Author: Ashton Wenborn

Top 5 countries with the highest trade tariffs

Posted on by Ashton Wenborn

When Donald Trump took his seat in the White House, he promised to shake up global trade as part of his ‘America First’ policy. The US president certainly upheld that promise, initiating trade attacks on China, the EU and neighbouring partners such as Canada and Mexico. The trade war with China, in particular, has upset global markets, which have risen and fallen at each new development.

In an era where developed nations swear by low tariffs and free trade, the US has firmly stuck a spanner in the works. With the prospect of increased tariffs looming, World Finance lists the countries that impose the highest charges on imported goods.

 

1 – The Bahamas (18.56%)
The Caribbean’s wealthiest country also imposes the world’s highest tariffs on imported items. Despite relying on imports – the country has a trade deficit of $7.781bn – the Bahamian Government raises 60 percent of its total revenue from import taxes. While the basic tariff rate is levied at 35 percent, a growing list of tax-free items has reduced the average tax rate to 18.56 percent.

Despite relying on imports – the country has a trade deficit of $7.781bn – the Bahamian Government raises 60 percent of its total revenue from import taxes

It’s a stark contrast to the Bahamas’ tax rates; the country imposes no income tax, corporate tax, capital gains tax or wealth tax. Along with the tariffs, the island, which is located just off the coast of Miami, relies on tourism, mainly from the US, to drive its economy.

 

2 – Gabon (16.93%)
Located on Africa’s west coast, this Francophone country is one of the continent’s medium-sized economies. While its crude oil reserves and abundance of timber have resulted in a healthy trade surplus of $2.79bn and steady GDP growth since the start of the millennium, unemployment remains high, along with poverty rates. In addition, the country’s failure to diversify its economy has resulted in a slowdown in recent years.

Gabon is part of the Central African Economic and Monetary Community (CEMAC), an alliance between seven Central African nations, where no tariffs are imposed on its partners – though trade between them is rare. However, elsewhere around the global the CEMAC community imposes high charges on imported goods such as food and raw materials.

 

3 – Chad (16.36%)
The landlocked Central African nation is another CEMAC member, again following the imposition of high tariffs on imports from outside the alliance. Trade makes up 68 percent of Chad’s GDP, though unlike Gabon, the nation has run up a trade deficit in recent years, at $630m. However, much of Chad’s trade is informal – 80 percent of residents rely on agriculture and the exchange of cattle – and has never been recorded. Therefore trade estimates should be treated with caution.

Oil and agriculture make up the majority of Chad’s exports, with over half heading to the US. Imported rice and flour are subject to the lowest tariffs at just five percent, which increases to 30 percent for tinned foods and electronics.

 

4 – Bermuda (15.39%)
The isolated British overseas territory has one of the world’s highest GDP per capita, as a result of its offshore financial services. Considered a tax haven with loose regulations, an estimated 18,000 foreign companies operate on the island. Bermuda is scarce in resources suitable for exports and has a non-existent manufacturing base. Therefore, most of its products are imported, mainly from the UK.

The high tariffs imposed on goods account for a large proportion of government revenue and generally reflect expensive retail prices. The majority of products are subject to a charge of 22.25 percent, though this is lower for food, and tariffs on essential medical items are removed altogether.

 

5 – Central African Republic (14.51%)
The third CEMAC country to make this list, the Central African Republic (CAR), is one of the world’s poorest countries. The nation is trapped in a civil war, which decimated its GDP in 2013 and has resulted in substantial foreign aid being needed to support the government and its citizens. CAR is rich in natural resources and possesses a range of minerals such as diamonds, gold and uranium. However, smuggling is rife in the country and a large percent of goods end up in the hands of illicit traders.

Crops such as coffee, cotton and tobacco are also exported, however, despite its supplies, the country imports nearly double the amount it exports. In a similar vein to its fellow CEMAC members, CAR’s imports mainly consist of food, as well as machinery to aid the country’s mining sector.

Venezuelan President Nicolas Maduro remains defiant as his second term begins

Posted on by Ashton Wenborn

On January 10, Venezuelan President Nicolas Maduro began a second six-year term in power, despite an international outcry over the legitimacy of his re-election, further isolating the South American country in the iron grip of an economic and humanitarian crisis.

The 56-year-old heir of Hugo Chávez, Maduro has presided over the Venezuela’s worst economic crisis in history. The country’s economy has collapsed by almost 50 percent in the past five years, contracting by 15.7 percent in 2017 alone.

