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Apple Inc. (AAPL) Stock Sinking as Cook Complains About “Crap”

Apple Inc. (NASDAQ:AAPL)

Apple Inc. doesn’t like to be accused about paying its fair share, and the firm’s CEO Tim Cook says that discussions about the firms tax bill are nothing but “political crap.” Mr. Cook was speaking to 60 Minutes on CBS when he made the comments. Mr. Cook told the program that “Apple pays every tax dollar we owe.”

Apple Inc. (NASDAQ:AAPL) Store

Tim Cook holds that the US tax system is “backwards. It’s awful for America. It should have been fixed many years ago.“ He says it doesn’t suit firms in the “digital age” and that’s the reason he’s forced to keep billions in offshore accounts.

Apple Inc. stock is still burdened

Mr. Cook was referring to inquiries into the way the firm handles its cash pile for sales outside of the US. If Apple were to choose to return its $181B cash pile to the US the firm would incur estimated taxes of almost $60B according to figures reported by The Guardian.

While Mr. Cook addresses those issues, the firm’s stock is sinking on rumors that iPhone sales will fall in the year ahead. In the last six months the firm’s shares have lost more than 17 percent of their value. Shares closed on Friday at $106.03. On Thursday RBC Capital analyst Amit Daryanani said that the firm is likely to sell just 54M iPhones in the first three months of 2016. In the same three months of 2015 the firm sold more than 61M iPhones.

The firm’s tax situation is indeed linked to its sinking stock price. Apple has delivered billions of dollars to its investors in a massive capital return program in recent years. That program likely had the effect of keeping stock higher than otherwise, but it has been paid for with massive debt. The firm had to take on that debt in order to pay investors in the US because it can’t return its cash pile to the US without incurring a massive tax bill.

Going ahead Apple Inc.  may have to take on even more debt in order to fund that program as the kind of tax reform Mr. Cook is looking for seems unlikely to arrive in the next year.

Europe looks at more than just “political crap”

Mr. Cook’s comments were clearly focused on the firm’s tax situation in the United States, but it’s clear that Apple Inc. faces tax trouble in more than one jurisdiction. Right now the European Commission is investigating the firm’s tax deals in Ireland. The organization is looking to find out whether the deal between Ireland and Apple was illegal state aid.

While Apple may pay its fair share of tax inside the United States, it’s clear that European governments don’t believe the same is true inside that union. If Apple is found to have received that aid, it will be forced to pay its tax bill which might cost it as much as $19B according to Rod Hall of JPMorgan.

A change in tax policy in the EU, and across the world if the OECD BEPs program comes in in full force, could have a material effect on Apple Inc. stock, and it’s unclear if those effects are priced into the firm’s shares right now.

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