07/04/2016 BBC Business Live


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This is Business Live from BBC News, with Ben Thompson


Evading versus avoiding - the fierce debate over


tax havens rages on, as governments around the world


investigate where the rich and powerful are hiding their money.


Live from London, that's our top story.


Well, income tax in Singapore is capped at just 20%.


And that's only for money earned in Singapore.


here is how markets are faring in the first half of trade. And we meet


the modern marks. This French economist tells us that uneven tax


regimes are to blame for the growing income inequality. He says Europe


should take in a million migrants a year.


Lots of messages from you already about the question of ethics.


We're starting with the big tax scandal that's hit


We've covered the fall out of the revelations


It's shone the spotlight on the role of tax havens and the practice


Singapore has been tipped to overtake Switzerland as the top


spot for the rich to open an offshore account,


And it's not just individuals - big international firms are rushing


to slash their tax bill by setting up in places like Singapore.


It's perfectly legal - but that doesn't mean


Well, income tax in Singapore is capped at just 20%.


And that's only for money earned in Singapore.


Income earned abroad is taxed at zero.


In Singapore, companies pay just 17% tax on their profits - and none


Now compare that to Australia, where the corporate tax rate


So it's easy to see why big firms from those countries channel


billions of dollars of earnings through their offices in Singapore.


As our Asia Business Correspondent, Karishma Vaswani,


Setting up an offshore account is perfectly legal. In fact, in some


parts of Asia, it is as easy as plugging some details into your


laptop. It will only take you a couple of hours.


But here so it gets complicated. There is a difference between tax


evasion and tax avoidance. Someone who has income to report and does


not reported, that illegal. But tax avoidance is different. If you found


a loophole in the tax system which takes advantage of provisions to


avoid paying tax, depending on the contrary that you are in, you may


not be doing anything illegal at all. But we are not talking just


about people. Companies do it too. Google, Apple, Microsoft, Rio Tinto,


all household names, and all have admitted recently to being under


audit by the Australian tax authorities for having their


services set up in Singapore. they say they are not doing anything


wrong and that Singapore is an important hub for them. But


Australia says if you make money in Australia, you should be paying


taxes there. Singapore says it takes a very serious view on tax evasion


and does not tolerate tax related crimes.


Hong Kong has chimed in as well. In fact, many Asian countries say they


have signed up to a commitment to


exchange more tax information with one


But frankly, it is all about who goes first. If one offshore


banking centre starts opening itself up to greater scrutiny, there is a


very good chance customers will flee, chasing


the next most secret place to stash the cash.


Alex Cobham is the Director of Research at the Tax Justice Network.


Can we just start by being as clear as we can on this? It is such an


important element to this story. Evasion is illegal, avoidance is


legal. That is right. What we see in a lot of the material that has


emerged in the Panama leeks is a set of cases where people have


deliberately hidden information. That almost always takes you into


evasion. When we talk about multinationals shifting their


profits around, by and large they are not hiding information, they are


not pretending one thing one another thing is the case. They are using


existing loopholes. Largely that falls under the heading of


avoidance. Is there much of a difference? At the moment the focus


is Panama. But we are looking at other financial centres. Is there a


difference between Panama, the British Virgin Islands, Delaware,


the Cayman Islands, Jersey etc? Each of these jurisdictions offers


different types of secrecy. But by and large they are competing in the


same place. You suggested that Singapore may overtake Switzerland.


That certainly looked like it was the case at a few years ago. But we


found that the United States, including Delaware and other states


competing very aggressively, including Wyoming and Nevada, seems


to be the biggest mover. It is the United States that has put a lot of


pressure on other jurisdictions to become more transparent, while at


the same time becoming, if anything, less transparent itself, providing


more opportunities for people from outside to use the United States


itself for evasion and other corrupt practices.


Alex, this is an issue of morals and ethics. As we touched on there, many


of these organisations are doing nothing illegal but they are still


reluctant for us to be able to shine a spotlight on their tax affairs,


because they are simply not acting ethically. That is the issue when it


comes to their customers. They want to be seeing to be doing the right


thing -- Maxine. Certainly true. For high street names there is a


reputational risk attached to be seen to be very aggressively tax


avoiding. What it is also the case that some avoidance behaviour does


actually shade towards the evasion. There is a spectrum rather than a


clear line. If you are not sure about your position, you are


interested in hiding it even if you think you are just on the right side


of the evasion of line. Alex, we do appreciate your insight. Thank you.


Let's bring you up-to-date with a story we touched on yesterday.


US drugs giant Pfizer has scrapped a planned merger


with Ireland's Allergan amid plans to change US tax laws.


The decision comes two days after the US Treasury announced


fresh plans to prevent what's known as tax inversion, where a US firm


buys a company in a country with a lower tax rate.


The Pfizer-Allergan deal, valued at $160bn, would have been


the biggest example of an inversion, as well as the biggest


Tata Steel will begin the formal process of selling its UK plants


He's been holding talks with Tata in Mumbai,


and said a number of parties had come forward, but only


named Liberty Steel, whose interest is already known.