While this so-called ‘economic war’ originated under Chávez, it has been exacerbated by Maduro’s failure to cut public spending during the 2014-15 oil glut and the subsequent devaluation of the country’s most precious commodity. Maduro, meanwhile, has blamed the crisis on a capitalist plot to drive up inflation rates.

Maduro was elected after Chávez’s death in 2013 by a margin of just 1.6 percentage points, the closest vote in the country’s history. His re-election in May last year was also mired in scandal, with accusations of vote buying and corrupt electoral processes running rife.

Last week, 13 of the 14 members of the so-called Lima Group, a Latin American bloc that includes Brazil, Argentina and Canada, announced that they would not recognise Maduro as a legitimate leader of Venezuela. The most fervent critics within the bloc include Brazil’s far-right leader Jair Bolsonaro, who has described Maduro’s communist ideology as “despicable and murderous” and in 2017 vowed to “do whatever is possible to see that government deposed.”

In the US, the Trump administration has also stepped up pressure on Maduro through the application of economic sanctions. The latest measures, announced this week by the US Treasury Department, aim to curb a currency exchange scheme that allowed corrupt government officials to siphon off billions of dollars in illegal profits.

“Our actions against this corrupt currency exchange network expose yet another deplorable practice that Venezuela regime insiders have used to benefit themselves at the expense of the Venezuelan people,” US Treasury Secretary Steven Mnuchin said in a statement on January 8.

President Trump himself has also suggested that the US was prepared to use military action against Venezuela if necessary.

Most members of the Lima Group have called their diplomats home from Venezuela and will not send delegates to Maduro’s inauguration as per international custom, according to diplomatic sources.

Meanwhile, while the rest of the world turns its back on Venezuela, its citizens are desperately crying out for help. Rampant hyperinflation, currently approaching two million percent, has devalued salaries in the country to the point that the monthly minimum wage is not longer sufficient to purchase a box of eggs. The IMF expects it to rise to 10 million percent by the end of the year.

Venezuela’s Living Conditions Survey found in 2017 that 75 percent of the country’s citizens has lost an average of at least 19 pounds (7kg) over the previous year as they simply could not afford to feed themselves adequately. The same survey revealed that 87 percent of the country was living below the poverty line in 2017, with a staggering 61.2 percent classed as extremely poor.

Maduro’s response to hyperinflation has been to raise the national minimum wage, which has only fuelled the issue further, meaning that Venezuelans spending ability actually decreases with every raise. In August 2018, Maduro launched a new currency, named the ‘sovereign bolivar’, which was pegged to the state-backed petro cryptocurrency. This did nothing to solve hyperinflation, which simply began again from the base benchmark set by the new currency, while the policy drew international ire as the petro cryptocurrency is regarded as fanciful by many other world powers.

According to the United Nations, some three million people have emigrated from Venezuela since 2015, in a frantic bid to escape malnutrition and the rising crime epidemic. While Maduro’s government has repealed access to crime data and has ceased to publish official figures, research from the NGO Venezuelan Violence Observatory put the country’s violent death rate at 81.4 per 100,000 citizens in 2018. This makes Venezuela the most violent country in Latin America, with more deaths than notorious crime hotspots like El Salvador and Honduras.

As the country sinks further into socio-economic ruin, it seems increasingly less likely that it will be able to pull itself free without substantial international aid. All the while Maduro remains in power, however, there is scant chance of that aid coming to fruition. Meanwhile, the country’s impoverished citizens become ever more desperate, with malnutrition, disease and rising crime posing ever greater threats to their lives.

World Bank slashes 2019 forecast amid global economic slowdown

Posted on by Ashton Wenborn

The World Bank has warned of “darkening skies” for the global economy, leading it to cut its growth forecast from three percent to 2.9 percent for 2019.

A downturn in the US economy increases the probability of a global recession to 50 percent

In its Global Economic Prospects (GEP) report, issued on January 8, the international financial institution cited elevated trade tensions and the contraction of financing conditions as key reasons for the downgrade.

The US-China trade war is named as a significant concern, along with dismal performance in the US, the world’s largest economy. In 2021, the US’ economic expansion is forecasted to be just 1.6 percent, compared to last year’s 2.9 percent rate, as a result of rising protectionism and the diminishing effect of tax cuts.

Unlike some commentators, the World Bank is not forecasting a recession for the US in 2019. It has said, however, that a downturn in the US economy increases the probability of a global recession to 50 percent.

