31/08/2017 World Business Report

Now it's time for World Business Report.

A taxing task for Trump, as he pushes plans to ease

the burden on business and the middle classes.

But can he sell it to a sceptical Congress?

Plus, crude warning - the boss of Shell says the price

of oil could soon be heading higher as lack

Also coming up, unexpected good news as China's factories move up

where President Trump has begun a speaking tour to try and build

He described the US tax code - which hasn't been reformed for three

And he called for a more competitive system to boost jobs and wages,

repeating his ambition to cut America's corporate tax rate

On paper the US corporation tax rate is one of the world's

Taking into account various tax breaks, top US firms pay a bit less

That still compares unfavourably with the 25% rate in China,

19% in the UK, and just 12.5% in Ireland -

where many top US firms have their overseas headquarters.

Which has led of course to this - $2.5 trillion worth of profits

channelled overseas by top US companies as they look

The US national debt is spiralling towards $20 trillion.

So would cutting taxes boost the economy, and tempt US firms

Or would it just do more damage to the government's finances?

That's an argument the President will have to take to Congress,

as Michelle Fleury reports from New York.

These stock market is art. The unemployment rate is at an all-time

low. If you listened to Donald Trump on Wednesday, you heard him say the

system is rigged. In a speech to introduce tax reform, the US

President told the crowd, the country's tax system was broken. His

sales pitch, which was light on details, focused on how it would

then that the middle class. Our self-destructive tax code costs

Americans millions and millions of job, trillions of dollars, and

billions of hours spent on compliance and paperwork. One

proposal he has been pushing is cutting the nation's 35% corporate

tax rate to 15%. Those in favour say it would encourage companies to stay

in the United States and create jobs, but not so fast. Budget

experts say the plan could cost the government $2 trillion, and critics

argue there is no evidence that companies saving more on taxes will

expand their workforces. Plus, the tax code is so full of loopholes

that most firms already pay less. There is bipartisan support to

simpler by America's tax code. But given potential impact on workers,

businesses and the country's deficit, modernising the rules would

get for water. Professor Alan Auerbach is Professor

of Economics at the University Good to see you again, Professor.

Can you give us your take on President Trump's challenge? Will he

pull it off and get a 15% corporation tax rate in the US? I

think he is still talking about 15%, but others in his administration

have begun talking about 20% or 25%. So maybe he is still talking about

that in speeches, but I think it is extremely unlikely we are going to

see a 15% tax rate. So we will see some kind of political fudge at the

end of it? Well... Will it either desired effect of American companies

bringing profits home? -- will it see the desired effect. I think it

depends on the details, and as you said, that has been very light so

far. If we just have a cut in the corporate tax rate, that in itself

would encourage companies to bring profits home and perhaps to locate

more production in the United States. The big question is how he

will pay for it. Simply issuing more debt in order to do that would

equate counter-productive. All in all, that would not be a good policy

to follow. They are taking a path of least resistance right now and

promising benefits without really indicating how they are going to

balance the package. And of course that is where the difficulty comes

in. Partick million trying to hold their fragile Republican coalition

together, especially in the senate. -- particularly in trying to hold.

From your perspective, how are the public finances? We have given the

barebones facts, with public debit heading towards $20 trillion. That

is such an enormous sum. But the US economy, we had a revision of the

latest GDP numbers upwards, I mean, the economy is healthy. The economy

is very healthy. We are experiencing a very low unemployment rate. We

just had a revision upward of our recent growth. The US economy is

doing well, which is not to say that we couldn't do better, with a more

sensible tax system. But I would say that taking harsh or extreme

measures right now in the name of rhetoric thing and economy, I think

that would be inappropriate. A cheerful, well-designed tax reform

would be a benefit for the US economy. -- careful, well-designed.

But simply passing a tax cut to declare victory, that something has

been accomplished, that would be a big mistake. We will watch this

space closely. Thank you for your time.

Let's go to Asia and talk about the economy. China moved up in August in

terms of their factory sector, better than most economists were

predicting. That will ease concerns about the help of the Chinese

economy. Sharanjit Leyl joins us. The numbers are looking good for

China, following hot on the heels of the US revision upwards as well?

Absolutely. You said it. Most markets in the region are going up

as a result, because of all this good news. China, as you said,

posted stronger than expect the factory sector growth in August. The

purchasing managers index, that is the official one, it is a gauge of

the help of the manufacturing sector, and it came in at 51.7,

crucially above the 50 point mark that separates growth from

contraction. Analysts had expected it to actually be fairly little

change from July. So China's resilience is giving something of an

extra boost to the global recovery, especially, like you said, at a time

in the US economy also seems to be bouncing back. You just said US

growth would be revised up to register growth, the fastest pace in

more than two years. China has had to manage its economy much more

carefully, because it has cracked down on riskier lending, it has put

in place tough curbs to get its housing market under control, and we

saw a growing by a better-than-expected 6.9% in the

first half. -- saw it growing. So we have seen this better data, but the

services sector has not shown as much growth. Thank you, Sharanjit

Leyl. The industry has got

used to lower prices, but the boss of Shell,

Ben van Beurden, has told the BBC that prices could start rising soon,

as underinvestment reduces Good news for oil companies,

you might think. But not necessarily,

as he told our business editor If you look at it in the slightly

longer term, I think the fundamentals are such that supply is

going to be a little bit tight. Not necessarily next quarter, not

necessarily very predictably. There might be seasonal effects, there

might be other effects. But I think the market is actually in balance,

and it will tighten a bit more. So there is probably more propensity

for the oil price to drift higher than lower. But you have to bear in

mind come in the short term, it is driven by sentiment, so it can go in

any direction. That is interesting. You are saying that underinvestment

in bigger projects over the last couple of years, because of the low

oil price, is so -- is selling PCs for a potential oil price spike

knowing forward? -- selling in the seeds. -- sowing. I think that is a

risk, and nobody would benefit from that. You would. I don't think so.

It is a popular belief, that this is good for oil companies, but I can

tell you that it isn't. What is important to us as a relatively

predictable market, a relatively predictable outlook for supply and

demand, prices, et cetera. Because look at what happens, if oil prices

drop down from over 100 to less than 30, you know, there in mind every

$10 in the oil price is like $5 billion of cash per year for me. --

bear in mind. So the amount of impact on our operations is massive.

We cannot, as an industry, have a predictable and efficient way of

running our business, when you have so much disruption and so much

cycling. Of course, we can take costs out of a weak and simple by

projects, but also you have to put people out of business because you

can't afford it any more, or you are not going to build as much as you

would like to build. And next time around, you know, it all reverses

again. That is a very inefficient way of actually running the

industry, and nobody benefits from that. Least of all customers, but

definitely also not us. That was the boss of Shell, speaking

to Simon Jack. Looking at markets now, the price of oil has declined,

but gasoline is going up and up. This has to do with Hurricane Harvey

pounding the energy rich Gulf of Mexico coastline. Mixed markets,

slightly down for Hong Kong. Overall, sentiment is positive,

thanks to the news from China and also the GDP figures from the US the

night before. I will see you again shortly.

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