German rival ThyssenKrupp and investment firm Grey-bull have


also been reported to be interested in acquiring parts of the business


The risk of a global economic slowdown was a key factor preventing


the US Federal Reserve from raising interest rates in March,


according to the minutes from the central bank's latest meeting.


Fed members feared a slowdown would make it difficult to reach


The US central bank raised rates in December, saying it expected


Let's look at the website. Let's look at M When you do the


domestic tally in the UK, you cover it a lot. M is an international


brand. But they have struggled. We see it as a good indicator of the


state of the high-street up and down the country. When Amadeus is doing


well, it suggests people are willing to go out


of their shopping. -- M When it is


not, it signals that changing shopping habits are affecting the


business. statement for the first three months


of the year. They were looking for better figures.


Food does really well. Clothing always struggles.


Laois has the details. Good to see you.


It has been a difficult three years for Samsung, battling with


competition, Apple, the Chinese rivals.


some market share, doing very well in the likes of


India? That is right. Samsung has focused his attention on emerging


markets as a way to move away from the reliance on smartphones.


They are releasing phones costing ?100 -- $100 or $200. We will have


to watch and wait and see if it works.


Their profits are doing better than expected. Analysts did not expect


the numbers that came out today. They expect operating profit to rise


by more than 10% to nearly $6 billion. The final numbers


arrived at the end of the month. These guidance numbers tend to


pretty much be quite accurate. because of a new phone. It is not


hugely different to their previous models.


seem to be doing well. Maybe because it was released earlier in the year.


There are no hopes that Samsung is bouncing back


from the decline in its mobile business. But overall I think some


analysts remain I'm going to rattle through the


markets. Asia bouncing back overnight. I want


to show you what is happening in Europe in the


first Havenaar. The markets looking generally more positive. They have


not been hugely affected by what we have


heard from the Panama papers. You may expect some


scrutiny. But not so. They have been obsessed


with other things. Including the failed Pfizer deal.


Richard Fletcher, the business editor of the Times joins us.


what then hinted at, highlighted. It is an interesting thing. The


papers occupying pretty much every news channel around the world.


The markets not really focused on that. But boy, they were all across


the Pfizer deal? Absolutely. 2015 was a fantastic year to be an


investment banker. There were $46 trillion worth of deals done. 2016


appears to be turning into a nightmare. Regulators are taking a


keen interest in some of these megadeals.


seeing a regulators and government is


We have seen tax inversions been very controversial in the US. We


have seen the crackdown there. We also saw yesterday Hali Burton,


an oil services company, buying its rival, Baker


Hughes. in a Delaware court. We have seen 18


deals this year so far in the US challenge by regulators.


We have seen European regulators be tough. These megadeals do seem to be


concerning governments. They are worried about companies


getting too big. That is affecting markets. Let's


look at Asia. The yen soaring against the dollar again. That is


hammering stocks, particularly in firms that export


around the world. Yes. We did have a positive end to Japan but only just.


consecutive runs of negative days. In the last couple of


haven, despite the huge debts in Japan.


That is pushing the yen up. That hits the stock prices.


We have not seen an intervention in Japan since 2011. But we are


starting to see those reports, sources


close to the Minister etc. They are getting more concerned.


Still to come, he has been described as one of the most influential


economists of modern times. Our business editor is sitting down


why he thinks global wealth inequality is getting worse.


You are with businesslike. The Co-op has been a fixture


of the High Street for 150 years offering everything from food


and insurance to funerals, but it's In 2013 they had their worst year


in their history, with losses of ?2.5 billion mainly caused


by problems at their bank. Since then to turn things


around they've sold off most of the Co-op Bank,


as well as their pharmacy chain and farms and refocused


on its convenience stores. This morning they announced pre-tax


profits of ?23 million for 2015. Chief executive Richard Pennycook


says the business is Although it is only year one of our


rebuild, we can already see great momentum. So just in the last three


weeks, we have been told that we are the fastest-growing of the big five


food retailers, and all of our businesses are responding very well


to the investment that we have been making. We are investing for growth


and for the further development of our businesses, and that is across


the piece. It was about 400 million last year with 900 million still to


come. Customers will have seen it. For example our fruit and veg was


15% lower priced last year than the year before. Our colleagues are


seeing it. We put through an 8.5% pay rise for 40,000 front-line


colleagues last year. And we are also investing right the way through


our infrastructure and our systems. Now we can go to the live page


because there are a lot of results out this morning, including those by


Marks Spencer. Described by one of our regular posters as less awful


this morning, falling again, but a similar picture. Clothing sales


doing reasonably well but not as good as food. Food tends to buck the


trend for M, but clothing is a problem area. Competition on the


High Street when it comes to rivals like Next and H, things affecting


the business on the High Street. Steve wrote describing it as a mixed


performance, he is a chief executive. It is what they had


before and what they have got now and of course it is all relative.


