Stocks today were lower but running counter to the decline were bank stocks which were higher as investors feel they could benefit should the Federal Reserve hike interest rates. Leading on the downside were utility stocks. The Dow closed the day off 48 points to 18,454 on heavy trading volume. The rally is under pressure.
Apple CEO Tim Cook is fired up about getting a $14.5 billion tax bill imposed on Apple by the European Commission (which is an unelected body) saying that Apple got a sweetheart tax deal from Ireland when it established operations there 36 years ago. At issue is whether the EC can override a sovereign nation’s tax code. Gubment officials in Ireland plan to appeal the ruling saying “you cannot become prosperous by eating your seed potato”. So this all comes down to apples and potatoes. The corporate tax rate in Ireland is 12.5% and in the US it is 35%. Ireland has a low tax rate so that it can attract big business and the plan, much to the chagrin of the rest of Europe, has been working. One interesting aspect of this ruling is that should Apple pay the “full potato” so to speak, they could get a dollar for dollar credit against their US tax bill under the foreign tax credit rules. This means the US will be the big looser on this deal. Even the Treasury Department is against the deal calling it “supranational” and that it is for Ireland to decide if taxes are owed. Apple has $230 billion in cash on hand so paying the bill is not a problem it’s the principle of the thing that worries Apple since it could open the door to more tax actions in other places.
The price of gold has been under pressure heading into this Friday’s labor report for August. The report is expected to show continued strong jobs growth which raises the prospects for a Fed rate hike. Gold finished the day off $13.90 per ounce to $1,313.