The 200-page document also highlighted that emerging markets have been hit particularly hard by adverse macroeconomic conditions.  “In a nutshell, growth has weakened, trade tensions remain high, several developing economies have experienced financial stress, and risks to the outlook have increased,” it stated.

Increasing debt in emerging markets is also marked out as a source of concern, particularly if the global economic downturn gathers pace. According to the report, median government debt has risen by more than 17 percentage points of GDP since 2013, creating vulnerabilities in developing economies and leaving them more susceptible to market fluctuations and compromised rapid recoverability.

“The majority of Low Income Countries would be hard hit by a sudden weakening in trade or global financial conditions given their high levels of external debt, lack of fiscal space, low foreign currency reserves, and undiversified exports,” the GEP document observes.

Prospects for sub-Saharan Africa are notably poor, with the report predicting per capita growth of less than one percent. This rate is not sufficient to lift the region, which is forecasted to hold 86 percent of the world’s poorest people by 2030, out of poverty.

The World Bank expects challenging financial conditions to continue into 2020, for which it has also cut its growth predictions from 2.9 to 2.8 percent.

The global financial institution is also facing its own challenges, as its president Jim Yong Kim unexpectedly resigned on January 7, three years before he was expected to retire. While the succession process is supposed to be open, the World Bank has been governed by an American since its inception in 1944, due to an unwritten rule struck up between the US and its European allies after the Second World War.

Developing nations are now expected to redouble their efforts to nominate non-American candidates for the prestigious position, creating a challenging environment for the US, which has always typically nominated a successor. The final decision lies with World Bank shareholders.

European Central Bank confirms end of quantitative easing programme

Posted on by Ashton Wenborn

Following a decade of recessions and financial crises, the European Central Bank (ECB) announced on December 13 that one of the most extensive quantitative easing programmes ever seen would come to a close. The unanimous decision by the ECB council was widely expected – the bank has long signalled it would end new purchases this month.

For four years, the bond-buying scheme has kept interest rates, and therefore borrowing costs, at historic lows to encourage investment from European governments. At a press conference regarding the decision, Mario Draghi, President of the ECB, said that at times quantitative easing was “the only driver of this recovery”. In total, the programme pumped €2.6trn ($2.94trn) into the eurozone economy.

Despite it being one of the more contentious economic policies among European politicians, advocates have credited Draghi’s programme with propelling a robust post-crisis recovery.

Beginning in 2015, the ECB’s quantitative easing policy followed the actions of the UK and US. The UK created £375bn ($550bn) of new money in its quantitative easing programme between 2009 and 2012, while the US Federal Reserve bought bonds worth more than $3.7trn between 2008 and 2015.

Although the decision to end the stimulus programme signals that Draghi has increased confidence in the health of the eurozone, the cessation comes at a time of slowing growth

Although the decision to end the stimulus programme signals that Draghi has increased confidence in the health of the eurozone, the cessation comes at a time of slowing growth. The ECB chief warned that rising uncertainty had forced the bank to downgrade growth forecasts.

Following healthy expansion in 2017, when the eurozone grew at its fastest rate since the financial crisis, this year’s third quarter saw growth slow to a four-year low of just 0.2 percent. In fact, Germany, the eurozone’s largest economy, shrank from July to September.

“The risks surrounding the euro area growth outlook are assessed as broadly balanced,” read Draghi’s statement. “On the one hand, the prevailing positive cyclical momentum could lead to stronger growth in the near term. On the other hand, downside risks continue to relate primarily to global factors, including rising protectionism and developments in foreign exchange and other financial markets.”

The euro fell 0.3 percent against the dollar in response to the ECB’s decision, while the ECB said it would continue to reinvest the proceeds of bonds that are now maturing.

Why wine continues to be one of the most secure global investments

Posted on by Ashton Wenborn

Following the 2008 financial crisis, investors have become much more cautious about their activities – even more so as a result of the market volatility and record low interest rates for the last decade. This unpredictability has led to an enhanced demand for diversified investments, including passion assets. This term describes physical commodities that the investor gains pleasure from owning – cars, coins, antiques and fine wines – and that prove stable in all types of economic conditions.

Real estate consultancy Knight Frank found that 68 percent of respondents to its annual Attitudes Survey, published in its Wealth Report 2018, said their high-net-worth clients had become more interested in these sorts of investments. In its 2017 Luxury Investment Index, Knight Frank also discovered that of the 10 luxury investments it tracked, eight had increased in value over a 10-year period. In the decade from Q4 2007 to Q4 2017, fine wine experienced a 192 percent growth.

