:00:00. > :00:00.This is Business Live from BBC News, with Ben Thompson
:00:07. > :00:12.Evading versus avoiding - the fierce debate over
:00:13. > :00:15.tax havens rages on, as governments around the world
:00:16. > :00:18.investigate where the rich and powerful are hiding their money.
:00:19. > :00:50.Live from London, that's our top story.
:00:51. > :01:02.Well, income tax in Singapore is capped at just 20%.
:01:03. > :01:10.And that's only for money earned in Singapore.
:01:11. > :01:21.here is how markets are faring in the first half of trade. And we meet
:01:22. > :01:27.the modern marks. This French economist tells us that uneven tax
:01:28. > :01:31.regimes are to blame for the growing income inequality. He says Europe
:01:32. > :01:53.should take in a million migrants a year.
:01:54. > :02:05.Lots of messages from you already about the question of ethics.
:02:06. > :02:08.We're starting with the big tax scandal that's hit
:02:09. > :02:10.We've covered the fall out of the revelations
:02:11. > :02:15.It's shone the spotlight on the role of tax havens and the practice
:02:16. > :02:20.Singapore has been tipped to overtake Switzerland as the top
:02:21. > :02:23.spot for the rich to open an offshore account,
:02:24. > :02:37.And it's not just individuals - big international firms are rushing
:02:38. > :02:40.to slash their tax bill by setting up in places like Singapore.
:02:41. > :02:42.It's perfectly legal - but that doesn't mean
:02:43. > :02:46.Well, income tax in Singapore is capped at just 20%.
:02:47. > :02:51.And that's only for money earned in Singapore.
:02:52. > :02:54.Income earned abroad is taxed at zero.
:02:55. > :02:57.In Singapore, companies pay just 17% tax on their profits - and none
:02:58. > :03:03.Now compare that to Australia, where the corporate tax rate
:03:04. > :03:12.So it's easy to see why big firms from those countries channel
:03:13. > :03:18.billions of dollars of earnings through their offices in Singapore.
:03:19. > :03:19.As our Asia Business Correspondent, Karishma Vaswani,
:03:20. > :03:34.Setting up an offshore account is perfectly legal. In fact, in some
:03:35. > :03:38.parts of Asia, it is as easy as plugging some details into your
:03:39. > :03:40.laptop. It will only take you a couple of hours.
:03:41. > :03:47.But here so it gets complicated. There is a difference between tax
:03:48. > :03:52.evasion and tax avoidance. Someone who has income to report and does
:03:53. > :03:59.not reported, that illegal. But tax avoidance is different. If you found
:04:00. > :04:02.a loophole in the tax system which takes advantage of provisions to
:04:03. > :04:05.avoid paying tax, depending on the contrary that you are in, you may
:04:06. > :04:12.not be doing anything illegal at all. But we are not talking just
:04:13. > :04:21.about people. Companies do it too. Google, Apple, Microsoft, Rio Tinto,
:04:22. > :04:24.all household names, and all have admitted recently to being under
:04:25. > :04:28.audit by the Australian tax authorities for having their
:04:29. > :04:36.services set up in Singapore. they say they are not doing anything
:04:37. > :04:38.wrong and that Singapore is an important hub for them. But
:04:39. > :04:44.Australia says if you make money in Australia, you should be paying
:04:45. > :04:50.taxes there. Singapore says it takes a very serious view on tax evasion
:04:51. > :04:50.and does not tolerate tax related crimes.
:04:51. > :04:55.Hong Kong has chimed in as well. In fact, many Asian countries say they
:04:56. > :04:58.have signed up to a commitment to
:04:59. > :04:58.exchange more tax information with one
:04:59. > :05:06.But frankly, it is all about who goes first. If one offshore
:05:07. > :05:09.banking centre starts opening itself up to greater scrutiny, there is a
:05:10. > :05:16.very good chance customers will flee, chasing
:05:17. > :05:18.the next most secret place to stash the cash.
