30/08/2016 BBC Business Live


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This is Business Live from BBC News, with Sally Bundock and Alice Baxter.


The tech giant Apple could face a multi-billion dollar tax bill


following an investigation by the European Union.


Live from London, that's our top story on Tuesday 30th August.


The United States has already warned the EU over unfair tax treatment


Could Brussels go one step further and take a bite out of Apple?


Is today the day we wave goodbye to the UK's biggest tech company?


Shareholders of the chip-designer ARM are expected to vote in favour


And we will keep you up to speed with all the latest from the market.


In London there was no trading In London there was no trading


yesterday due to a bank holiday. And the battle against


soaring rents in India - we'll be finding out


about a new hotel which is promising to offer affordable accommodation


at just 50 cents a night. And as the EU is set to rule


on Apple's tax affairs, we want to know whether you think


Europe needs a rethink Do businesses get a free ride


or is Brussels being too hands-on? Get in touch, just use


the hashtag #bbcbizlive. American tech giant Apple is facing


a potential tax bill running After a three-year probe


into the tech giant's tax arrangements with the Irish


government the findings of a European Union investigation


are expected to be released today. The Financial Times are reporting


that Ireland has given US company "illegal aid" through a so-called


"sweet heart" deal. That deal meant that Apple would


effectively pay just 2% or less in corporation tax if it


based its operations in Cork The big benefit for Ireland


is significant job creation However, under EU law,


national tax authorities are not allowed to give tax benefits


to selected companies - which the EU would consider to be


illegal state aid. Apple may face a bill of as much


as $19 billion if the Irish government is forced to recoup


taxes from the company. However, some reports say


the figure may not be much But it will be up to Irish


authorities to calculate Apple and the Irish government


are both likely to appeal With me is our business


editor, Simon Jack. Good morning. We have been waiting


for this, we are expected to get the outcome of their investigation


today. It is squaring up to be quite tasty trade war because the US


warned, don't get involved with this, if anyone is owed back taxes


from Apple it is the US government. They said the European Union is


getting too big for its boots, acting like a supranational tax


authority, going round to the member countries and telling them how to


organise their tax deals. They have said this is a sweetheart deal, it


is through advantageous tax systems like this that people are tracked --


We are expecting a figure of about We are expecting a figure of about


$1 billion. It is actually up to the Irish government to pursue those


funds and yet the Irish government is saying, we like this arrangement,


it benefits us and Apple. Exactly, 5500 people work for Apple in


Northern Ireland. By giving this tax deal, lots of companies want to go


there. There are lots of other areas that will be looking into this as


well. It is interesting because we will see a race to the bottom in


terms of corporation tax rates. This deal has a tax rate of less than


two. The UK says we have 15% corporation tax and would like to go


lower. It is very divisive when countries offer much lower tax rate


than in another. From the point of view of the Competition Commission,


they have investigated Tarbox, Amazon, Facebook is said to be in


its sights as well. -- Starbucks. I think the recovered about 13 million


from Starbucks. -- 30 million. So this is the big one. There was a lot


of talk about where they should be taxed and they live in the financial


equivalent of outer space with this money, no one can get their hands on


them and that is the danger. I met Tim Cook a short while ago, and he


said if you took it home he would have to pay a tax rate of 35% on


that. That is the backdrop, they are saying this is crazy. The money is


sitting out there in the financial equivalent of outer space, never


comes home because the tax rate is too high. If they were ever to do


it, the shareholders would sue their chief executive for losing so much


money. It is an interesting situation which will be returned to


again and again but Apple is the test case. There is a lot more


detail on our website and we will update you as soon as we hear the


outcome of that investigation. Later today European regulators


will spell out exactly how the continent's so-called net


neutrality rules will work. Net neutrality is the idea that


all pieces of data moving across the internet should be


treated equally - regardless as to whether it's a web page,


a movie or a video call. There are fears that changes


to existing rules could favour major We'll have more on this


later in the show. The remarkable performance


of Japan's labour market continued in July, with the jobless rate


falling to a two-decade low. The unemployment rate fell