In the decade from Q4 2007 to Q4 2017, fine wine experienced a 192 percent growth

One of the main benefits of investing in wine is that it has huge consumer and collector demand. Global alcohol consumption is estimated to have grown by 0.1 percent in 2017, which equates to 3.5 million nine-litre cases, according to market researcher IWSR. In comparison, global wine production has dropped to a historic low, with the International Organisation of Vine and Wine confirming that production is at the lowest level since 1957 as a result of poor weather conditions across the EU. In investment terms, this means wine has become more attractive as a commodity based on the supply vs demand economic laws.

Historically, wine has performed well in pure investment returns and has the benefit of being a tax-free asset. There are numerous ways to invest in wine, whether through a winery, physical wine, a wine fund or publicly traded stocks and shares. As these areas can be tough to navigate, one of the main methods investors can enhance their knowledge is through the use of an investment specialist.

Cult Wines is an award-winning global leader in fine wine investment and collection management services. The company has featured in The Sunday Times’ Fast Track 100 in three of the last four years and won the prestigious Queen’s Award for Enterprise: International Trade in 2017. Cult Wines prides itself on openness and transparency and has a huge amount of experience and data at its disposal to help investors succeed in the wine market. This is borne out by the strength of its average portfolio returns, which have consistently outperformed the industry benchmark.

The company has grown dramatically from a start-up in 2007. In addition to its headquarters in London, it has offices in Hong Kong and Singapore. Its website caters to a global audience, offering a comprehensive overview of the company’s services as well as an introduction to the world of fine wine investment; providing a wealth of tools to kick-start the investment process, including a fine wine directory, a guide to wine investment, videos and events.

Tom Gearing, Managing Director at Cult Wines

Speaking about the importance of its service, Tom Gearing, Managing Director at Cult Wines, said:

“High levels of customer service are crucial for any successful firm, but we strive to go one step further, as what we offer is bespoke to each and every client. We see the relationship with our customers as one that is defined by this personal approach, delivered by our Portfolio Managers – who maintain each client relationship from inception and for the whole duration, typically over many years. In turn we offer comprehensive services to help people invest in the best wine, such as sourcing, logistics, storage, analysis, reporting, technology and accounting. We constantly seek to improve what we do on a daily basis and pride ourselves on our attention to detail.”

To discover more about the service, go to wineinvestment.com or read the Cult Wines Fine Wine Investment Guide here.

EU-Japan trade deal ratified by EU parliament

Posted on by Ashton Wenborn

On December 12, following nearly five years of negotiations, the European Parliament finally approved the EU-Japan trade deal. It is hoped the agreement, the largest ever struck by the EU, “will raise the benchmark for international commercial ties”.

President of the European Commission Jean-Claude Juncker said in a statement: “I praise the European Parliament for today’s vote that reinforces Europe’s unequivocal message: together with close partners and friends like Japan we will continue to defend open, win-win and rules-based trade.”

The deal binds together two economies that together account for a third of global GDP

The agreement was ratified with 474 votes in favour, 156 against and 40 abstentions. Japan’s parliament agreed to the deal earlier in the week. Once EU member states approve the pact on February 1, 2019, the trade deal will create the world’s largest free trade zone.

The deal binds two economies that together account for a third of global GDP. It will remove EU tariffs of 10 percent on Japanese cars and three percent for most car parts. Japanese duties on cheese and wine will also be scrapped.

Additionally, it will open up services markets, including financial services, telecoms, e-commerce and transport. An estimated €58bn ($66bn) of goods and €28bn ($32bn) of services are exported by EU businesses to Japan each year.

Before the US withdrew its signature, Japan was part of the 12-nation Trans-Pacific Partnership. However, Donald Trump’s rejection of the deal saw Tokyo turn its focus towards other prospective partners.

In similar circumstances, after negotiations regarding the Transatlantic Trade and Investment Partnership stalled with the US, the EU also branched out to find other potential partnerships.

“Everyone knows there is a tariff man on the other side of the Atlantic,” said Bernd Lange, Head of the European Parliament Committee on International Trade. “Our answer is clear. We are not tariff men, but the people of fair trade.”

Japan and the EU face continued tension with Trump, who has imposed tariffs on imports of steel and aluminium. Nevertheless, both parties have pledged to start separate trade talks with the US.

