30/09/2014 World Business Report

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A question of law: Is Apple's tax deal with Ireland illegal state aid?

The European Commission will set out its case today. In contempt of

court: A US judge says Argentina must pay its outstanding bond

holders but the indebted nation argues the finding is absurd.

Welcome to World Business Report. I'm Sally Bundock. Also in the

programme, we'll go live to Hong Kong to gauge the impact the

protests are having on businesses in the country. But first, The European

Commission will publish a paper today that will accuse Apple of

prospering from illegal tax deals with the Irish government. The

report is part of a broader EU investigation into tax policies in

Ireland, Netherlands and Luxembourg. The Commission is examining whether

these countries have unfairly favoured multi`national companies

including Apple, Fiat and Starbucks.The in`depth enquiry into

Ireland will decide whether the country's benign tax regime means

multinationals are, in fact, receiving a form of unfair state

aid. If Brussels rules that Ireland's flexible approach to tax

is illegal, Apple could face a fine that would extend into the billions.

Apple says it has not had any special deals in Ireland. Thank you

for being on the programme. Apple has been here before. It has had to

justify its system of working through Ireland and having a very

low tax threshold there are politicians in the United States.

Why will this be any different? I do not think the allegations will be

correct. There is very little detail what is in the report. It is true

that Apple has two Irish companies and they are putting international

revenue through these companies. 60% of the profit and revenue is

flushing through the subsidiaries and they have no residence tax. The

question is, why are multinational firms doing this? Many technology

giants are doing the same in the US because the corporate tax in America

is too high. Perhaps they should address that problem. That will mean

that companies can come back into the US. They are not happy with how

the system is running. The question that stands as, if the European

commission are able to come up with these allegations and can back them

up, what will happen with the Irish government? This is going to be

dragged out in the European courts. They will say they have not given

Apple any kind of special treatment. Then, the battle will

start between the tax regulators and Apple itself. This is looking at

Corporation tax across the board. There is no way that the American or

British government could compete with a 2% tax deal being offered in

Ireland. He cannot possibly imagine anyone would compete. `` you cannot.

That is true. We are not sure. These are just rumours. They have got a

huge base in Ireland. The company has been very intelligent. They

formed a couple of companies in Ireland in 1980. If that is true or

if there is a backdoor deal, or if there is a sweetener, we will have

to find out. We will have to leave it there. It is a complicated legal

story. Thank you very much. The story has got legs. We will touch on

it in the near future. We will tell you more about this when it comes

out. Let's discuss Argentina. A US judge has ruled Argentina is in

contempt of court for refusing to obey an order to repay the debt it

owes to two US hedge funds. The news adds another twist to this dispute

between Argentina and the fund who bought the country's debt at a

discount after its default in 2001. As creditors continue to argue the

country must repay its outstanding debt in full, the Argentinean

president has other ideas. So will either side back down? And what does

this court ruling mean for Argentina? Victoria Fritz has this

report from New York. The judge said that Bernard Saros acted illegally

by avoiding paying the hedge funds. `` as well as arrows. This comes one

day after the US ambassador to Argentina wrote to the Secretary of

State and said this would be an unprecedented escalation in the

conflict and would constitute interference in foreign affairs. Why

are we here in the first place. There were two hedge funds switch

held about $1.3 billion of Argentinian bonds. They were scooped

up after the country defaulted in 2001. They have not taken part in

restructuring. They want full repayment of the bonds. Argentina

says this is impossible. They are refusing to pay them. They have

called them vulture funds. There will be a new default. It started at

the end of July. The judge has not applied penalties for the moment. It

is not clear what practical implications there will be for the

country. The country continues to defy the rulings of the judge. As

the crowds continue to grow in the central business district of Hong

Kong, so markets are falling as banks fail to open, ATMs run out of

cash and businesses in the region remain closed.Later this week Hong

Kong will celebrate a public holiday and there are now concerns retail

sales will fall by more than 20% in the coming days.

They will be a public holiday. After a 2% fall on Monday, the Hang Seng

is down over 1% today. Joining me now is Gavin Parry from the Parry

Global Group ` live from Hong Kong for us now. Thank you for being on

the programme. How debilitating could this be for businesses in Hong

Kong? It does not look like we'll be resolved quickly or easily. It will

have an impact. It is a big retail sale period. We do not think that

this will be a long situation. The Chief Executive made a statement

this morning. This could last for a while. There are certain forces,

economic, political, sociological, and the underlying aspect is that

Hong Kong has always been the golden goose for China. There is a connect

taking place. Hong Kong has always been and looks like it will always

be the international gateway for China. The great fear for us was

that they were going to be converted into an international board. We are

in a position to become the international board for China. I do

not see this as having a big impact. It could have a short`term economic

impact. What are you advising clients based in Asia to do? There

has already been pressure. The market has been affected heavily.

The strong US dollar is an aspect. You have got to think about it on a

historical basis. When this started, when the money was pumped

into the economy, a large chunk of it was going to Hong Kong. It does

not have to be checked by the Treasury. As the stimulus was

growing, asset prices were growing. The tapering of the liquidity is

coming. That is already happening. Thank you very much indeed, Gavin.

Ford Motor has cut it pre tax profit forecast to $6 billion. Previously

the car maker had been hoping to rack in $7 billion to $8 billion in

2014. However, Ford expects pre`tax profits to rise in 2015 to between

$8.5 billion and $9.5 billion. Japan's jobless rate shrank to 3.5%

in August and the availability of jobs held steady at the highest in

22 years. The seasonally adjusted employment rate fell from 3.8% in

July reflecting recent improvement in Japan's labour market.

That is all from the business for now. I will be back in a minute to

review the newspapers. You are watching BBC News. Nearly

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