So here comes Apple, and it’s a big pile of money and they can go get it, and Apple’s just the first. And the interesting thing about this is who does Tim Cook sidle up to? The very people who want to do this to his company. You know what else is interesting about this? This babe over there that did this, her name is Margrethe Vestager. I don’t know how she pronounces it. This was this morning in Brussels during the press conference she had.
VESTAGER: Our decision concludes that splitting the profits —
RUSH: Listen to this. Hold it a minute. (laughing) This is even better than I thought it was gonna be. (imitating Vestager) Oh, man, this is just too perfect.
VESTAGER: Our decision concludes that splitting the profits did not have any factual or economic justification. The so-called head office had no employees, no premises, no real activities. The so-called head office was attributed almost all of the company’s profits. The second company, Apple Operations Europe, makes certain Apple computers in Ireland. Under the same two tax rulings, the majority of its profit was also artificially attributed to a so-called head office that only existed on paper and whose profits were not taxed.
RUSH: Look, I don’t have a dog in this fight. I’m just telling you that Apple set themselves up according to Irish law. So they set themselves up according to Irish law. But, folks, you can have one or the other but you can’t have both. You can either have confiscatory taxation like this or you can have jobs. The problem with leftists is they think you can do both. They think they can tax the golden goose as often and as highly as they want, and that the golden goose is gonna keep producing. Because they’ve never been in that sector of life where the golden goose lives.
All they are is a bunch of takers, a bunch of people in government with power to take. But you put on them the responsibility for innovation, creation, productivity, invention, and you’ve got nothing, because they are clueless. So they come along and they start demanding all this. And then they start demanding jobs, and you have to choose one or the other. Confiscatory taxation or jobs. What do you want?
But there’s another aspect to this that isn’t being reported, and that is the anti-Americanism of this, the EU. All this globalism, Obama and his cronies trying to tell us that globalism is the future and that the US was gonna be once again loved and respected once Obama was there and George W. Bush was jettisoned, and now this? This woman delighted in screwing the screws tighter to an American corporation, and the US and Obama did everything to try to stop her from doing it, and she relished it all the more. Ha.
RUSH: Just one more thing on the Apple story. This thing is gonna be tied up for years with the appeals and everything. There’s one reason Apple has so much money in Europe. You know what the Apple cash pile is right now? It’s $231 billion and climbing. I mean, it’s profit, yeah, but that’s how much they’ve made that they have not reinvested, and their R&D budget is huge. It’s just a phenomenal pile of money.
You know how much of that $231 billion is being held overseas? About $210 billion of it. It is striking. Maybe $20 billion — if I read that right this morning, $20 billion of Apple’s $231 billion is in the United States. Meaning when they say “cash,” it’s not all greenbacks in the bank. This means it’s invested in various assets, stocks, bonds, like anybody else would invest. It’s fairly liquid.
But you know why $220 billion of it is overseas? It’s not strictly because Apple is a global corporation; it’s because of the US tax rate. The United States has the highest business tax rate in the world, 35%. So Apple received favorable tax proposals from European countries, including Holland and Ireland, because they wanted jobs, they wanted an economic boost, and they offered Apple attractive tax packages, which is common.
I mean, how many of you have heard of the state of New York exempting taxes for whatever business that they want to invest in the state, open in the state, build factories in the state? It happens all the time. There’s nothing unfair about it; it’s nothing unusual. It’s the way markets work. And if there are confiscatory tax rates in play, you can guarantee that smart-money people are gonna do everything they can to avoid them. And it isn’t irresponsible.
I mean, you can make the argument Apple has the duty to shareholders to maximize profits, so as to maximize stock price and dividends if they pay it. All that, of course, is true. But it just makes sense anyway: It’s Apple’s money. It isn’t the European Union’s money. It’s not Barack Obama’s money or John Kerry’s or Hillary Clinton’s; it’s Apple’s. But if you’re Elizabeth Warren, you come along and say, “You didn’t build that. You didn’t build that iPhone. We made that possible for you,” all that rotgut rigmarole.
So the European Union is like any other massively bloated, overweight bureaucracy: It’s out of money. They can’t manage their own finances. They have the ability to take money from anybody, anywhere, any time. It’s called taxes and fees and taxes and fees and user fees and who the hell knows what all mechanisms, and even at that they’re broke. And it’s typical; the people who do not work and who have nothing to do with the production of the money they have, have no appreciation for how it was acquired.
If you can get money by taking it from other people, you’re gonna think you can always get money by taking it from other people. And if you have a lot of money and you’ve never earned it, guaran-damn-teed you are never going to appreciate the value of that money. And that’s government for you. Government confiscates wealth. Government does not create wealth, pure and simple. “Wait a minute, Rush. What about defense contracts?”
Well, the government’s not doing the work, and it’s taxpayer money to begin with. It isn’t government money. Government doesn’t produce jack. All government does is get in the way. Government could do much more than they do by getting out of the way. There can be even more wealth, Apple could have even more money.