Deutsche Bank reports suspicious tax transactions to German authorities

Posted on by Ashton Wenborn

Deutsche Bank has notified German authorities of a number of suspicious transactions that may have allowed customers to falsely claim dividend tax credit, according to data from an internal review.

The transactions in question relate to the issue of American depositary receipts (ADRs). Non-US companies use ADRs to trade on US exchanges, as they are denominated and pay dividends in US dollars.

In July this year, Deutsche Bank was fined $75m for its part in fraudulent ADR transactions

Normally, to issue an ADR a depository bank must hold the equivalent number of domestic shares in custody. When contacted by a counterparty seeking to purchase an ADR, the bank swaps the domestic shares for ADRs. This process removes both the ADRs and the domestic shares from the market.

However, some banks can pre-release ADRs, issuing them before the underlying shares are received, provided the broker acting for the counterparty signs off on the transaction.

This effectively means the shares exist in two places simultaneously. As part of the deal, the counterparty theoretically promises the ADR issuer that it will not claim a tax credit on those shares. In the case of Deutsche Bank, this promise was not upheld.

According to sources familiar with the document, the German lender’s internal review found that more than five percent of its pre-released ADR transactions between 2010 and 2015 had potentially been mishandled and German dividend tax credit claimed erroneously.

Deutsche Bank estimated that the potentially suspicious transactions accounted for around €25m ($28.5m) in German withholding tax. Up to €5m ($5.7m) of this sum may relate to transactions between different units of Deutsche Bank, which acted as counterparties for one another in various transactions.

The review did not include data on whether irregular claims were actually made. If any capital was claimed by its own staff, however, the bank will be expected to repay it in full to the German authorities.

German politician Gerhard Schick said the review clearly demonstrates “illegal conduct.” He told the Financial Times: “you cannot claim tax credit for taxes which you did not pay in the first place.”

The US Securities and Exchange Commission (SEC) has been investigating pre-release ADRs since 2014, after discovering “industry-wide abuses”. A number of lenders, including ITG, Citibank and Deutsche Bank, have already reached settlements with the SEC regarding improper handling of ADRs.

In July this year, Deutsche Bank was fined $75m for its part in fraudulent ADR transactions, with the SEC stating that the lender had been “negligent” in ensuring that counterparties actually owned shares.

Finance Minister Olaf Scholz will tackle Deutsche’s latest misgivings in German parliament on December 11. Deutsche Bank declined to comment on the allegations.

Nigeria moves further towards financial inclusion with Eyowo app

Posted on by Ashton Wenborn

In recent years, many political leaders have become concerned by the levels of economic inequality in the world, much of which is caused by the number of people who have little or no access to the basics – education, health care, power and financial services. The problem of financial inclusion is most pronounced in low and middle-income emerging markets and has a huge impact on an individual’s ability to start a business, pay for education and engage in other opportunities to further their economic prospects.

Africa has big issues with financial inclusion. Nigeria has one of the largest unbanked populations; of its 197 million population, only 30 million have access to banking services, as of 2017. Policymakers are trying to remedy this through the country’s Financial Inclusion Strategy, but many see technological development as the best long-term solution. Numerous fintech organisations have opened in the country to provide citizens with easily accessible banking products. The Circle Group, for example, has produced Imaginarium, a group-based app to encourage friends and family to make joint savings and investments.

Eyowo can be used on a wide variety of devices, meaning users do not need smartphones to access
its services

One Nigerian organisation that has made huge strides in enhancing financial inclusion is Softcom, a technology company. It has done much to support Nigeria’s unbanked population through its new mobile application, Eyowo. This product allows people to make transactions using only their mobile phone so a user can send money to anyone who has a phone number with or without a bank account and internet connectivity.

What separates Eyowo from other products is its convenience and accessibility – as long as you have a GSM phone line, you can use Eyowo’s features.

Currently, if someone in Nigeria wants to pay for a service or product, they can do so through one of the following channels: online transactions, point of sale (cards) and cash, all of which pose various challenges to its users with risk associated to cash theft and the struggling digital infrastructure to support electronic payments. Eyowo takes away these risks, as money can be sent or received using just a mobile number and can be accessed offline. Given that internet connectivity has a low penetration rate of just 50 percent, Eyowo’s creators see its offline potential as a great way to move towards financial inclusion.

Eyowo has empowered Nigerians with its facilities

Eyowo can be used on a wide variety of devices, meaning users do not need smartphones to access its services. The app, which was launched in July 2018, is safe and easy to use. It offers biometric face ID and fingerprint verification for those with smartphones. Users can access the app online using their PIN, meaning they can still use the service if they don’t have their phone to hand. Users can also send money to a bank from a phone and perform card-less withdrawals at an ATM.

