Apple Computer is one of the most important companies in the world.
Essentially, it is among the top five mainstay investments in nearly everybody’s portfolio.
Anything affecting Apple’s financial viability affects the global marketplace directly and indirectly.
Imagine the surprise by the entire investment world when the European Union Competition Commission decided that Apple’s saving of taxes was deemed uncompetitive.
The offense had nothing to do with competition as you and I understand it. What the EU objected to was that Apple followed all the tax rules and figured out how to keep more of their positive cash flow and pay out less in taxes.
The value of Apple in the financial marketplace is understood to be its earning per share after tax.
Companies with positive cash flow are the ones that will live another day.
Apple followed the tax law of Ireland and apparently the United States and virtually all the other jurisdictions in which it does business. Besides the I-phone Apple has lots of good tax lawyers and accountants.
Was the EU claiming that all these professional tax advisors were engaged in some multi-billion dollar tax evasion conspiracy?
No. Not exactly.
The European Union Competition Commission which levied the penalty has no tax authority. What it does is to try and maintain competition between the European states.
As far as the EU is concerned, for a jurisdiction to enact a tax law that attracts multinational companies to do business, then that is illegal.
In true Orwellian doublespeak, the EU Competition Commission says that countries are competing by having lower tax rates than other countries are being uncompetitive.
The EU ordered Ireland to collect from Apple up to $21 billion in past taxes (including interest) which is money Ireland doesn’t want.
The European Union has, as feared by some right from the beginning, turned out to be a runaway bad idea controlled by a small group of delusional ideologues.
The head of the Commission is Margarethe Vestager, a staunch member of Denmark’s Social Liberal Party, is typical of the EU bureaucrats in Brussels.
In the ideology of these social liberals, charging a lower tax rate amounts to “state aid” which is, therefore, a no-no. High tax rates, however, are not considered state rape as one would think would be the case.
The EU Commission insists that high tax rates are good. There is no penalty imposed on a member state by the EU Competition Commission for charging too much tax.
Clearly, the European Union bureaucrats are not considering as important how corporations and their shareholders will react to betting clipped for excessive tax charges.
Or what the effect will be on such things as retirement and pension funds when a major stock like Apple takes a hit in its cash flow.
Neither does the U.S. government. The U.S. just doesn’t like it when the EU is poaching on what they think should be their private stock.
The multi-national corporations and financial institutions have been far too subservient to the crazy tax policies of the EU and the US. I guess they enjoy the pain.
The EU is sending a clear signal that every corporation’s cash flow and financial well-being are at risk just like Apple’s.
As each of the EU countries and the US take a bigger tax bite out of companies like Apple, then before too long there won’t be much left for the investors.