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Corporation tax, Facebook and Italian banks

21 November 2016

12:47 PM

21 November 2016

12:47 PM

Corporation Tax

The Prime Minister will today pledge to match the lowest corporation tax rates within the G20 — even if that means sinking to President-elect Trump’s 15 percent, says The Times. At her conference speech, Theresa May seemed to signal that she would be cracking down on big business which saw tax as ‘an optional extra’. She also criticised companies that use cheap foreign labour over British workers. But now she is softening her stance on businesses, and will tell the CBI Annual Conference today that she plans to make the UK one of the most vibrant economies in the world by keeping tax rates low. Corporation tax currently stands at 20 percent, and is due to be reduced to 17 percent by 2020 under existing plans. However the Tory pledge to keep the lowest taxes in the G20 means that it could be cut down to 15 percent if Trump keeps his election promises.

Her statement suggests a disagreement between the Prime Minister and the Chancellor of the Exchequer. Like Theresa May, Philip Hammond has explicitly stated that the UK must be at the forefront of innovation and new business; but he is also concerned with boosting existing infrastructure and maximising potential. ‘To the extent that we are able to increase borrowing we should target it on productive economic investment,’ Hammond told Robert Peston on ITV yesterday morning. ‘Investment in the R&D capacity of our economy, investment in our network infrastructure, the things that will improve the productivity of the UK economy.’ The Chancellor made clear that he was reluctant to soften corporation taxes. Meanwhile Labour leader Jeremy Corbyn will also be reaching out to business today, so long as they ‘live up to their side of the deal’ with fair wages, workers’ rights and tax transparency.


Facebook

One company already planning UK expansion is Facebook, which will provide 500 new jobs when it opens a new London office in 2017. The additional jobs will represent a 50 percent increase in British employees by the tech giant. ‘We came to London in 2007 with just a handful of people, by the end of next year we will have opened a new HQ and plan to employ 1,500 people,’ said Nicola Mendelsohn, Facebook’s European head. The Financial Times notes that the announcement comes only days after Google’s pledge last week to hire an extra 3,000 people — and that Amazon and Apple will likewise expand their London operations in the coming years. ‘The capital’s vibrant tech scene is the envy of Europe and Facebook’s continuing commitment is another sign that London is open to talent, innovation and entrepreneurship from all four corners of the world,’ said Sadiq Khan, Mayor of London.

Eurozone

The man who predicted the sub-prime mortgage crisis and inspired the Hollywood hit movie The Big Short has warned that Europe might be on the brink of financial collapse, says the Daily Mail’s This Is Money. Steve Eisman has identified that Italian banks are holding up to £310 billion of non-performing loans; if other European countries are forced to step in and bail out Italy, the effect across Europe would be cataclysmic. ‘Europe is screwed,’ said Mr Eisman. ‘In the Italian system, the banks say they are worth 45-50 cents in the dollar. But the bid price is 20 cents. If they were to mark them down, they would be insolvent.’ The revelations raise questions about the safety of the Eurozone, and highlight potential infrastructure problems that might affect Italy’s referendum on 4th December.

BT

BT has been banned by Ofcom from bidding on more mobile phone ‘spectrum’ — the raw matter that makes downloads faster. The services provider, along with its mobile arm EE, already has dominance in the market, with 45 percent of the UK’s possible spectrum. O2 meanwhile has only 15 percent. However BT will be allowed to bid on airwaves which optimise 5G technology, a move which has angered rival network Three says The Guardian. Last year Three bid £10.25 billion to take over O2 but was blocked by competition regulators.


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