In addition to its main functions, Eyowo also works as a kiosk system, meaning agents can make money from providing financial services through the app. Once designated as a kiosk, a user can earn commission when they perform financial transactions on another person’s behalf, such as cash withdrawal, funds transfer, bills payment and airtime recharge. Eyowo’s inventors hope this will improve the fortunes of people living in Nigeria and contribute to the country’s sustainable development goals. The company has plans to bring Eyowo to more destinations in the future.

Since launching in 2007, Softcom has worked within the education, energy, financial and telecommunications sectors as a technology partner to the leading organizations in the sector.

Softcom’s goal is to connect people and businesses with meaningful innovation, Eyowo is another step forward in connecting over 70 million unbanked Nigerians with mobile phones to financial services that will improve their lives.

To discover more, go to eyowo.com

G20 economic restrictions soar, covering $481bn of trade in six months

Posted on by Ashton Wenborn

G20 countries applied 40 new restrictive measures to over $481bn of trade between May and October this year, according to a new report from the World Trade Organisation (WTO).

The new restrictions cover six times more trade than the preceding six months and were the most comprehensive to be applied since the WTO began monitoring G20 trade in 2012.

Director-General of the WTO Roberto Azevêdo said the report’s findings “should be of serious concern for G20 governments and the whole international community”.

The number of trade restrictions averaged eight per month between mid-May and mid-October this year, an increase from six per month in the previous reporting period from mid-October 2017 to mid-May 2018.

The number of trade restrictions averaged eight per month between mid-May and mid-October this year, an increase from six per month in the previous reporting period

Three quarters of the restrictions were tariff hikes, many of which were applied in retaliation to steel and aluminium tariffs applied by US president Donald Trump in March.

The report highlights that 33 new import-facilitating measures were applied during the same period. However, these only accounted for $216bn of trade, less than half the value of trade-restrictive measures. Two thirds of that value were attributed to China’s reduction of more than 1,400 tariffs on vehicles and other mechanical components.

Measures that have been announced but not yet implemented have been omitted from the data.

The WTO’s report comes as a warning to G20 leaders, who are set to meet in Argentina next week for the annual summit, as to the implications of ongoing global trade tensions.

“Further escalation [of trade-restrictive measures] would carry potentially large risks for global trade, with knock-on effects for economic growth, jobs and consumer prices around the world,” the report cautioned.

The WTO has counselled all G20 economies to “use all means at their disposal” to resolve the fraught international situation. It has pledged to offer its support wherever possible but has warned that political will and leadership from the G20 is the most vital element.

The greatest contributing factor to global restrictions has been the US-China trade war, with the world’s two largest economies applying tariffs on a collective $360bn of goods in 2018. The G20 summit will be the first time Trump and Chinese president Xi Jinping have met since the trade war began in March.

Hopes are high for a truce between the two leaders, as fraught relations between the US and China have had severe knock-on effects for the world economy and notably led the IMF to downgrade its global economic predictions for the coming months.

In its World Economic Outlook report, published in October, the IMF revised its earlier prediction of 3.9 percent global growth for 2018-19, bringing it down by 0.2 percentage points as a result of ongoing trade tensions.

Currently, the next round of levies implemented by Trump, which will raise tariffs from 10 percent to 25 percent on $200bn of Chinese merchandise, are scheduled to come into force on January 1. These could be put on ice if the two leaders are able to strike a peace deal in Buenos Aires next week.

Miner BHP settles 15-year tax dispute with Australian authorities

Posted on by Ashton Wenborn

BHP Billiton has signed an agreement with Australian tax authorities to settle a long-running unpaid tax claim over its operations in Singapore.

The world’s largest miner will pay a total of AUD 529m ($386m) in additional taxes on income from 2003 to 2018. BHP said in a statement that it had already paid AUD 328m ($239m) of the overall sum.

The unpaid tax relates to the activities of the company’s Singapore-based subsidiary, BHP Billiton Marketing, of which BHP owns a 58 percent stake. The Australian Taxation Office (ATO) has alleged that the company marketed and sold products that were mined in Australia through its subsidiary in Singapore, making them taxable in both countries.

The ATO claimed BHP had not paid the tax due in Australia, although BHP has not admitted any liability for tax avoidance

The ATO claimed the company had not paid the tax due in Australia, although BHP has not admitted any liability for tax avoidance in the case.

