Apple shares lose a little shine after EU tax bill

Journalists report on Ireland's tax dealings with Apple from the European Commission in Brussels on Aug 30, 2016.
Journalists report on Ireland's tax dealings with Apple from the European Commission in Brussels on Aug 30, 2016.PHOTO: REUTERS

LONDON (AFP) - Apple shares lost some of their shine on Tuesday (Aug 30) after the European Union ordered the US tech giant to pay a record €13 billion (S$19.7 billion) in back taxes in Ireland.

Shares in the iPhone and iPad maker were down 0.7 per cent in late morning trading, making for a more than 3 per cent loss in the two weeks ahead of the widely-anticipated decision.

Apple has vowed to appeal the ruling, as has Ireland, which has attracted multinational firms with its low corporate tax rate and willingness to negotiate specific tax treatment.

The European Commission concluded that Dublin had shown preferential treatment in an arrangement that allowed Apple to avoid virtually all tax on its business in the bloc, paying an effective corporate tax rate of just 0.005 per cent on its European profits in 2014.

ETX Capital analyst Neil Wilson said investors were fretting over the longer term implications rather than the size of the fine.

"For Apple and others like it, this could be a watershed," Wilson added.

"Caught between an aggressive EC and the Obama regime's clampdown on tax inversions, it's looking increasingly tough for multinationals to avoid paying the going tax rate."

The EU has recently stepped up its campaign against its member states giving huge tax breaks to firms, last year ordering US coffee giant Starbucks and Italian automaker Fiat to each repay up to €30 million in back taxes to the Netherlands and Luxembourg respectively.

Shares in other multinationals which run much of their international operations via Ireland, such as Google parent Alphabet and Facebook, also dipped.

Overall, Wall Street's main indices were down around 0.3 per cent in late morning trade.

Meanwhile, in Europe, shares ended mixed.

Frankfurt's DAX 30 finished up 1.1 per cent and the CAC 40 in Paris added 0.8 per cent as weak German inflation and a drop in eurozone business confidence reinforced expectations that the European Central Bank will have to step up stimulus measures.

The Economic Sentiment Indicator (ESI) for the 19-nation euro zone compiled by the European Commission fell one full point to 103.5 in August as Britain's vote to quit the European Union continued to undermine euro zone business and consumer confidence in August, holding above the boom-bust line of 100 points.

Meanwhile, Germany's 12-month inflation rate dipped to 0.3 per cent in August using the ECB's methodology, an indication that its efforts to stimulate the eurozone economy and bring inflation back towards a more healthy rate of just under 2 per cent are not yet bearing fruit.

"The ECB has reason to increase its policy support, perhaps as soon as next week," Jack Allen at Capital Economics wrote.

Meanwhile London's FTSE 100 index of top blue-chip companies dipped 0.3 per cent after coming back from a long holiday weekend.

Asian equities mostly rose on Tuesday, but Tokyo ended slightly lower on tepid data and profit-taking.

London - FTSE 100: DOWN 0.3 per cent at 6,820.79 points (close)

Frankfurt - DAX 30: UP 1.1 per cent at 10,657.64 (close)

Paris - CAC 40: UP 0.8 per cent at 4,457.49 (close)

EURO STOXX 50: UP 1.2 per cent at 3,033.63

New York - DOW: DOWN 0.3 per cent at 18,442.28

New York - S&P 500: DOWN 0.3 per cent at 2,174.76

New York - Nasdaq: DOWN 0.2 per cent at 5,220.50

Tokyo - Nikkei 225: DOWN 0.1 per cent at 16,725.35 (close)

Shanghai - Composite: UP 0.2 per cent at 3,074.68 (close)

Hong Kong - Hang Seng: UP 0.9 per cent at 23,016.11 (close)

Euro/dollar: DOWN at US$1.1146 from US$1.1187 late on Monday

Dollar/yen: UP at 102.93 yen from 101.88 yen

Pound/dollar: DOWN at US$1.3081 from US$1.3105