:05:19. > :05:21.Alex Cobham is the Director of Research at the Tax Justice Network.
:05:22. > :05:38.Can we just start by being as clear as we can on this? It is such an
:05:39. > :05:47.important element to this story. Evasion is illegal, avoidance is
:05:48. > :05:50.legal. That is right. What we see in a lot of the material that has
:05:51. > :05:54.emerged in the Panama leeks is a set of cases where people have
:05:55. > :06:00.deliberately hidden information. That almost always takes you into
:06:01. > :06:03.evasion. When we talk about multinationals shifting their
:06:04. > :06:07.profits around, by and large they are not hiding information, they are
:06:08. > :06:11.not pretending one thing one another thing is the case. They are using
:06:12. > :06:16.existing loopholes. Largely that falls under the heading of
:06:17. > :06:21.avoidance. Is there much of a difference? At the moment the focus
:06:22. > :06:27.is Panama. But we are looking at other financial centres. Is there a
:06:28. > :06:33.difference between Panama, the British Virgin Islands, Delaware,
:06:34. > :06:36.the Cayman Islands, Jersey etc? Each of these jurisdictions offers
:06:37. > :06:41.different types of secrecy. But by and large they are competing in the
:06:42. > :06:45.same place. You suggested that Singapore may overtake Switzerland.
:06:46. > :06:50.That certainly looked like it was the case at a few years ago. But we
:06:51. > :06:54.found that the United States, including Delaware and other states
:06:55. > :07:00.competing very aggressively, including Wyoming and Nevada, seems
:07:01. > :07:04.to be the biggest mover. It is the United States that has put a lot of
:07:05. > :07:09.pressure on other jurisdictions to become more transparent, while at
:07:10. > :07:12.the same time becoming, if anything, less transparent itself, providing
:07:13. > :07:16.more opportunities for people from outside to use the United States
:07:17. > :07:21.itself for evasion and other corrupt practices.
:07:22. > :07:25.Alex, this is an issue of morals and ethics. As we touched on there, many
:07:26. > :07:29.of these organisations are doing nothing illegal but they are still
:07:30. > :07:33.reluctant for us to be able to shine a spotlight on their tax affairs,
:07:34. > :07:38.because they are simply not acting ethically. That is the issue when it
:07:39. > :07:46.comes to their customers. They want to be seeing to be doing the right
:07:47. > :07:49.thing -- Maxine. Certainly true. For high street names there is a
:07:50. > :07:54.reputational risk attached to be seen to be very aggressively tax
:07:55. > :07:58.avoiding. What it is also the case that some avoidance behaviour does
:07:59. > :08:02.actually shade towards the evasion. There is a spectrum rather than a
:08:03. > :08:07.clear line. If you are not sure about your position, you are
:08:08. > :08:12.interested in hiding it even if you think you are just on the right side
:08:13. > :08:21.of the evasion of line. Alex, we do appreciate your insight. Thank you.
:08:22. > :08:26.Let's bring you up-to-date with a story we touched on yesterday.
:08:27. > :08:28.US drugs giant Pfizer has scrapped a planned merger
:08:29. > :08:31.with Ireland's Allergan amid plans to change US tax laws.
:08:32. > :08:33.The decision comes two days after the US Treasury announced
:08:34. > :08:36.fresh plans to prevent what's known as tax inversion, where a US firm
:08:37. > :08:39.buys a company in a country with a lower tax rate.
:08:40. > :08:41.The Pfizer-Allergan deal, valued at $160bn, would have been
:08:42. > :08:44.the biggest example of an inversion, as well as the biggest
:08:45. > :08:57.Tata Steel will begin the formal process of selling its UK plants
:08:58. > :09:01.He's been holding talks with Tata in Mumbai,
:09:02. > :09:03.and said a number of parties had come forward, but only
:09:04. > :09:08.named Liberty Steel, whose interest is already known.
