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Speaker 1: Global business news twenty four hours a day's Bloomberg dot

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Speaker 1: Com the radio plus mobile lap and on your radio.

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Speaker 1: This is a Bloomberg Business flash from Bloomberg World handquaters.

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Speaker 1: I'm Charlie Tellot, the Dow, the SMP, NEZDAC all lower,

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Speaker 1: and we are brought to you by Sector spidery t

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Speaker 1: F S. Why by a single stock when you can

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Speaker 1: invest in the entire sector of visits sector sp d

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Speaker 1: rs dot com or call one six Sector e t F.

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Speaker 1: Now let's head right over to the first word breaking

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Speaker 1: news desk for today's afternoon call. And here he is

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Speaker 1: ed Lalan. Good afternoon, Charlie, Manu. S averages are lower today,

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Speaker 1: with the Dow down sixty five points, SMP fall seven

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Speaker 1: and NASDAC declines nineteen, Small Cat six center loses one,

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Speaker 1: and the US tenure yield at one point five seven percent.

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Speaker 1: Nine of tennessem P sectors are lower, led by losses

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Speaker 1: in utilities, consumer discretionary and consumer staples. Financials is the

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Speaker 1: only sector with games. Dow, Transports rise thirty eight, NASDAC,

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Speaker 1: Biotechs lose eight, utilities fall six, and the VIX rises

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Speaker 1: three percent. Leaders to the downside and the down include Boeing, Nike,

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Speaker 1: and Apple, while down leaders to the upside include Goldman,

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Speaker 1: Sachs and JP Morgan, Canada's Potash and Agraham confirmed they

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Speaker 1: are in merger talks. Shares trade up eleven and seven percent, respectively.

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Speaker 1: Other industry players Mosaic and CF Industries both gain on

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Speaker 1: merger excitements. United Continental hires a new president away from

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Speaker 1: American Airlines. United shares up eight percent. Hershey declines eleven

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Speaker 1: percent after Mondale abandoned merger talks and Abercrombie and Fish

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Speaker 1: loses twenty percent after reporting a larger second quarter loss

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Speaker 1: and missing comps sales estimates. Live from the First Word

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Speaker 1: breaking news desk at Lan Charlie all right, hey, thank

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Speaker 1: you very much, Adam to hear live breaking news over here.

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Speaker 1: Bloomberg Times Squawk sq you a w K on your terminal.

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Speaker 1: I'm Charlie Pelt that sub Bloomberg Business Flash. This is

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Speaker 1: taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.

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Speaker 1: A very big story as Apple was ordered to pay

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Speaker 1: a record thirteen billion euros that's fourteen and a half

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Speaker 1: billion dollars plus interest after the your commission, your your abuse,

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Speaker 1: give me the European Commission. The EU said Ireland illegally

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Speaker 1: slashed the Iphonemaker's tax bill in a crackdown on fiscal

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Speaker 1: loopholes that also risks inflaming tensions with the U. S.

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Speaker 1: Treasury and is actually causing a little bit of consternation

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Speaker 1: among Irish voters, according to our Dublin Bureau chief yesterday,

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Speaker 1: dar A Doyle, who said, they're kind of wondering why

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Speaker 1: the Irish government says they don't want to take the

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Speaker 1: results of this fine. So let's bring in Matt Larson.

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Speaker 1: He's litigation analyst at Bloomberg Intelligence, which provides real time

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Speaker 1: research and context on industries and market and government factors

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Speaker 1: that impact business, which you can access on your Bloomberg

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Speaker 1: b I go. So, Matt, you were among the few

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Speaker 1: who said that this this loophole on transparency, a tiny

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Speaker 1: little loophole, could lead to a very big fine. What

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Speaker 1: did you see then and what do you see now? Yeah,

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Speaker 1: that's right. Back um. Back in January, we took a

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Speaker 1: look at the investigation that EU had launched, specifically the

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Speaker 1: European Commission. UH kind of read through the document, looked

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Speaker 1: at how they were assessing Apple's current tax arrangement UM

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Speaker 1: in Ireland and kind of ran through the numbers. UM

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Speaker 1: did an estimate based on internal pricing. This whole investigation

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Speaker 1: had to do with how transfer pricing arrangements are taxed.

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Speaker 1: So when Apple sells intermediate product to itself, UM, what

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Speaker 1: revenue was realized there? We came up with an estimate

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Speaker 1: of about eight billion dollars just kind of back of

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Speaker 1: the envelope. UM. JP Morgan's rod Hall put out an

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Speaker 1: estimate that was around twenty billion, and the final bill

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Speaker 1: came out to be right in between the two. So

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Speaker 1: basically what the EU was looking at is did Ireland

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Speaker 1: give Apple an advantage in the way that they kind

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Speaker 1: of tax this revenue at a much lower rate than

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Speaker 1: their usual twelve point five percent corporate tax rate? So, uh,

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Speaker 1: this is a done deal. Now. It went back and

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Speaker 1: forth for a while. You know, the Apple ended up

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Speaker 1: paying you say, just almost no tax in Ireland. So,

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Speaker 1: h how does it risk inflaming tensions with the U. S. Treasury?