Under the terms of the agreement, the company will make BHP Billiton Marketing a fully owned subsidiary. This change in ownership will bring the subsidiary into the ATO’s ‘green zone’, making it fully taxable in Australia.

BHP’s chief financial officer, Peter Beaven, said in the statement: “This is an important agreement and we are pleased to resolve this longstanding matter.”

Beaven added: “The settlement provides clarity for BHP and the ATO in relation to how taxes will be assessed and paid on the sale of Australian commodities. That certainty is good for business and for Australia.”

The ATO described the settlement as “landmark and precedential”. It said: “Given the importance of mining and natural resources to the Australian economy, it is critical that exporters of Australian commodities, whether iron ore, coal, gas or other commodities, pay the correct tax in Australia on their profits.”

The case marks a significant development in the ATO’s crackdown on tax payments by multinational businesses operating in Australia. Under the ATO’s new marketing hubs strategy, BHP’s fellow mining company Rio Tinto, as well as Google, holiday resort operator Crown and telecoms firm Optus are currently under investigation for their subsidiary operations.

Marketing hubs provide sales functions for goods or commodities that are produced in Australia and sold offshore. Last year, the ATO set out a new risk framework to identify and prevent issues with transfer pricing, which, if abused, could allow a company to shift goods or services to its marketing hub to avoid paying tax in Australia.

The tax authority has said that under this framework it will always seek to resolve issues without resorting to litigation, except where it needs to “call out unacceptable behaviour”, as it did in the BHP case.

Michael Kors buys Versace for $2.1bn

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Famed Italian fashion house Versace has been sold to US clothing and handbags group Michael Kors in a $2.1bn deal confirmed on September 25.

The Versace and Michael Kors brands, along with Jimmy Choo, which Kors purchased last year for $1.2bn, are to be folded into a new company called Capri Holdings.

Versace was founded 40 years ago by Gianni Versace and was transferred into family ownership after the label’s founder was shot dead outside his Miami mansion in 1997. Today, the family controls an 80 percent stake in the business. Gianni’s siblings, Donatella and Santo, own respective stakes of 16 percent and 24 percent; his niece, Allegra, holds a further 40 percent.

Michael Kors has closed 100 stores this year and streamlined its product offering in an effort to shake off its current all-American, mass appeal image

Blackstone Capital, a US private equity firm that currently owns 20 percent of Versace, will sell all of its stock to Kors in the merger. The Versace family will maintain a €150m ($176m) stake in the new company Capri Holdings. Donatella, who is currently the brand’s vice-president and artistic director, will stay on to “lead the company’s creative vision”.

In her statement, Donatella pronounced that Versace had to be sold for the brand to realise its full potential. “We believe that being part of this group is essential to Versace’s long-term success,” she said. “My passion has never been stronger. This is the perfect time for our company, which puts creativity and innovation at the core of all of its actions, to grow.”

The purchase of Versace is part of a larger plan by Michael Kors to reposition itself as an uber-luxury brand. The company has closed 100 stores this year and streamlined its product offering in an effort to shake off its current all-American, mass appeal image.

In a press release, John Idol, Chairman and CEO of Michael Kors, paid tribute to the label’s prestigious reputation: “For over 40 years, Versace has represented the epitome of Italian fashion luxury, a testament to the brand’s timeless heritage.” However, he also told Bloomberg that Versace is “terribly underdeveloped” in terms of revenue compared with other Italian luxury brands that are “doing in the billions of euros today”.

With the aim of enhancing earnings growth, Idol revealed plans to increase the number of Versace stores from 200 to 300, as well as boosting the brand’s e-commerce sales and expanding into Asia.

Versace is the latest in a string of family-owned European brands to be taken over by global fashion conglomerates. In 2017, French group LVMH, which also owns Louis Vuitton and Balenciaga, bought Dior for $13bn, and in June, the Missoni family sold a 41 percent stake in their eponymous brand to an Italian private equity venture for €70m ($82m).

Incorporation into a larger luxury group provides clear benefits for brands, such as priority access to sought-after storefront space and advertising slots. It does, however, pose a risk to a brand’s creative soul, as artistic freedom is likely to be limited by corporate owners to economise on production costs.

The luxury fashion sector has seen a significant number of consolidations in the past 12 months, with new partnerships being formed between brands that occupy very different corners of the fashion landscape. Only time, consumer reactions and future revenue will tell whether those partnerships are successful.

