taxes out of net cash would affect AAPL share price by as little as $3 to $5. He also noted that the appeal process will likely take many years --?IBM just concluded a 7-year dispute with Japanese tax authorities, for example.

Also weighing in on Tuesday was Amit Daryanani of RBC Capital Markets, who noted that even factoring in its debt, Apple still has some $150 billion in net cash on its balance sheet.

"Ultimately, we think today's result should have a minimal impact on AAPL's EU operations," Daryanani wrote in a note to investors.

The European Commission announced the amount of back taxes owed by Apple on Tuesday, the culmination of a years-long investigation. Both Apple and the country of Ireland have appealed the ruling.

In the European Union's view, Ireland granted "illegal tax benefits" to Apple. They calculated that the company's tax rates on European profits were 0.005 percent in 2014, and 1 percent in 2003.
patchythepirate
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Comments

  • Reply 1 of 67
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    SpamSandwichjony0
  • Reply 2 of 67
    This tax is not enforceable.
    The European Union is so clueless, it should be dissolved.
    One good thing could come out of this.  Ireland could follow the UK out of the EU.

    https://66.media.tumblr.com/3da2defc9d1f1b43a8c56381a9564916/tumblr_nqnzqcLSZh1sg3akro1_250.gif 
    edited August 2016 patchythepiratelatifbpmonstrosityjony0Capriguy
  • Reply 3 of 67
    nhughesnhughes Posts: 737editor
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    Please, describe this very complex and nuanced story in 92 characters or less for me. You can't please everyone.
  • Reply 4 of 67
    nhughes said:
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    Please, describe this very complex and nuanced story in 92 characters or less for me. You can't please everyone.
    "EU tax ruling"?

    "EU tax claim"?

    "EU spat with Ireland over Apple taxes"?

    "Tax ruling that Apple and Ireland claim is nuts"?

    "EU ruling that Apple and Ireland will appeal"?

    I could go on...

    ---
    ADDED: PERHAPS YOU MEANT THE WHOLE HEADLINE, SO HERE GOES (CHARACTER COUNT WITH SPACES INCL.):

    With $231B in cash, EU’s $14.5B Irish-Apple tax ruling doesn't concern Wall Street (82 characters)

    With $231B in cash, EU’s $14.5B tax claim against Apple doesn't concern Wall Street (83 characters)

    With $231B in cash, EU’s tax spat with Ireland over Apple taxes doesn't concern Wall Street (91 characters)


    edited August 2016 SpamSandwichdrewys808pscooter63jony0
  • Reply 5 of 67
    lkrupplkrupp Posts: 6,091member
    Meanwhile @BenLovejoy over at 9TO5Mac is scribbling editorial after editorial while pounding his chest about how he knew all long Apple would lose and why Apple’s and Ireland’s appeals will fail. He does admit one thing, however. Apple will not writing a check anytime soon. Of that you can be sure.
    patchythepirateCapriguy
  • Reply 6 of 67
    maestro64maestro64 Posts: 4,148member

    Yeah is does not matter what the EU says, this is why the market is not reacting and probably pissing the EU off.

    To put it into perspective. It would be like the FTC in the US telling California they need to tax Apple more because they gave Apple unfair tax advantage which allow them to compete better in the rest of the US states. No entity in the US including congress or president can force any state to change their tax laws. State give company all kinds of tax incentives for company to do business in their state. The only thing the US government could do is not share federal tax with California. But Brussels does not collect taxes so they have nothing to hold over Ireland other than to say they will try and make thing hard for them.

    patchythepirateradarthekatjony0
  • Reply 7 of 67
    So Apple being hit with a $14.5 billion back tax bill does not concern Wall Street, eh? Let the amount sink in a bit longer than ask again.
    frankie
  • Reply 8 of 67
    So Apple being hit with a $14.5 billion back tax bill does not concern Wall Street, eh? 
    Yes, it does not, because, despite what the headline above says (and that may be the reason for your misunderstanding), there is no tax "hit." That is just the fact. Unfortunately, people can try and spin it otherwise, there's no law against that.
    edited August 2016 jony0
  • Reply 9 of 67
    crowleycrowley Posts: 5,430member
    It'll all be offset out of the USA tax bill when repatriation becomes an accounting obligation anyway.

    It's all sunshine.
    e1618978radarthekat
  • Reply 10 of 67
    nolamacguynolamacguy Posts: 4,758member
    nhughes said:
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    Please, describe this very complex and nuanced story in 92 characters or less for me. You can't please everyone.
    I think his point is that it's not a "hit" in that it won't be coming out of their coffers any time soon since it's only a commission's claim as opposed to a final ruling in a court of law.
    Capriguy
  • Reply 11 of 67
    nhughesnhughes Posts: 737editor
    nhughes said:
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    Please, describe this very complex and nuanced story in 92 characters or less for me. You can't please everyone.
    "EU tax ruling"?