0.1% to 3% last month, and versus economists' expectations


it would hold steady at 3.1%. This is the lowest


reading since May 1995. Kim Dotcom, the German-born


entrepreneur who faces extradition to the US over copyright


infringement charges, has won his request to have his appeal


hearings live streamed Mr Dotcom, who lives in New Zealand,


had said the hearings Shares in Hershey have plunged


about 12% after it rejected a $23 billion takeover offer


by Mondelez International - the snacks giant which makes Oreo


cookies and Cadbury chocolates. The tie-up would have created


the world's biggest candy maker. But Mondelez says it's no longer


pursuing the acquisition. Banks in China have seen


their shares rise ahead of releasing Both ICBC and Bank of China


are due to report earnings. These banks are huge, aren't they?


Some of the biggest in the world? They are indeed, and their earnings


are being closely watched. There are lots of concerns because things are


slowing down, lots of major concerns about the banking system and high


levels of bad debt. As of clay you have seen squeezed profit margins,


mounting bad loans, all of this expected in the report. But shares


are up for both these banks as investors seem to be shrugging off


these concerns alongside warnings from credit rating agencies that the


banking system in China faces a systemic risk. You also have things


like overcapacity in some industries like mining and steel which made


less investment is funded by debt less profitable and analysts have


pointed to several indicators showing how Chinese firms' ability


to pay debt is now also starting to deteriorate. Amongst the most


troubled sectors, we are seeing real estate, manufacturing, steel as well


as mining, so all of this means these earnings results will not be


great. Nevertheless stocks are higher today with ICBC approaching


its highest close since October last year, while Bank of China extended


verse 2/7%. Let's have a look at the impact of that.


Japan's Nikkei is flat. Here in London, the FTSE 100 was closed on


Monday for a bank holiday. Today we can see it is open, just a verso


slightly down. The US dollar backed off a two-day hike, still hovering


under $50 per barrel. Elsewhere in Europe, markets modestly higher.


Michelle has the details about what's ahead on Wall Street today.


Wall Street will have a couple of economic


reports to digest ahead of the


Data due out later this Tuesday is likely to show consumers


are feeling more anxious about their financial situation.


US consumer confidence is expected to have


Better news is anticipated from the housing market.


Case Shillar releases its monthly 20 city housing price index and it's


forecast to have risen 5.2% in the past 12 months to June.


And on the corporate front, struggling teen


clothing retailer, Abercromby and Fitch reports second quarter


Investors will look for comments on the recovery at the


brand and its performance so far in the third quarter.


Now, the company has been investing heavily to


remodel its Hollister stores and is working to try and turn


With me is Simon French, chief economist for Panmure Gordon.


Nice to see you. Michelle mentioned quite a lot going on in the States,


but let's talk about arm Holdings, which is a big success story here in


the UK, and it looks like their shareholders will approve its


takeover by the Japanese company Softbank. It is a huge deal, and


after the announcement of the takeover there was a premium of 43%


of the trading value and that's where shares are trading this


morning. Theresa May has revealed an industrial strategy from the


Government will take a more critical eye at takeovers, the backdrop to


this is Cadbury and Kraft and also the botched takeover of Pfizer and


AstraZeneca seem not to be in the interests of the firms involved. The


first real test was whether the Government would take a closer look


at this. It seems it won't, it seems the investor confidence priority


post-referendum vote has taken priority over industrial strategy


and we expect that by Friday, Arm will delist from the FTSE 100. It is


quite phenomenal really. It is, the huge story. Another big story this


morning is where the negotiations between this free trade deal. We


heard the German economy Minister saying he thinks negotiations will


all but fail, over the weekend. Where are we? Officials have been


negotiating this for about three years now, but actually I think as


we enter into the electoral cycle, most obviously in the US in


November, but also in French and German elections in 2017, the


politicians are looking back at their electorates and saying there


is no support for free trade arrangements. Most of the electorate


look at arrangements that have been brokered over the last 20, 30 years,


and don't see a material benefit for themselves so public support to try


to have common standards and regulatory processes, certainly


controversial in Europe where it is billed as a race to the bottom in


terms of regulation, it means these things will certainly be parked as


we get through the electoral cycle and arguably parked for good.