Well, anyway, the United States government would love some of Apple’s money but not enough to alter the tax rate, so 35%’s what it is and Apple’s gonna keep their money overseas, and they have arranged for all of their sales to be recorded. They’ve got an office I think in Reno, and arranged for most of their sales to be recorded in Ireland. People say, “Wait, they don’t make anything in Ireland.” Yeah, I know, the actual assembly process is in China, but their supply chain is worldwide.
Most people don’t ever — and there’s no reason they would — most people never stop to think, take an iPhone, or any smartphone, I don’t care if it’s Samsung’s or anybody, what goes into making that phone a reality is beyond most people’s comprehension. Apple’s supply chain is massive, it is intricate, and it is one of the most well-oiled machines in and of itself in all of American corporate life. They’ve got it down pat.
When Apple is on a role, you know how often they turn over their inventory? I’m talking about everything, iPhones, iPads, Macintosh computers, whatever. When Apple is humming, they turn over their inventory every eight days. Stop and think of that, worldwide. To have your manufacturing down so that you’re not saddled with a big bunch of inventory you’re holding onto, which just drags down everything, it slows manufacturing, it slows everything in the supply chain, it slows down the profitability of all your suppliers. To be able to have your manufacturing such that you’re able to turn total inventory five to eight days in a global circumstance is just phenomenal.
For these governments to come along and try to claim that Apple’s cheating here and cheating there, it’s typical. Anyway, what has to happen, Apple’s gonna appeal this, so they have to put the money — it’s about $13 billion euros, translation to $15 billion. They have to put the money in escrow. Some of that $15 billion is interest and penalties on the original base amount that the fine is.
So Apple will appeal, and it goes on. It’s gonna be years before this is solved. It’s not gonna have any immediate impact on the Apple stock price. It’s just government doing what government does, particularly these clowns in the European Union, who are just inept.
Well, anyway, I was reading my tech blogs about this today. And the tech blogs are young Millennial, and younger, journalists. And I want to read to you just one excerpt from one of them. I mean, I could probably find this thinking in all of them.
“Apple likes to present itself as a friendly, open company that is on the side of consumers. Yet here it is arguing that its complex financial arrangements, which serve to dramatically reduce its overseas tax bills, are justified. It does this at a time when the public mood is very much against such maneuvering.”
Oh, okay. So the public mood is against responsible fiscal behavior. So what should Apple do? “Given than Apple isn’t short of cash by any stretch of the imagination, why doesn’t it simply take the moral high road and voluntarily pay the taxes that it really believes should be due?”
You see, this is what we’re up against dealing with Millennials. So now it’s a moral issue. Apple has lots of money. The way they arrange their finances is very complex. It’s bad PR to scrap and fight over every dollar. Apple should just pay up. It’d be a great PR move. Apple’s customers — and we of course in the tech media, we would love Apple. Not. Because, of course, giving government money, why, that is the supreme definition of morality, don’t you see? Apple should just figure out what it owes morally and pay that, whatever the real tax bill is.
Isn’t that instructive? Doesn’t that tell us a lot? So, Apple, as a PR move, should not argue this. They should not even dispute it. They should just pay up and maybe even pay a little more than they owe, and get great PR benefits as a result. Does anybody think that’s what would happen?
What do you think would happen, Mr. Snerdley, if Apple followed this advice and issued a press release today by Tim Cook, the CEO, “Hi, I’m Tim Cook, CEO of Apple. We have just been told by the European Union that we have underpaid our taxes by $15 billion. We dispute this, but because we want our customers to think we are moral people, we’re gonna actually give them $20 billion. By the way, our new iPhones come out the next week, and we really hope you snap ’em up.”
What would be the practical result of Apple publicly announcing they’re gonna pay either exactly what they owe with no dispute or adding to it for the — (interruption) Right. Well, that’s true. The next thing to happen would be every tinhorn government dictator and bloated bureaucracy in the world would be lining up demanding that Apple exercise its morality with them. And then what would they say Apple should do? “They should pay it! They should pay what these governments say. That’s the only way to have good PR and buzz. They should do it. They’ve got so much money, more than they need. Look at that cash wad Apple has. They don’t need all of that.”
I guess there’s really nothing new in that kind of thinking about wealth and so forth. What is missing, however, is the acknowledgment or the appreciation for what it took to create that wealth. And this is what, sadly, is often missing. People see the wealth. They don’t have any idea what went into creating it. And if a corporation’s involved, they might even think it’s all because of cheating, lying, maybe even killing their customers, like Big Pharma does and Big Drug does and Big Oil. But I doubt, in the real world, it’s not gonna have much of an impact on you.
But it’s an interesting exercise, instructive in taxation and bureaucracy and government and how government behaves. And they’re out of money. And it’s not just the European Union. There isn’t a government in the world that’s in the black. And they’re gonna go look for money wherever they can get it. If it’s your pension fund that your money’s in, if it’s a 401(k), if it’s a hedge fund, don’t put it past ’em, in dire straits.