    "EU tax claim"?

    "EU spat with Ireland over Apple taxes"?

    "Tax ruling that Apple and Ireland claim is nuts"?

    "EU ruling that Apple and Ireland will appeal"?

    I could go on...

    ---
    ADDED: PERHAPS YOU MEANT THE WHOLE HEADLINE, SO HERE GOES (CHARACTER COUNT WITH SPACES INCL.):

    With $231B in cash, EU’s $14.5B Irish-Apple tax ruling doesn't concern Wall Street (82 characters)

    With $231B in cash, EU’s $14.5B tax claim against Apple doesn't concern Wall Street (83 characters)

    With $231B in cash, EU’s tax spat with Ireland over Apple taxes doesn't concern Wall Street (91 characters)


    I was trying to keep things simple, because technically the European Commission (which is a part of the EU but is not the entire EU) are the ones who imposed the new tax, but putting EC instead of EU in the headline would just be confusing. We can't fit every single detail in a headline or tweet. Anyhow, it doesn't matter — point taken, headline updated. Thanks.
    patchythepiratedrewys808Capriguy
  • Reply 12 of 67
    Wall Street never understood Apple and never will do.
    The best part of the letter from Tim Cook is —at least for me— that Apple is playing on ‘principles.’ (The same idea behind de book affair.)
    Here we can see the different between Apple and Google.

    Apple wants to do ‘the right thing.’
    Google used to say ‘Don't do evil.’

    As a side note: $14.5 billion out of $231 billions is like 6%.
    ;Maybe this is ‘pocket change’ for the Wall Street's kids that gave us the 2008 debacle… but not for any other person/company.
    patchythepirate
  • Reply 13 of 67
    nhughesnhughes Posts: 737editor
    nhughes said:
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    Please, describe this very complex and nuanced story in 92 characters or less for me. You can't please everyone.
    I think his point is that it's not a "hit" in that it won't be coming out of their coffers any time soon since it's only a commission's claim as opposed to a final ruling in a court of law.
    Decisions by the commission are legally binding. Yes, they can be appealed, but that can be said for basically any legal decision. For example, when the US DOJ found Apple guilty of violating antitrust laws, Apple *was* legally in violation of antitrust laws. Subsequent appeals could have potentially reversed that, but without a successful appeal, Apple remained in violation of US antitrust laws. We can't write headlines based on hypothetical outcomes of appeals.

    The point is, the European Commission's decision is not just some recommendation. It's legally binding. Appeals can (and probably will) alter the penalty, but conveying all of that in just a few words in a single headline is why there is more to news reporting than just headlines or tweets.
    gatorguysingularitycnocbuiCapriguy
  • Reply 14 of 67
    radarthekatradarthekat Posts: 2,428moderator
    So Apple being hit with a $14.5 billion back tax bill does not concern Wall Street, eh? Let the amount sink in a bit longer than ask again.

    Here's the real reason this will not effect Apple... when Apple eventually repatriates their overseas cash, it will owe the US a higher percentage in taxes than the additional 10% being demanded by the EU.  And when paying tax on foreign earnings, the US gives a dollar for dollar tax break for taxes already paid to foreign governments on those profits.  So if Apple pays $14b to Ireland, then its eventual US repatriation tax will simply be reduced by that same $14b.  This is what I wish the articles would explain.  It's literally no skin off Apple's back, unless...  there is a repatriation holiday in the US or a reduced tax rate below about 12%, in which case Apple would then have paid about 12% and that would be more than they would have had to pay should the US reduce repatriation rates to, say, 5%.  But that's just not likely to happen.

    and this is a big part of the reason the US Treasury is on Apple's side; any additional taxes paid to Ireland will reduce the US' eventual tax take on all those foreign profits as they are repatriated.  And this, of course, goes beyond just Apple and that $14b; it will extend to all the other companies who have foreign profits parked offshore in a similar manner as Apple.
    edited August 2016 drewys808
  • Reply 15 of 67
    Pay your fair share, Apple.  You've benefited from "the commons", in all ways and shapes.  There's no free lunch.  You've used the skies, the shipping lanes, the international and national court systems, multiple nations' militaries, the water, electricity, natural resources.  It's time you paid your fair share for those "freebies", just like the rest of us.  Used to be that corporations carried much of the US tax burden, shielding the people from much of it.  That's flipped around, we all work to support the corporations now.  It's insane.  We only ask what is fair, and what's fair is that you pay the same effective income tax rate of between 20 and 35%, like we all do.  If corporations are people, as ruled by the less-than-Supreme Court, then Apple should not object to paying their fair share, as another law abiding citizen.
    singularityfrankie
  • Reply 16 of 67
    radarthekatradarthekat Posts: 2,428moderator
    Gymkhana said:
    Pay your fair share, Apple.  You've benefited from "the commons", in all ways and shapes.  There's no free lunch.  You've used the skies, the shipping lanes, the international and national court systems, multiple nations' militaries, the water, electricity, natural resources.  It's time you paid your fair share for those "freebies", just like the rest of us.  Used to be that corporations carried much of the US tax burden, shielding the people from much of it.  That's flipped around, we all work to support the corporations now.  It's insane.  We only ask what is fair, and what's fair is that you pay the same effective income tax rate of between 20 and 35%, like we all do.  If corporations are people, as ruled by the less-than-Supreme Court, then Apple should not object to paying their fair share, as another law abiding citizen.

