Here's a story we're going to be hearing an awful lot more about once-acceptable tax deals blowing up in big companies' and perhaps even small governments' faces.
The European Commission has just ruled that Apple has to pay as much as €13bn about £11bn at the moment in back taxes to Ireland.
The Commission reckons that Apple's tax deals with Ireland between 1991 and 2015 amounted to illegal state aid. In other words, this isn't a criticism of Ireland's tax system as such (although Ireland's low corporation tax rate does infuriate the EU), it's a criticism of its specific treatment of Apple.
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Sales were attributed to a head office "that existed on paper only and could not have generated such profits", reports The Guardian. As a result, Apple "avoided tax on almost all profits from sales of its products across the EU's single market by booking the profits in Ireland rather than the country in which the product was sold".
Apple plans to appeal the ruling. Here's a quote from a long letter chief executive Tim Cook put out: "The European Commission has launched an effort to rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process.
"The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals.
"We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don't owe them any more than we've already paid."
Dublin plans to appeal too. The Irish finance minister, Michael Noonan, said that an appeal "is necessary to defend the integrity of our tax system, to provide tax certainty to business and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation".
The US can't exactly be enamoured with the ruling either. Last week, the US Treasury warned that the Commission was in danger of becoming a "supra-national tax authority".
Other than demonstrating that Americans really still don't "get" what the European project is all about (ever-closer union means harmonised tax rates, and if that's by the back door, then so be it it's the European way), you also have to remember that the Americans would like to get their hands on some of the juicy cash piles saved up overseas by Apple and co.
The last thing they want is the Europeans sinking their teeth in, particularly if that ends up costing shareholders in the US.
So you can see that this one promises to run and run. But this is something that you need to be aware of and considering as part of your investment process right now.
Apple isn't the only company being pulled up for past tax arrangements, although this is the biggest fine so far. The EU has already told Starbucks and Fiat Chrysler to repay millions (they're both appealing) and it is looking into the tax arrangements of Amazon, McDonald's and Google in various countries.
As we've been saying in MoneyWeek for literally years now my colleague Merryn in particular cash-strapped governments are looking to raise money where they can find it. And an awful lot of it is sitting on the balance sheets of cash-rich multinationals.
These same multinationals have also proved to be popular destinations for investors who are hungry for yield and want to invest in companies that are "rock solid', having been rattled by the events of 2008.
So most of these companies look expensive, just at a point where governments are finally starting to get around to working out how to raid their balance sheets.
Now don't get me wrong. I think every company and individual should pay their taxes, and they should all pay them at the same rate. It's out of order that a big multinational company can get an easier tax deal than a small local company because of political connections, prestige and short-term headline-grabbing.
But it also irritates me when tax systems and rules are set up with enough flexibility to allow governments to turn a blind eye until it suits them to do otherwise. When governments are keen to get their money, arrangements that looked like nothing more than clever tax planning during the "free and easy" times are rapidly reclassified as evil tax avoidance. That's not a sustainable or reasonable basis for a legal system.
So if you've got chunky, cash-rich, big-name brands with low effective tax rates sitting in your portfolio beware. It's easy to be complacent and to assume that companies will win this, but that's probably not the case.
The hassle and bad publicity involved will have a "chilling" effect if nothing else, which means that we can expect the average multinational's tax rate to rise in the coming years. That'll have a commensurate impact on corporate profits.
It might also have an impact on dividend-paying capacity. That's another reason why the decades to come promise to be tricky for income-seeking investors.
The Brexit effect
Journalist and economist Ed Conway of Sky made a few interesting points on Twitter. As he notes, "this is all part of a bigger struggle in which nation states/govts attempt to reassert control from multinational corporations".
But Conway also makes the intriguing point: "Is this the end of tax competition in the EU? If so, potentially great news for UK post-Brexit."
Unless of course, other countries take this as their cue to ditch an over-reaching EU too.
My colleague Tim Price looks at some other reasons to be wary of "expensive defensive", particularly in the US.
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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