:09:09. > :09:11.German rival ThyssenKrupp and investment firm Grey-bull have
:09:12. > :09:14.also been reported to be interested in acquiring parts of the business
:09:15. > :09:23.The risk of a global economic slowdown was a key factor preventing
:09:24. > :09:25.the US Federal Reserve from raising interest rates in March,
:09:26. > :09:30.according to the minutes from the central bank's latest meeting.
:09:31. > :09:33.Fed members feared a slowdown would make it difficult to reach
:09:34. > :09:38.The US central bank raised rates in December, saying it expected
:09:39. > :10:03.Let's look at the website. Let's look at M When you do the
:10:04. > :10:09.domestic tally in the UK, you cover it a lot. M is an international
:10:10. > :10:13.brand. But they have struggled. We see it as a good indicator of the
:10:14. > :10:17.state of the high-street up and down the country. When Amadeus is doing
:10:18. > :10:18.well, it suggests people are willing to go out
:10:19. > :10:24.of their shopping. -- M When it is
:10:25. > :10:26.not, it signals that changing shopping habits are affecting the
:10:27. > :10:35.business. statement for the first three months
:10:36. > :10:39.of the year. They were looking for better figures.
:10:40. > :10:45.Food does really well. Clothing always struggles.
:10:46. > :10:53.Laois has the details. Good to see you.
:10:54. > :11:01.It has been a difficult three years for Samsung, battling with
:11:02. > :11:07.competition, Apple, the Chinese rivals.
:11:08. > :11:11.some market share, doing very well in the likes of
:11:12. > :11:18.India? That is right. Samsung has focused his attention on emerging
:11:19. > :11:25.markets as a way to move away from the reliance on smartphones.
:11:26. > :11:32.They are releasing phones costing ?100 -- $100 or $200. We will have
:11:33. > :11:38.to watch and wait and see if it works.
:11:39. > :11:43.Their profits are doing better than expected. Analysts did not expect
:11:44. > :11:46.the numbers that came out today. They expect operating profit to rise
:11:47. > :11:50.by more than 10% to nearly $6 billion. The final numbers
:11:51. > :11:53.arrived at the end of the month. These guidance numbers tend to
:11:54. > :12:03.pretty much be quite accurate. because of a new phone. It is not
:12:04. > :12:03.hugely different to their previous models.
:12:04. > :12:08.seem to be doing well. Maybe because it was released earlier in the year.
:12:09. > :12:10.There are no hopes that Samsung is bouncing back
:12:11. > :12:14.from the decline in its mobile business. But overall I think some
:12:15. > :12:15.analysts remain I'm going to rattle through the
:12:16. > :12:31.markets. Asia bouncing back overnight. I want
:12:32. > :12:40.to show you what is happening in Europe in the
:12:41. > :12:41.first Havenaar. The markets looking generally more positive. They have
:12:42. > :12:47.not been hugely affected by what we have
:12:48. > :12:49.heard from the Panama papers. You may expect some
:12:50. > :12:53.scrutiny. But not so. They have been obsessed
:12:54. > :12:59.with other things. Including the failed Pfizer deal.
:13:00. > :13:03.Richard Fletcher, the business editor of the Times joins us.
:13:04. > :13:11.what then hinted at, highlighted. It is an interesting thing. The
:13:12. > :13:15.papers occupying pretty much every news channel around the world.
:13:16. > :13:25.The markets not really focused on that. But boy, they were all across
:13:26. > :13:31.the Pfizer deal? Absolutely. 2015 was a fantastic year to be an
:13:32. > :13:34.investment banker. There were $46 trillion worth of deals done. 2016
:13:35. > :13:39.appears to be turning into a nightmare. Regulators are taking a
:13:40. > :13:41.keen interest in some of these megadeals.
