April Webinar RegistrationApril Webinar Registration


EU To Hit Apple, FANG Stocks With Digital Tax If Ireland Goes Along

It's likely the European Commission will slam U.S. tech and internet giants Google, Apple (AAPL), Facebook (FB) and Amazon.com (AMZN) with taxes on digital revenue, says a Cowen & Co. analyst.

X France is pushing the EU to squeeze more money out of the U.S. companies, with Germany, Spain and Italy also supporting the move. Ireland, which has had tax-friendly policies for large multinational companies, may fight digital taxes. But Ireland could be swayed to go along with some political horse trading, Paul Gallant, Cowen analyst, said in a note to clients.

"Lobbying opposition and intra-EU politics are clearly hurdles, but we believe there is a 65% chance that the EU will enact a new digital tax policy by late 2019 that raises tax rates on the European profits of many companies including Alphabet's (GOOGL) Google, Amazon, Apple, Facebook and Netflix (NFLX)," said Gallant. He says the taxes would be effective by 2021 or 2022.

According to an EU report released in September, internet companies pay much less in taxes than other multinational companies, partly by steering profits to Ireland and Luxembourg. The EU has charged that Apple in particular has benefited from tax policies in Ireland. The EU last year ordered Apple to pay billions of dollars in back taxes. The iPhone maker is appealing.

Amazon's EU headquarters is based in Luxembourg.

"The EU is concerned that gradual replacement of physical goods with digital services — which pay much lower taxes due partly to the mobility of assets like intellectual property — is eroding its tax base and unfairly favoring Internet-based companies over physical ones."

Gallant says, though, that it could take two years for all of the EU's 28-member states to approve a new digital tax.


IBD'S TAKE: If you want to understand the state of the market, read IBD's Stock Market Today columns throughout the market day, and the end-of-day The Big Picture (take a free trial) for timely market analysis and highlighted growth stocks breaking out of proper bases.


The American Chamber of Commerce has objected to the EU imposing a digital tax.

Talk of new digital taxes comes amid the EU's crackdown on Alphabet's Google on antitrust issues.

RELATED:

Short Sellers Step Up Bets Against Netflix, Amazon, Facebook

Facebook, Amazon, Google: Should They Now Fear Regulators?

Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks

Leaderboard: Daily Updates On Stocks With Potential For Big Gains