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Bloomberg Times Squawk sq you a w K on your terminal. I'm Charlie Pelt that sub Bloomberg Business Flash. This is taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio. A very big story as Apple was ordered to pay a record thirteen billion euros that's fourteen and a half billion dollars plus interest after the your commission, your your abuse,
give me the European Commission. The EU said Ireland illegally slashed the Iphonemaker's tax bill in a crackdown on fiscal loopholes that also risks inflaming tensions with the U. S. Treasury and is actually causing a little bit of consternation among Irish voters, according to our Dublin Bureau chief yesterday, dar A Doyle, who said, they're kind of wondering why the Irish government says they don't want to take the results of this fine. So let's bring in Matt Larson.
He's litigation analyst at Bloomberg Intelligence, which provides real time research and context on industries and market and government factors that impact business, which you can access on your Bloomberg b I go. So, Matt, you were among the few who said that this this loophole on transparency, a tiny little loophole, could lead to a very big fine. What did you see then and what do you see now? Yeah,
that's right. Back um. Back in January, we took a look at the investigation that EU had launched, specifically the European Commission. UH kind of read through the document, looked at how they were assessing Apple's current tax arrangement UM in Ireland and kind of ran through the numbers. UM did an estimate based on internal pricing. This whole investigation had to do with how transfer pricing arrangements are taxed. So when Apple sells intermediate product to itself, UM, what
revenue was realized there? We came up with an estimate of about eight billion dollars just kind of back of the envelope. UM. JP Morgan's rod Hall put out an estimate that was around twenty billion, and the final bill came out to be right in between the two. So basically what the EU was looking at is did Ireland give Apple an advantage in the way that they kind of tax this revenue at a much lower rate than their usual twelve point five percent corporate tax rate? So, uh,
this is a done deal. Now. It went back and forth for a while. You know, the Apple ended up paying you say, just almost no tax in Ireland. So, h how does it risk inflaming tensions with the U. S. Treasury? I mean, I guess just because it's now clear that Apple exploited this loophole not just a little bit, but to a very large degree. Yeah, and you know, there's been a big debate um internationally and in the US
about how how tech companies should be taxed. A lot of companies will transfer patent holdings or will do license agreements with international subsidiaries to kind of send revenue overseas into lower tax jurisdictions. Part of that is their high corporate tax rates in the US and there are other places where it's more favorable. So, uh, this kind of
triggers that discussion. Apple is known to have a large amount of cash overseas, you know, upwards of UM, and so a lot of countries are looking at that and saying, wait a second, shouldn't you know some portion of that have been taxed in in our country? And even even today there are comments about other countries may actually be entitled to a slice of UM of some of what was awarded to Ireland. So there's some rumblings about that.
But I think this could definitely drive tax policy discussions in the US about how what behaviors are being incentivized and how companies are being um you know, moved to to set up their international tax structures. Large new or litigation analyst for Bloomberg Intelligence, I guess we can expect more litigation, maybe in the form of an appeal from Apple. I believe that chief financial officer has accused the EU of using a completely made up number when it comes
to Ireland, So there was no special deal from the Irish. Yeah, you know, there's definitely gonna be a lot of litigation to follow, both Apple and UH and Ireland. Although you think, you know this might be a windfall for Ireland, they will also be appealing the decision UM, and that process is going to take at least a couple of years. There's some similar UM investigations that might might come ahead of this to preview what what the European courts are
going to do with these types of decisions. UM. And you know Apple's Apple is right in the in the sense that they negotiated their their tax arrangement with Ireland. It was signed off on. Apple paid every penny that was due under these UM kind of pre certified arrangements. UM. But you know, the question is was the way this tax calculated um? The way that it should be done from an economics perspective is are these transfer pricing arrangements
taxed appropriately in Ireland? And so I don't you know, I don't. I don't think that from a Bloomberg Intelligence perspective, we see that dollar going down to zero, but you may see it come down a little bit further, and they're gonna be some policy considerations. As you referenced earlier, the US Treasure has been getting involved. They put out a white paper about a week ago that signals, um,
they're going to be supporting Apple. Um, you know, maybe with a little bit of self interest in trying to get some dollars back to the US. But the fight is far from over. Well then, I know that you are far from ending your appearances here on taking stock Matt Larson, because this story, is you point out, is just beginning and it is a very important one, not just for Apple and you and Ireland more broad because he said, we're looking at taxes, what corporations pay, Are
they paying the right amount? Are they exploiting loopholes? Very especially an election year, very hot topic. Thanks to Matt Larson, litigation analyst for Bloomberg Intelligence, I'm Kathleen Hayes. Keep it right here, this is Bloomberg. We are going to be taking a look at the energy market oil. Where is that price heading and what does it mean for some of the big ETFs investing in Stephen Shork of the Short Report, he's coming up now