:13:42. > :13:49.seeing a regulators and government is
:13:50. > :13:54.We have seen tax inversions been very controversial in the US. We
:13:55. > :13:58.have seen the crackdown there. We also saw yesterday Hali Burton,
:13:59. > :14:04.an oil services company, buying its rival, Baker
:14:05. > :14:10.Hughes. in a Delaware court. We have seen 18
:14:11. > :14:20.deals this year so far in the US challenge by regulators.
:14:21. > :14:23.We have seen European regulators be tough. These megadeals do seem to be
:14:24. > :14:27.concerning governments. They are worried about companies
:14:28. > :14:30.getting too big. That is affecting markets. Let's
:14:31. > :14:34.look at Asia. The yen soaring against the dollar again. That is
:14:35. > :14:40.hammering stocks, particularly in firms that export
:14:41. > :14:42.around the world. Yes. We did have a positive end to Japan but only just.
:14:43. > :14:49.consecutive runs of negative days. In the last couple of
:14:50. > :15:00.haven, despite the huge debts in Japan.
:15:01. > :15:05.That is pushing the yen up. That hits the stock prices.
:15:06. > :15:13.We have not seen an intervention in Japan since 2011. But we are
:15:14. > :15:14.starting to see those reports, sources
:15:15. > :15:17.close to the Minister etc. They are getting more concerned.
:15:18. > :15:30.Still to come, he has been described as one of the most influential
:15:31. > :15:31.economists of modern times. Our business editor is sitting down
:15:32. > :15:35.why he thinks global wealth inequality is getting worse.
:15:36. > :15:43.You are with businesslike. The Co-op has been a fixture
:15:44. > :15:46.of the High Street for 150 years offering everything from food
:15:47. > :15:49.and insurance to funerals, but it's In 2013 they had their worst year
:15:50. > :15:57.in their history, with losses of ?2.5 billion mainly caused
:15:58. > :16:00.by problems at their bank. Since then to turn things
:16:01. > :16:02.around they've sold off most of the Co-op Bank,
:16:03. > :16:05.as well as their pharmacy chain and farms and refocused
:16:06. > :16:09.on its convenience stores. This morning they announced pre-tax
:16:10. > :16:13.profits of ?23 million for 2015. Chief executive Richard Pennycook
:16:14. > :16:27.says the business is Although it is only year one of our
:16:28. > :16:31.rebuild, we can already see great momentum. So just in the last three
:16:32. > :16:36.weeks, we have been told that we are the fastest-growing of the big five
:16:37. > :16:39.food retailers, and all of our businesses are responding very well
:16:40. > :16:43.to the investment that we have been making. We are investing for growth
:16:44. > :16:49.and for the further development of our businesses, and that is across
:16:50. > :16:53.the piece. It was about 400 million last year with 900 million still to
:16:54. > :16:58.come. Customers will have seen it. For example our fruit and veg was
:16:59. > :17:03.15% lower priced last year than the year before. Our colleagues are
:17:04. > :17:09.seeing it. We put through an 8.5% pay rise for 40,000 front-line
:17:10. > :17:16.colleagues last year. And we are also investing right the way through
:17:17. > :17:21.our infrastructure and our systems. Now we can go to the live page
:17:22. > :17:25.because there are a lot of results out this morning, including those by
:17:26. > :17:30.Marks Spencer. Described by one of our regular posters as less awful
:17:31. > :17:34.this morning, falling again, but a similar picture. Clothing sales
:17:35. > :17:40.doing reasonably well but not as good as food. Food tends to buck the
:17:41. > :17:45.trend for M, but clothing is a problem area. Competition on the
:17:46. > :17:51.High Street when it comes to rivals like Next and H, things affecting
:17:52. > :17:56.the business on the High Street. Steve wrote describing it as a mixed
:17:57. > :18:04.performance, he is a chief executive. It is what they had
:18:05. > :18:08.before and what they have got now and of course it is all relative.
