Apple Inc. (NASDAQ:AAPL) launched a legal challenge against the hefty $14.0-billion fine levied by the EU European Commission—which the commission considers back taxes—in a case that may alter international tax law and affect Apple stock.
Apple stock has yet to be impacted by the fine, which will probably take several years to enact, following the multi-tiered appeal process, if at all. This does, however, create a conflict that may have profound affects on international tax law and state regulation. (Source: “Apple appeals EU tax ruling, says it was a ‘convenient target‘,” Reuters, December 19, 2016.)
On August 30, the European Commission slapped Apple with the $14.0-billion fine that would be payable to Ireland, claiming that the the Irish tax deal was illegal state aid. Apple houses its European headquarters in Ireland, due to the country’s favorable tax laws.
According to the European Competition Commissioner Margrethe Vestager, Apple has paid a tax rate of a paltry 0.005% in 2014 and, over the past 10 years, a tax rate of 3.8% on some $200.0 billion in non-U.S. profits. Again, if the fine does eventually go through and potentially alter future tax rates, this could be trouble for Apple stock.
But the tech giant is not going down without a fight. General Counsel Bruce Sewell said that the company was being singled out for its success.
“Apple is not an outlier in any sense that matters to the law. Apple is a convenient target because it generates lots of headlines. It allows the commissioner to become Dane of the year for 2016,” Sewell said in an interview with Reuters. The “Dane of the year” comment refers to the title given to Vestager by Danish newspaper Berlingske last month.
The company’s representatives claim that there was no engagement with the arguments presented to counter the European Commission’s ruling.
Sewell continued: “Now the Irish have put in an expert opinion from an incredibly well-respected Irish tax lawyer. The Commission not only didn’t attack that – didn’t argue with it, as far as we know – they probably didn’t even read it. Because there is no reference (in the EU decision) whatsoever.”
In any case, the ramifications won’t be immediate, but when all the dust settles around this case, Apple stock could see some drastic changes in terms of international tax law.