    No ongoing profitable business has ever shielded the people from the overall US tax burden.  By definition businesses pass along all costs of doing business to their customers.  While you can tell yourself you're not participating by not purchasing products from a specific company that is paying a lot of taxes, any citizen of the modern world is purchasing from some businesses.  And thereby, all citizens, in aggregate, of the world, are the ones ultimately footing the bill for all taxes paid by all entities, whether those taxes are paid by individuals directly or by companies.  In fact, corporate taxation almost always represents double taxation, as consumers are first taxed on their income before spending it to consume products sold by businesses, which then, in turn, pay taxes again on the profits they garner.  There is no shielding; that's just a simplified, and wholly incorrect, idea.

    Also, both citizens and corporations are subject to tax laws in affect, and as long as each entity conforms to the laws, paying only the amount of taxes owed under the law, then there's no complaint.  Apple asserts that it did exactly this, and that has not been show to be a false assertion.  
    jbdragon
  • Reply 17 of 67
    gatorguygatorguy Posts: 18,735member
    Gymkhana said:
    Pay your fair share, Apple.  You've benefited from "the commons", in all ways and shapes.  There's no free lunch.  You've used the skies, the shipping lanes, the international and national court systems, multiple nations' militaries, the water, electricity, natural resources.  It's time you paid your fair share for those "freebies", just like the rest of us.  Used to be that corporations carried much of the US tax burden, shielding the people from much of it.  That's flipped around, we all work to support the corporations now.  It's insane.  We only ask what is fair, and what's fair is that you pay the same effective income tax rate of between 20 and 35%, like we all do.  If corporations are people, as ruled by the less-than-Supreme Court, then Apple should not object to paying their fair share, as another law abiding citizen.

    Also, both citizens and corporations are subject to tax laws in affect, and as long as each entity conforms to the laws, paying only the amount of taxes owed under the law, then there's no complaint.  Apple asserts that it did exactly this, and that has not been show to be a false assertion.  
    Hasn't it in reality been proven, with the weight of law behind it? Whether it stands after a court hears the details is altogether another matter. But factually for the moment Apple has unfairly dodged their tax obligations with the assistance of the Irish tax authorities. That's the legal ruling of the EU Commissioner isn't it? 
    edited August 2016 singularityadm1
  • Reply 18 of 67
    SpamSandwichSpamSandwich Posts: 29,347member
    nhughes said:
    There is no freakin' "Irish tax hit", AI. Stupid headline. C'mon...
    Please, describe this very complex and nuanced story in 92 characters or less for me. You can't please everyone.
    "EU tax ruling"?

    "EU tax claim"?

    "EU spat with Ireland over Apple taxes"?

    "Tax ruling that Apple and Ireland claim is nuts"?

    "EU ruling that Apple and Ireland will appeal"?

    I could go on...

    ---
    ADDED: PERHAPS YOU MEANT THE WHOLE HEADLINE, SO HERE GOES (CHARACTER COUNT WITH SPACES INCL.):

    With $231B in cash, EU’s $14.5B Irish-Apple tax ruling doesn't concern Wall Street (82 characters)

    With $231B in cash, EU’s $14.5B tax claim against Apple doesn't concern Wall Street (83 characters)

    With $231B in cash, EU’s tax spat with Ireland over Apple taxes doesn't concern Wall Street (91 characters)


    I nominate you for Chief Headline Officer.
    Capriguy
  • Reply 19 of 67
    cnocbuicnocbui Posts: 3,613member
    lkrupp said:
    Meanwhile @BenLovejoy over at 9TO5Mac is scribbling editorial after editorial while pounding his chest about how he knew all long Apple would lose and why Apple’s and Ireland’s appeals will fail. He does admit one thing, however. Apple will not writing a check anytime soon. Of that you can be sure.
    You are quite right; no cheque will be written..  The EU competition authority will give Apple the IBAN number of the escrow account and Apple will transfer the money into it. 

  • Reply 20 of 67
    SpamSandwichSpamSandwich Posts: 29,347member
    For statists and supporters of their Commie-lite Progressive agenda, "fair share" means a 100% tax rate for you and nothing for them.
    edited August 2016 latifbpCapriguy
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