When we talk to the experts, it is the clothing. Is it just the


perception? They don't get the designers right? It is the speed of


getting it into the stores, getting the right fashion in. Exactly.


Our top story: Evading versus avoiding.


We've been assessing the fierce debate over tax havens


as governments around the world investigate where the rich


There is plenty of detail on that on the BBC website, related to the


Panorama investigation. Events this week have cast


the spotlight on how much tax is or isn't paid


by wealthy individuals. But what does it tell us


about the wider economy and the controversial issue


of wealth inequality? He's been dubbed the modern Marx


in reference to the socialist Thomas Piketty, the French


economist, came to fame when he published his book


Capital In The 21st Century. He's been described as one


of the most influential economists In the book, Piketty looks back


at decades of changes in how wealth is distributed and discusses


the outlook for global inequality. He claims that a current post-war


surge in inequality has been fuelled by capitalism


and he calls on governments to step in and rectify it by adopting


a global tax on wealth. Our economics editor Kamal Ahmed sat


down with Mr Piketty and discussed why the growth in inequality


is getting worse. I believe in private


property but I think we need We need more financial


transparency, more public knowledge about who is benefiting


from growth in order to adjust our policy, whether it is our tax


policy, social policy, our educational policies, so as to make


sure that growth doesn't only benefit a small group of the global


elite but benefits the middle class, Recent evidence from


the Institute for Fiscal Studies has suggested that


actually income inequality has If we take a longer


perspective, there is absolutely no doubt that there has


been rising inequality in Western If you compare the 1980s and 1970s


with today, 20 or 30 years on, there is no doubt that not


only in the US but also in the UK and in most developed countries


we have had rising inequality. Also if you were to look


at worsening wealth equality, you would


see a definite rise of consumption of property


in When you have the kind of real


estate prices you have in London it means that


access to property for a working family


with no initial family wealth is


extremely difficult. What do you think are


the economic threats now? Well, to me, the main


problem with rising inequality in the long run


that there is a risk that it leads to political instability, in some


I think when you don't manage to solve


your local, domestic inequality, your social problems, in a peaceful


manner, it is always tempting to blame others.


You can blame foreign workers, like the extreme right in


You can blame foreign countries, you can blame Europe in


some cases, and in France we like to blame Germany or China and in


The problem is that this is not going to solve the problem.


You look at the eurozone, Britain, America,


there are real concerns about the level of growth.


I think there has been too much austerity since the


There has been an attempt particularly in the eurozone to


When you look at the growth trajectory of Europe as compared to


the United States, I think it is very clear


that we have started a new


recession in 2011, 2012, 2013, which shall lead again to excessive


austerity and rising unemployment and xenophobia, right at the time


when there was a need for Europe to be more


rest of the world, in particular regarding the refugee crisis.


Thomas Piketty there. We asked at the start of the programme whether


tax havens were unethical or just a sign of global business. Lots of you


getting in touch. Alfie says purely unethical. Jordan says nothing wrong


if it is not illegal. Another one saying look at whether tax is paid


and if it is in the right place. If the rich are going to complain about


paying more tax, then they should all be paying it, not just avoiding


it around the world. Are you done? Richard is back and we want to go


through the papers. Let's talk about yours, the Times. The mobile phone


operator network, they are keeping the O2 bid alive. Tell us more. We


talked about people flexing their muscles. We'll adapt this deal which


would see Three buying O2, and there has been a lot of noise, and


Hutchison has given way and they are allowing rivals into their network.


The biggest foreign direct investor in the UK, and they own Superdrug


and lots of other things, they are upset about how this has been dealt


with in Europe, rather than by regulators here. They are very upset


and they have put some of their other investments under review,


future investments, because they are so upset about the hard time they


are being given to get this deal through. The Wall Street Journal.


Amazon struts fashion sense challenging traditional stores.


Interesting given what we have said about Marks Spencer already


struggling with clothing. Amazon is somewhere where you get things a bit


cheaper but they say with fashion they charge full price and there is


a good reason for that. Clothing retailers love to talk about price


architecture, where you protect your price. Look at the success of Next,


because they only have a sale at certain times and they know that


they will not go on sale early. Amazon has been making people know


this because they are known for discounting and they do not have a


feel of a luxury brand. We all use it, I use it, but there are other


retailers out there! But clothing retailers have been nervous about


what it does to their brand if they are seen as the lowest possible


price, displayed in the same way as everyone. But as ever, Amazon have


been courting them and they want to grow this part of their business.


When I read about the dot-com boom in 2000, people said they would


never sell clothing online, but look at the excessive online, Next and


even Marks Spencer. Do you think Amazon will crack it? I think they


will. I love Amazon. But there are other people as well! As you say.


Thank you for your company today. Have a great day wherever you are


watching us in the world. Goodbye. Good morning. Essentially we are


looking at another day of sunny spells and scattered showers, so I


suspect that there could be seen


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