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Speaker 1: I mean, I guess just because it's now clear that

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Speaker 1: Apple exploited this loophole not just a little bit, but

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Speaker 1: to a very large degree. Yeah, and you know, there's

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Speaker 1: been a big debate um internationally and in the US

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Speaker 1: about how how tech companies should be taxed. A lot

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Speaker 1: of companies will transfer patent holdings or will do license

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Speaker 1: agreements with international subsidiaries to kind of send revenue overseas

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Speaker 1: into lower tax jurisdictions. Part of that is their high

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Speaker 1: corporate tax rates in the US and there are other

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Speaker 1: places where it's more favorable. So, uh, this kind of

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Speaker 1: triggers that discussion. Apple is known to have a large

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Speaker 1: amount of cash overseas, you know, upwards of UM, and

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Speaker 1: so a lot of countries are looking at that and saying,

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Speaker 1: wait a second, shouldn't you know some portion of that

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Speaker 1: have been taxed in in our country? And even even

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Speaker 1: today there are comments about other countries may actually be

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Speaker 1: entitled to a slice of UM of some of what

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Speaker 1: was awarded to Ireland. So there's some rumblings about that.

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Speaker 1: But I think this could definitely drive tax policy discussions

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Speaker 1: in the US about how what behaviors are being incentivized

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Speaker 1: and how companies are being um you know, moved to

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Speaker 1: to set up their international tax structures. Large new or

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Speaker 1: litigation analyst for Bloomberg Intelligence, I guess we can expect

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Speaker 1: more litigation, maybe in the form of an appeal from Apple.

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Speaker 1: I believe that chief financial officer has accused the EU

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Speaker 1: of using a completely made up number when it comes

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Speaker 1: to Ireland, So there was no special deal from the Irish. Yeah,

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Speaker 1: you know, there's definitely gonna be a lot of litigation

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Speaker 1: to follow, both Apple and UH and Ireland. Although you think,

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Speaker 1: you know this might be a windfall for Ireland, they

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Speaker 1: will also be appealing the decision UM, and that process

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Speaker 1: is going to take at least a couple of years.

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Speaker 1: There's some similar UM investigations that might might come ahead

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Speaker 1: of this to preview what what the European courts are

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Speaker 1: going to do with these types of decisions. UM. And

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Speaker 1: you know Apple's Apple is right in the in the

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Speaker 1: sense that they negotiated their their tax arrangement with Ireland.

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Speaker 1: It was signed off on. Apple paid every penny that

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Speaker 1: was due under these UM kind of pre certified arrangements. UM.

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Speaker 1: But you know, the question is was the way this

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Speaker 1: tax calculated um? The way that it should be done

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Speaker 1: from an economics perspective is are these transfer pricing arrangements

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Speaker 1: taxed appropriately in Ireland? And so I don't you know,

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Speaker 1: I don't. I don't think that from a Bloomberg Intelligence perspective,

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Speaker 1: we see that dollar going down to zero, but you

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Speaker 1: may see it come down a little bit further, and

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Speaker 1: they're gonna be some policy considerations. As you referenced earlier,

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Speaker 1: the US Treasure has been getting involved. They put out

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Speaker 1: a white paper about a week ago that signals, um,

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Speaker 1: they're going to be supporting Apple. Um, you know, maybe

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Speaker 1: with a little bit of self interest in trying to

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Speaker 1: get some dollars back to the US. But the fight

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Speaker 1: is far from over. Well then, I know that you

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Speaker 1: are far from ending your appearances here on taking stock

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Speaker 1: Matt Larson, because this story, is you point out, is

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Speaker 1: just beginning and it is a very important one, not

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Speaker 1: just for Apple and you and Ireland more broad because

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Speaker 1: he said, we're looking at taxes, what corporations pay, Are

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Speaker 1: they paying the right amount? Are they exploiting loopholes? Very

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Speaker 1: especially an election year, very hot topic. Thanks to Matt Larson,

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Speaker 1: litigation analyst for Bloomberg Intelligence, I'm Kathleen Hayes. Keep it

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Speaker 1: right here, this is Bloomberg. We are going to be

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Speaker 1: taking a look at the energy market oil. Where is

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Speaker 1: that price heading and what does it mean for some

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Speaker 1: of the big ETFs investing in Stephen Shork of the

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Speaker 1: Short Report, he's coming up now