Interesting given that we will be in the thick of that negotiating


situation as well. Simon will return to look at the


papers and about five minutes. Also still to come...


Building affordable accommodation for low income workers.


We'll be talking to one entrepreneur who's about to open a hotel


You're with Business Live from BBC News


Foreign companies invested a record amount into the UK


The figures don't cover the period after the EU referendum,


but the figures suggest the UK is once again the most


attractive destination in the EU for foreign firms.


Our economics correspondent Andrew Walker can tell us more.


Andrew, walk us through these figures? One of the really striking


ones is the suggestion that there are 116,000 jobs either created or


protected as a result of investment from outside the UK. There is


striking, and in particular the Department of International trade


highlights Britain's status, it says, as the most popular


destination in Europe for investment from emerging economies. We have


some growth in investment from, they mention particularly, China, Hong


Kong and India. One of the central planks in the campaign to leave the


European Union was the idea that Britain could develop its economic


relationship with countries outside of the great emerging economies


outside the EU, like the three that I mentioned, more effectively. These


figures don't cover the period since the referendum, but at the very


least they suggest that any uncertainty created in advance of


the vote does not seem to have had any effect on inward investment,


certainly not as revealed by the Department of International Trade's


new figures. It is interesting, because as we get


more data coming in, it seems fairly positive? The bulk of it has been.


The one major exception to that was the survey data, the purchasing


index, which was what prompted the Bank of England into taking it very


striking action, cutting interest rates and restarting quantitative


easing. But a great deal of the data, particularly on consumer


spending, has been relatively positive. It has certainly suggested


no overwhelming short-term impact on the British economy. Many economists


would say we need to look to the longer term to see just how business


investment decisions respond over a longer period to the vote, and the


uncertainty created by Britain's future relationship with the EU


might have some impact, but much of what we have had so far has been


positive. Our top story - the tech giant Apple


could face a multi-billion dollar tax bill following an investigation


by the European Union. After a three-year probe


into the company's tax arrangements with the Irish government,


the findings of a European Union investigation are expected


to be released today. As soon as we hear, we will update


you. Now let's get the inside track on the global problem of housing.


Many people just can't afford housing.


One young social entrepreneur has launched Chototel,


a hotel start-up chain which seeks to provide the lowest paid


workers with affordable and dignified accommodation.


The first is opening next month in a densely populated industrial


town about 70 miles south of Mumbai, with three others planned


in the same town in the following four months.


Each Chototel will offer clean, digitally connected and carefully


The cheapest accommodation costs roughly 50 cents a night -


around one tenth of the typical $5 a day received by the


Chototel is planning to expand to the UK, UAE and Nigeria


She's the founder of Chototel, a chain of super-budget hotels.


Good morning, thank you for coming in. You are based in Mumbai. You are


just 24, which is very young to be starting up a company, but you are a


third generation entrepreneur all about social provision. Tell us


more? When you start off a business you always ask yourself, what are


your goals, are they clear enough to do? I think the most important


question that we should ask ourselves is our these goals in spy


business like this, it is very hard on the ground. Everything that can


go wrong inevitably goes wrong. Unless you have those inspiring


goals and that purpose in your vision, it does not give you the


motivation to fight another day. What greater joy than two solve the


most under Salt market segments, that is where we innovate from? We


mentioned you are fairly young, but your great-uncle, your father, they


have all been involved in this kind of thing in India, so you grew up in


that environment? I would imagine they have helped you a lot? Most


definitely. I have had more than 20 years of work. -- work experience.


