Apple wins $15B tax battle against EU

The court has annulled a 2016 order from the EU for Apple to pay $15 billion in taxes. Yahoo Finance's Edmund Heaphy joins the On the Move panel to discuss.

Video Transcript

ADAM SHAPIRO: We're going to go over seas to Ireland, to Cork, Ireland, actually, where Edmund Heaphy is going to tell us about Apple's victory. And it's poignant that you're in Cork because this all originates out of Ireland and Apple's attempts to protect their income from taxes.

EDMUND HEAPHY: Yes, Adam. Actually, at the European headquarters of Apple, which handles all of the company's sales outside of the Americas, is located just a stone's throw from me here in Cork. But yeah, the general court of the European Union, which is the bloc's second highest court, today annulled the hugely controversial 2016 Apple tax ruling.

Competition regulators at the European Commission had ordered Apple to pay almost $15 billion in supposedly unpaid taxes in Ireland, arguing that Irish tax authorities had given the technology giant preferential treatment. But in a huge win for both Apple and Ireland, which had joined Apple's appeal, the general court said that the commission was wrong to declare that the technology giant had been given illegal state aid.

In a pretty forthright statement, the court operated the Commission for failing to prove to the requisite legal standard that Apple had gained an unfair advantage as a result of two tax rulings in 1997 and 2007. The specifics of the Commission's original 2016 ruling are pretty complicated. They center on how intellectual property rights and the associated profits were allocated.

This, the Commission said, allowed Apple to pay negligible taxes in Ireland as low as 0.005% in some years, even though, as I said, all of its sales outside of the Americas are routed through the country. The court said that the Commission had failed to prove, however, that Apple had an unfair advantage compared to other firms. And this is really a stunning blow for EU Competition Commissioner Margrethe Vestager, who has staked her reputation on a series of increasingly aggressive competition rulings in recent years.

The 2016 ruling represented the largest anti-trust fine in corporate history. But somewhat counterintuitively, Ireland is absolutely delighted not to be collecting the $15 billion in taxes. Its favorable taxation regime is part of why and how it attracts so many multinationals to the country. But we need to hold off on celebrating for Ireland and Apple just yet because today's ruling can be approved to the EU's top court, which means that almost $16 billion in funds consisting of the potential fine plus interest will continue to sit in an escrow account.

ADAM SHAPIRO: Edmund Heaphy, thank you. I want to turn our attention to some stocks on the move as we head to the break. And one of them is the retailer Gap. Now, this is the company that you know as not only Gap but Old Navy, Athleta, Banana Republic. On Friday, they had said they're going to work with their vendors to compensate them in full for the finished goods and goods in production that actually were canceled because of coronavirus.

Shares of Gap up about 30%. Today, they're up around 10%. And that stock for the last month is up almost 15%. Then there's Royal Caribbean. Remember, their bonds are trading at junk status.