:18:09. > :18:13.When we talk to the experts, it is the clothing. Is it just the
:18:14. > :18:17.perception? They don't get the designers right? It is the speed of
:18:18. > :18:22.getting it into the stores, getting the right fashion in. Exactly.
:18:23. > :18:25.Our top story: Evading versus avoiding.
:18:26. > :18:27.We've been assessing the fierce debate over tax havens
:18:28. > :18:30.as governments around the world investigate where the rich
:18:31. > :18:41.There is plenty of detail on that on the BBC website, related to the
:18:42. > :18:45.Panorama investigation. Events this week have cast
:18:46. > :18:48.the spotlight on how much tax is or isn't paid
:18:49. > :18:50.by wealthy individuals. But what does it tell us
:18:51. > :18:52.about the wider economy and the controversial issue
:18:53. > :18:54.of wealth inequality? He's been dubbed the modern Marx
:18:55. > :18:57.in reference to the socialist Thomas Piketty, the French
:18:58. > :19:06.economist, came to fame when he published his book
:19:07. > :19:09.Capital In The 21st Century. He's been described as one
:19:10. > :19:11.of the most influential economists In the book, Piketty looks back
:19:12. > :19:19.at decades of changes in how wealth is distributed and discusses
:19:20. > :19:23.the outlook for global inequality. He claims that a current post-war
:19:24. > :19:26.surge in inequality has been fuelled by capitalism
:19:27. > :19:28.and he calls on governments to step in and rectify it by adopting
:19:29. > :19:33.a global tax on wealth. Our economics editor Kamal Ahmed sat
:19:34. > :19:36.down with Mr Piketty and discussed why the growth in inequality
:19:37. > :19:41.is getting worse. I believe in private
:19:42. > :19:45.property but I think we need We need more financial
:19:46. > :19:53.transparency, more public knowledge about who is benefiting
:19:54. > :19:57.from growth in order to adjust our policy, whether it is our tax
:19:58. > :20:01.policy, social policy, our educational policies, so as to make
:20:02. > :20:08.sure that growth doesn't only benefit a small group of the global
:20:09. > :20:13.elite but benefits the middle class, Recent evidence from
:20:14. > :20:20.the Institute for Fiscal Studies has suggested that
:20:21. > :20:24.actually income inequality has If we take a longer
:20:25. > :20:29.perspective, there is absolutely no doubt that there has
:20:30. > :20:32.been rising inequality in Western If you compare the 1980s and 1970s
:20:33. > :20:40.with today, 20 or 30 years on, there is no doubt that not
:20:41. > :20:44.only in the US but also in the UK and in most developed countries
:20:45. > :20:47.we have had rising inequality. Also if you were to look
:20:48. > :20:54.at worsening wealth equality, you would
:20:55. > :21:00.see a definite rise of consumption of property
:21:01. > :21:02.in When you have the kind of real
:21:03. > :21:07.estate prices you have in London it means that
:21:08. > :21:08.access to property for a working family
:21:09. > :21:10.with no initial family wealth is
:21:11. > :21:15.extremely difficult. What do you think are
:21:16. > :21:18.the economic threats now? Well, to me, the main
:21:19. > :21:27.problem with rising inequality in the long run
:21:28. > :21:31.that there is a risk that it leads to political instability, in some
:21:32. > :21:36.I think when you don't manage to solve
:21:37. > :21:39.your local, domestic inequality, your social problems, in a peaceful
:21:40. > :21:43.manner, it is always tempting to blame others.
:21:44. > :21:46.You can blame foreign workers, like the extreme right in
:21:47. > :21:53.You can blame foreign countries, you can blame Europe in
:21:54. > :21:56.some cases, and in France we like to blame Germany or China and in
:21:57. > :22:02.The problem is that this is not going to solve the problem.
:22:03. > :22:08.You look at the eurozone, Britain, America,
:22:09. > :22:11.there are real concerns about the level of growth.
