For weeks there have been reports about the European Commission levying a huge fine against Apple. Tuesday morning, that fine was finally revealed. And so was Apple’s response …
EU Lays Down The Bill. Apple Offers a Choice…
Apple (AAPL) is the biggest corporation in the world. Which means they have the biggest bullseye on their back. Now that target is coming under fire as the European Union’s executive branch declared Apple owes the Irish government $14.5 billion.
The problem? The Irish government doesn’t want the money.
EU Antitrust regulators ruled that Apple owes the $14.5 billion, saying the company’s original deal with the Irish Government from 1991 was illegal state aid. In that deal, The Irish Government said the company would pay very low tax rates if European operations were based in Ireland. Both parties have held up their end of the deal, with apple providing thousands of jobs in Ireland. As of last year, there are 5,000 employees in the country, with another 1,200 jobs on the way. Since then, the Irish government has repeatedly stood by the tax agreement.
According to the EU, the agreement was legal, although wrong. So why does the European Union care so much if both Apple and Ireland stand by their decisions and plan on appealing the ruling? Money, of course. According to the Commission, by having their own agreement, Apple and Ireland deprived other European countries of billions in unpaid taxes, since each country in the EU contributes to a revenue sharing system.
Margrethe Vestager, the European Commission’s competition commissioner, states the issue as Apple says it does not pay corporate taxes in the US because its foreign revenues are reinvested in the foreign territories which earn them. In this case, Ireland, which has a tax rate of 12.5%. The EC says that money was being funneled back into the US, and had that money stayed in Europe, could have created even more Apple jobs (and taxes) there.
Jobs or taxes. You can’t have both.
The ruling will be appealed, and will take years before a final decision is made. Regardless of the outcome, Apple can cover it with no losses. Don’t expect the news to hurt Apple’s shares anytime soon. But one issue the case brings up is summed up by part of Apple’s statement:
“Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the Commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.
Watch this news from Fox Business about EU’s fine to apple here!
This is one case worth watching for the long term. In the meantime, expect Apple’s shares to go UP with the unveiling of the iPhone 7 line in September.
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