Taxman Bites Apple
DOW – 48 = 18,454
SPX – 4 = 2176
NAS – 9 = 5222
10 Y + .01 = 1.57%
OIL – .70 = 46.28
GOLD – 12.70 = 1311.50
Since July 8, when the S&P rose 1.54%, that index hasn’t moved more than 0.9% in any given day, and most of those changes were slight gains, including 10 all-time highs. Since Brexit, the S&P 500 has now gone 43 straight sessions without a daily decline greater than 0.7%.
Compare that with the first 43 days of this year when it happened 15 times. For the month of August, the S&P 500 has managed to gain just 3 points, which means it is about as flat as it can be.
EU antitrust regulators have ordered Apple to pay up to €13-billion-euro ($14.5-billion dollars) in taxes to the Irish government after ruling that a special scheme to route profits through the country was illegal state aid. The EU Commission says Apple paid an effective corporate tax rate of less than five-one-thousandth of a percent (0.005%) on its European profits in 2014.
Apple has previously said it received no special treatment in Ireland. Apple’s tax arrangement with Ireland also meant the company avoided taxation on almost all profits from sales of its products in the EU single market, as the sales were recorded in Ireland rather than in the country where the transaction took place. Apple and Ireland said they would appeal the decision.
Ireland’s Finance Minister said he would fight the European Commission ruling that would force Apple to pay taxes to Ireland, even though €13-billion-euro in back taxes is more than twice the country’s entire 2015 corporate tax take and equivalent to about $3,000 for every man, woman and child in Ireland.
Apple is one of more than 700 U.S. companies that have units in Ireland, employing a combined 140,000 people. The government maintains that even if it were to take the cash, European rules mean it would have to use the money to pay down some of its €180 billion euros of national debt rather than fund spending.
CEO, Tim Cook wrote an open letter about the tax ruling and in it he said that Apple “in Ireland and in every country where we operate, follows the law and we pay all the taxes we owe.” And that is probably very true; no reason to doubt that Apple has hired top accountants and attorneys to figure out all the legal loopholes. And now the EU is closing one of the loopholes.
Tim Cook, that is to say Apple, has reacted with outrage, saying the decision would “upend the international tax system” and promising to appeal and overturn the decision. No doubt years of legal fees lie ahead for all involved. But the writing has been on the wall for Apple’s convoluted corporate structure in Ireland for years.
In 2013, a US Senate committee found that Apple pushed its foreign profits into a “stateless” company, one that paid no taxes anywhere, while using an intellectual property agreement to shift US profits to the subsidiary. In 2015, the EU released its own investigation, with more specificity: Apple had negotiated two special deals with Ireland that allowed it to allocate profits to this untaxed company.
The U.S. Treasury Department said it was disappointed with the European Commission seeking to force Apple to repay tax breaks given by Ireland and the case could undermine the “spirit of economic partnership between the U.S. and the EU.” In other words, the Treasury hopes to collect taxes on Apple’s overseas cash hoard someday and they don’t want to see that money going to Europe. Plus, any money Apple pays in taxes to the EU is deductible from Apple’s US tax bill.
Apple has its tax issues in Ireland but it will hope to put all that behind it next week as a new iPhone is expected to be announced. After all, as long as Apple is selling iPhones, $14 billion is not that much. What will an iPhone 7 look like? Pretty similar to an iPhone 6 but new features will likely include waterproofing, stereo sound, a touch-sensitive home button, a dual-lens camera, and due to its thinner chassis, the headphone jack will be removed. The starting point for storage on the new entry-level model is thought to be 32GB, up from 16GB.
New MacBooks, iPad features and a monitor may also be in the works from Apple – but at least some of those devices may not be seen until after the company’s Sept. 7 event. A thinner laptop, a faster iPad display to work with Apple Pencil, and 5K monitors are among the updates coming to Apple products. But the MacBook, which some tech bloggers had thought might come alongside the iPhone 7, is more likely to be released in October.
Voters are heading to the polls for Senate and House primaries in Arizona. Locations of polling places are assigned by address. The location that coincides with your registered address (on your voter information) is where you can cast your vote on election day. Arizona law allows any voter who is registered as independent to cast a vote in the primary election, but independent voters must choose a Republican or Democratic Party ballot at the polling place. The polls close at 7 PM.
The S&P CoreLogic Case-Shiller 20-city composite of existing home prices recorded a 0.8% gain in June and a 5.1% year-on-year advance; that’s down from a 5.3% pace the prior month. Home prices in three U.S. cities – Denver, Seattle and Portland, Oregon – showed the highest year-over-year gains. Housing prices in Phoenix were up 5.1% over the past 12 months.
The Conference Board’s consumer confidence index rose to 101.1 in August from a revised 96.7 in July. That’s the highest level since September 2015. Short-term expectations regarding business and employment conditions, as well as personal income prospects, also improved, suggesting the possibility of a moderate pick-up in growth in the coming months.
Americans’ view the economy right now was the strongest since before the Great Recession. The present situation index, a measure of current conditions, climbed to 123 from 118.8 and hit the highest level since late 2007. What consumers expect six months down the road, however, was less optimistic. The future expectations index edged up to 86.4 from 82, but it was still well below the post-recession high.
Fed Vice Chairman Stanley Fischer says the US job market is nearly at full strength and the pace of interest rate increases by the Federal Reserve will depend on how well the economy is doing. The Fed has signaled since March it would lift rates twice this year, but investors have been skeptical. Fischer did not comment on the timing of the next Fed rate hike but said “we choose the pace on basis of data.”
The U.S. Labor Department’s monthly employment report on Friday is expected to show the economy added 180,000 jobs in August. At the end of the day, it always comes down to the jobs number. Yellen can try to persuade us that the case for a rate hike is strengthening, and the other policymakers can chime in with their two cents. But they are all held hostage to the government’s jobs numbers on Friday.
Anything strong (250,000-300,000) and you won’t need anyone from the Fed telling us they are going to raise in September. The number will say it all: below 200,000, and it’s back to a December-only hike.
Trade talks between the European Union and the United States should be halted and a new set started, France’s trade minister said on Tuesday, adding his voice to calls from within Germany for an end to the negotiations. Three years of talks on a Transatlantic Trade and Investment Partnership (TTIP) have failed to resolve multiple differences, including over food and environmental safety.
Critics say the pact would hand too much power to big multinationals at the expense of consumers and workers. But despite a weekend comment by Germany’s Economy Minister that the talks had “de facto failed”, and today’s comments by the French Trade Minister, the European Commission says negotiations are making steady progress and there is an outline of a future agreement.
More than 76,000 people have signed a petition demanding former European Commission President Jose Manuel Barroso be stripped of his pension after taking a job at Goldman Sachs. Organizers plan to present it to current leaders of the EU institutions at the end of September. Critics claim the role is inappropriate given Goldman’s role in the U.S. subprime crisis and Greek debt talks. That’s one way to stop a revolving door.
The FDIC reported that U.S. banks earned $43.6 billion in the second quarter, up from $43 billion a year earlier. Around 60 percent of banks reported an increase in profit from a year earlier. However, the impact of low oil prices on energy companies led banks to continue to post bigger losses on commercial and industrial loans. Only 4.5 percent of banks were unprofitable, down sharply from 5.8 percent in the second quarter of 2015.
Countries including the U.K., Australia and Taiwan have issued travel advisories for tourists to Singapore after the city-state announced a further increase in Zika cases. Singapore’s Ministry of Health confirmed 15 more people with locally-transmitted Zika, bringing the total number affected to 56. Health officials think they will identify even more positive cases.