19/07/2013 World Business Report

could have supported life. Time to update you on all the

financial news in World Business Report.

Detroit files for encrypted, the fifth US state to go bust this year.

But what will it mean for residents? Making the multinationals pay their

wage. The 20 finance ministers take aim at corporate tax avoidance at

their meeting in Moscow. -- G 20. Welcome to World Business Report.

Also coming up in the programme, will Japanese voters give a thumbs

up to add a non- mix when they go to the polls on Sunday? -- Shinzo Abe.

But first, Detroit now has another unfortunate claim to fame. It has

filed for the largest municipal bankruptcy in US history. Taking a

look at the numbers. It owes 18.5 billion US dollars in long-term

debt. If the bankruptcy is approved by a judge, it will enter

negotiations with its thousands of creditors. Many will face major

losses. What about the broader ramifications of this? US cities are

$3.7 trillion is. That is the size of the municipal bond market. It

seems as a safe place to invest, but this will send some ripples through

it. There could be more of this on the way. For cities have filed for

bankruptcy. -- format. Time to talk to a city reporter at Detroit free

press. Tim Mac -- thank you for joining us. What does this mean for

residents who rely on the city for their income, pensioners, healthcare

workers, et cetera? It is up in the air right now. We

assume that pensions will not go away, healthcare will not go away

for an estimated 20,000 people. But there is significant talk about

reducing the amount of benefit they get. There is talk of moving city

workers from a city funded health-care plan to healthcare

exchanges that are part of the President's affordable care act.

There is a major showdown in the works between whether state

constitutional protection in Michigan that has kept public

pensions in the lockbox might go away. The real question is what

happens when a city like Detroit has no money to pay the pensions promise

to people years ago. Let us widen this out and talk about the wider

ramifications for the country's municipal bond market. It is worth

around $3.7 trillion. That is a huge sum. Traditionally it has been seen

as a safe place to put money. What could be the effect of this? There

are a number of people we have talked to about this. There is

concern among some folks in the bond industry that emergency managers

approach to bankruptcy has focused on separating secured creditors from

unsecured creditors. The secured creditors would be those who have

helped the city sell bonds of projects like water and sewage

systems. Those that generate revenue for the customers of Detroit who

paid monthly fees for their water service. Part of those fees are used

to pay down the bond that. -- debts. And now those who do not have the

link to specific revenue streams are unsecured. That could be several

billion dollars of debt. He is proposing treating them in a

different league than they would any other creditor. -- differently.

Bonds have usually be considered one of the safest forms of investment.

They do not provide the highest returns, but you would never worry

about losing money. There is the potential for a pension funds,

private investors, people who own accounts that invest in the bond

markets to take a hit. There are so much we could talk about. But we

have to live it there. Thank you for that update on how things stand the

people in the city of Detroit. Finance ministers from the G 20

economies are meeting in Moscow. Top of the agenda is how to tackle tax

avoidance by multinational corporations. They shift their

profits to tax havens like to tax havens like a renewed or Ireland. --

tax havens like renewed or Ireland. This is following news of grumbling

by which owners and small businesses that the richest corporations are

not paying their fair share. Apple has been held up a criticism. It

filed with the West regulators that it made every $37 billion in profit.

On that they just over $700 million in tax. That translates to a rate of

1.9%. To put that into context, the UK's corporation tax rate is 24%.

I think we are going to try and bring you that report if we can.

Entrepreneurs feel mistreated. They design and install luxury bathrooms.

Not an easy business to grow in France. They pay one third of their

profits in tax. But according to figures given to the National

Senate, multinational corporations like Amazon and Apple pay less than

1% on the money they make in France. Not fair play, says this company.

TRANSLATION: We use local production in our businesses. We take on

materials in France to help people living here. These companies and

they pay little in tax compared to what they generate in profit.

OECD, a think tank for developed economies, has developed an action

plan to close tax loopholes and stop the use of tax havens. If a company

locates its profit in a jurisdiction where nothing is happening, it will

not work. What we are trying to put in place are rules that will

neutralise this. But there are suggestions that behind the United

front shown by world leaders on corporate tax paying, delegates

working with the action plan have been jostled to promote national

interests. Germany was given the lead in drafting new laws to make

Internet firms like Facebook, Google, pay more tax in the

countries they do business. But the bulk of these firms are American. It

is understood that Washington has been lobbying to have the new

measures watered down. It will take two more years of negotiation before

the OECD can produce a fully fledged international tax code. But it says

the golden age of corporate tax avoidance is now reaching an end.

To Japan now, where voters go to the polls on Sunday to elect the upper

house of Parliament. Shinzo Abe and his ruling party are ahead in

opinion polls. That could see them regaining control of both houses of

Parliament for the first time in six years. The economy is seen as a top

reality. -- priority. That is all thanks to the policies that are

pumping sums of money into the economy. For more on what we can

expect, we will speak to a director at a financial group. As we were

saying, widely expected to see them switched to victory. But by how

much? As you say, he is very popular. He has a strong majority.

But also, because his opposition shot themselves in the foot. That is

one of the reasons he will have a total convincing victory. A sweeping

victory by Shinzo Abe. Let us talk about the sales tax that there will

have to be making a decision on shortly. Is that very likely?

most likely to go ahead. That is one of the answers the Japanese

government would have to the rest of the world in coping with increasing

debt problems. This is going to be very unpopular. He has to have a

look at the timing. He would still have the momentum of this

positivity. It will flow on to Japanese exporters. As will as a

continuation of the monetary policy. We are also expecting to see some

hard structural reforms. Absolutely. He has been able to come up with

painful policy. He is going to have to come up with the implementation