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Where next for Apple shares as $14B tax order set to be challenged?

Apple is set to continue to appeal the $14.4 billion back tax bill that the European Commission first handed down to the tech giant in 2016, this Tuesday.

Apple share price in focus Source: Bloomberg

The European Commission pursues Apple

Bureaucracy tends to slow things down.

Indeed, a $14.4 billion back tax order against the tech giant Apple (AAPL), courtesy of the European Commission (EC), has been ruminating for some time now.

This tax order originated all the way back in 2016, where the European Commission bluntly commented that ‘Ireland granted illegal tax benefits to Apple’ and ordered the tech giant to pay €13 billion ($14.4 billion) – that the company allegedly rightfully owed to Ireland in the form of back taxes.

Both the Irish government and Apple have appealed this ruling. The Irish government went as far to describe it as an ‘intrusion into Irish sovereignty.’

So far, this potential ‘tax fine’ has had little impact on Apple’s share price or company fundamentals.

The current situation

Apple is set to continue to aggressively defend its position against the European Commission – as a six-man team – led by Apple’s Chief Financial Officer; Luca Maesti, heads to Luxembourg to a front a court hearing this Tuesday.

According to Reuters, this hearing will take place over two days ‘at the Luxembourg-based General Court, the EU’s second highest court.’

Speaking to the time-frame of these matters, the Public Accountants Committee said the case could take as long as a decade to be fully resolved.

Some context on the $14.4B tax order

Ireland’s favourable tax laws have historically been a big draw for a number of multinational companies. Besides Apple – Facebook, Google, LinkedIn and Salesforce all have a growing presence in Ireland.

Though the full extent of the benefits across these varying companies remains unknown; Reuters noted that the:

‘European Competition Commissioner Margrethe Vestager pointed to a 0.005% tax rate paid by Apple’s main Irish unit in 2014 as an example of the unusually low payments by the company.’

Apple share price in focus

So far, the impact of a potentially sizable fine on Apple’s share price has been negligible.

Though the potential fine has been known to the market since August 2016, the Apple share price has approximately doubled in that period.

Indeed, even if the European Commission is successful in making Apple foot the $14.4 billion back tax payment, the tech behemoth is certainly not in a strained cash position.

In the third quarter of 2019, Apple reported that it had $210 billion in cash on hand, with the potential tax fine representing just 6.8% of that figure.

According to the Wall Street Journal, the analyst consensus rating for Apple remains overweight: 18 analysts rate the company a buy and 17 rate it a hold.

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