My uncle would come and discuss business at the dining table. Talk


me through the business model, it is a wonderful social enterprise, but


you have -- how have you created a hotel which so undercuts your


competitors? It works similarly to house rentals, where we own the acid


itself, which is appreciating in value, then you also benefit from


the monthly or the daily rents that you get from the residents. It is a


pretty hi-tech operation, talk me through how you work at someone's


bill, utility bill, Internet bill at such a technology plays a very large


part in why we can provide accommodation at $2 a night. We use


technology to build quicker, to run the hotels in an unmanned way. Most


importantly, we use financial technology to make sure money is


moved real-time and information is available anywhere. So you can


monitor usage of utilities like water and lighting, but they are


paying you digitally, the whole thing is running smoothly from that


point of view? If they are not paying you, they literally can't get


in the door? They are locked out? You know, we do use technology, it


is an important part of being able to scale the business. Unless


technology is that every point, it is impossible to run a very large


scale operation. You are planning to roll out the pilot in the by, then


you have plans to expand into the UAE and the UK. That fantastic price


point that we have talked about, how will that vary across these


different territories? Over year, we can afford to pay a little more than


$2 a night, but it is possible that around $5 in the UAE and about $8 in


the UK. How do you vet the people staying, is it first-come,


first-served? In your brief it says that if they were not staying in


your hotel it is likely they would be sleeping in the streets? We are


very firm believers of free markets, whether it is prices... The people


coming in, it has to be market-driven. The minute we give a


subsidy or accept one, our business is not scalable. The model is not


replicable. It is very much driven by the market. The solution to that,


which would be increasing the amount of supply available, but would keep


the prices low. Thank you the coming in, Rhea Silva. Fascinating, we


shall keep an eye on what Europe to Chototel, definitely.


Let's see what other stories are being talked


In a moment we'll take a look through the business pages,


but first here's a quick reminder of how to get in touch with us.


Website is how you can stay ahead. We will keep you up to date with the


latest details, with insight and analysis from the BBC's team of


editors around the world. We want to hear from you, get


involved on the BBC business web page. You can find us on Twitter or


Facebook. Business Live, on TV and online, whenever you need to know.


Simon has returned. You have been getting in touch, Michelle Fleury


has appealed to you, we have had some tweets about Apple.


Our question is whether Apple should have to pay tax apples in Ireland?


One person has said the company is literally richer than many


countries, they should pay every penny.


Another person says taxes should be collected where firms realise their


value is added, the aggressive EU tax policy is getting out of its


scope. It is interesting, Simon? Your thoughts? The corporation tax


regime was designed in a period capital was not able to freely move


across borders. It is wholly unfit for purpose. The OECD nanograms 20


run top of this and looking at base erosion profit shifting, as one as


your Tweet suggested, looking at where the profit is geographically


generated and taxed in that location. That is hard given the


technology systems available to the tax collecting bodies, but it is the


direction of trouble. Simon Jack said earlier, this is


retrospectively looking at quite aggressive Corporation Tax policies


from Ireland. If somebody came to you and said we want to relocate due


to Warsaw, we have a big offer, this is the financial the war sword charm


offensive to woo London bankers. Would you pack your bags? Probably


not. That is not a slight on Poland or Warsaw, but Warsaw is just one


city trying to take advantage of the referendum vote, trying to get by


this -- bankers and businesses to relocate. At -- Paris is another


one. But I think it will fall on deaf ears, because we do not know


which financial plus sporting will be available in the UK, post-Brexit.


Thank you for coming in, and thank you for your company. Goodbye.


Whilst we can look forward to another fine day with warm spells of


such a coming through, you might have heard that out in the Atlantic


there is Hurricanes Gaston Pereiro a category two hurricane, not far off


being category


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