:22:12. > :22:13.I think there has been too much austerity since the
:22:14. > :22:17.There has been an attempt particularly in the eurozone to
:22:18. > :22:25.When you look at the growth trajectory of Europe as compared to
:22:26. > :22:27.the United States, I think it is very clear
:22:28. > :22:33.that we have started a new
:22:34. > :22:35.recession in 2011, 2012, 2013, which shall lead again to excessive
:22:36. > :22:39.austerity and rising unemployment and xenophobia, right at the time
:22:40. > :22:42.when there was a need for Europe to be more
:22:43. > :22:54.rest of the world, in particular regarding the refugee crisis.
:22:55. > :23:02.Thomas Piketty there. We asked at the start of the programme whether
:23:03. > :23:08.tax havens were unethical or just a sign of global business. Lots of you
:23:09. > :23:14.getting in touch. Alfie says purely unethical. Jordan says nothing wrong
:23:15. > :23:18.if it is not illegal. Another one saying look at whether tax is paid
:23:19. > :23:22.and if it is in the right place. If the rich are going to complain about
:23:23. > :23:27.paying more tax, then they should all be paying it, not just avoiding
:23:28. > :23:31.it around the world. Are you done? Richard is back and we want to go
:23:32. > :23:39.through the papers. Let's talk about yours, the Times. The mobile phone
:23:40. > :23:45.operator network, they are keeping the O2 bid alive. Tell us more. We
:23:46. > :23:51.talked about people flexing their muscles. We'll adapt this deal which
:23:52. > :23:57.would see Three buying O2, and there has been a lot of noise, and
:23:58. > :24:01.Hutchison has given way and they are allowing rivals into their network.
:24:02. > :24:05.The biggest foreign direct investor in the UK, and they own Superdrug
:24:06. > :24:10.and lots of other things, they are upset about how this has been dealt
:24:11. > :24:14.with in Europe, rather than by regulators here. They are very upset
:24:15. > :24:17.and they have put some of their other investments under review,
:24:18. > :24:21.future investments, because they are so upset about the hard time they
:24:22. > :24:27.are being given to get this deal through. The Wall Street Journal.
:24:28. > :24:30.Amazon struts fashion sense challenging traditional stores.
:24:31. > :24:34.Interesting given what we have said about Marks Spencer already
:24:35. > :24:37.struggling with clothing. Amazon is somewhere where you get things a bit
:24:38. > :24:41.cheaper but they say with fashion they charge full price and there is
:24:42. > :24:45.a good reason for that. Clothing retailers love to talk about price
:24:46. > :24:51.architecture, where you protect your price. Look at the success of Next,
:24:52. > :24:54.because they only have a sale at certain times and they know that
:24:55. > :24:59.they will not go on sale early. Amazon has been making people know
:25:00. > :25:03.this because they are known for discounting and they do not have a
:25:04. > :25:08.feel of a luxury brand. We all use it, I use it, but there are other
:25:09. > :25:11.retailers out there! But clothing retailers have been nervous about
:25:12. > :25:15.what it does to their brand if they are seen as the lowest possible
:25:16. > :25:19.price, displayed in the same way as everyone. But as ever, Amazon have
:25:20. > :25:25.been courting them and they want to grow this part of their business.
:25:26. > :25:28.When I read about the dot-com boom in 2000, people said they would
:25:29. > :25:35.never sell clothing online, but look at the excessive online, Next and
:25:36. > :25:42.even Marks Spencer. Do you think Amazon will crack it? I think they
:25:43. > :25:46.will. I love Amazon. But there are other people as well! As you say.
:25:47. > :25:49.Thank you for your company today. Have a great day wherever you are
:25:50. > :26:14.watching us in the world. Goodbye. Good morning. Essentially we are
:26:15. > :26:16.looking at another day of sunny spells and scattered showers, so I
:26:17. > :26:18.suspect that there could be seen