With $231B in cash, Apple's $14.5B EU tax hit doesn't concern Wall Street
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.
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.
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.
Comments
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
"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...
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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)
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.
It's all sunshine.
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.
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.
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.