Barrick and Randgold agree $18bn deal to create world’s largest gold miner

Posted on by Ashton Wenborn

Canada’s Barrick Gold has announced an $18.3bn deal to merge with UK-based Randgold Resources, creating a world-leading gold miner.

On September 24, the companies said that under the terms of the all-share deal, Barrick shareholders would own around two-thirds of the combined company. Stockholders in Africa-focused Randgold will hold the remaining shares.

The combined group will have a diverse portfolio of assets containing some of the world’s most profitable gold mines

The combined group, which will be listed in Toronto and New York, will have a diverse portfolio of assets containing some of the world’s most profitable gold mines, including Cortez and Goldstrike in Nevada and the Kibali mine in the Democratic Republic of Congo.

Mark Bristow, the long-serving CEO of Randgold, will become president and CEO of the merged company, while Barrick’s John Thornton will stay on as executive chairman of the group.

A possible merger between Barrick and Randgold had been in talks for around three years. With the world’s largest collection of Tier One gold assets, Thornton said the combination would create a “champion for value creation” in the gold mining industry.

“Our overriding measure of success will be the returns we generate and not the number of ounces we produce,” he added. “There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth.”

In Barrick’s statement, Bristow said the new group would operate differently from typical gold miners and added that he is prepared to make tough decisions.

The industry has been criticised for focusing on short-term solutions and providing undisciplined growth and poor returns on invested capital. This, combined with the recent drop in the price of gold, means investors have not been enthralled by the sector.

The merger of two gold mining giants may be enough to excite investors, though Bloomberg reported that Barrick shareholders might not be pleased to inherit exposure to geopolitical risks in Africa, leading to a potential rival offer by US-based mining giant Newmont Mining.

For now, investors appear to be pleased. Randgold’s London-listed shares, which had fallen by about a third over the past year, rose more than five percent following the merger announcement. Barrick’s stock, which had dropped by around 50 percent over the course of the past two years, jumped nearly four percent in pre-market trading in New York.

DEWA invites organisations to participate in the Dubai Solar Show

Posted on by Ashton Wenborn

His Excellency Saeed Mohammed Al Tayer, Managing Director and CEO of Dubai Electricity and Water Authority (DEWA), has invited companies involved in concentrated solar power and solar photovoltaic (PV) technology to participate in the third Dubai Solar Show, the region’s largest solar energy exhibition.

The show, which is organised by DEWA, will run in conjunction with the 20th Water, Energy, Technology and Environment Exhibition (WETEX 2018) and the World Green Economy Summit 2018. It will be held from October 23 to 25 at the Dubai International Convention and Exhibition Centre and will cover approximately 14,000sq m of space and attract 125 exhibitors.

Always improving
“Organising the third Dubai Solar Show highlights the UAE’s leadership in this field, as well as its increasing reliance on solar energy and transformation to a green economy,” said Al Tayer. “At DEWA, we are keen to embrace sustainability in all aspects of our business – environmental, social and economic – to ensure a sustainable future for generations to come.

The Dubai Solar Show is an ideal platform for a number of businesses and institutions to learn about the latest technologies and trends in the growing solar industry

“This goal supports the UAE Vision 2021 project, which hopes to improve air quality, conserve water and increase renewable energy use in the emirate, plus the Dubai Plan 2021, which will establish Dubai as a smart and sustainable city. The UAE Centennial 2071 project aims to improve the economy, education and government in the UAE.

“A number of initiatives have been launched to achieve global leadership in the sustainable development sector. The Green Economy for Sustainable Development initiative, launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, and the Dubai Clean Energy Strategy 2050 both aim to transform Dubai into an international hub for clean energy. By 2020, the hope is that 25 percent of Dubai’s total power output will come from clean resources and 75 percent by 2050.

“Through its participation in the Dubai Solar Show, DEWA will review its efforts in research, development and innovation in the field of solar energy. It will also assess the achievements of the Mohammed bin Rashid Al Maktoum Solar Park, which is the largest single-site solar park using the independent power producer (IPP) model.

“It will produce 5,000 MW by 2030, with a total investment of AED 50bn [$13.61bn]. When completed, the project will reduce carbon emissions in the country by 6.5 million tonnes each year. DEWA aims to engage the community in its efforts to increase reliance on solar energy through the Shams Dubai initiative, which encourages building owners to install PV panels on their rooftops to generate electricity from solar power. Already, 1,145 buildings with a total capacity of nearly 50 MW have been installed. It is hoped that all buildings in the emirate will have PV panels by 2030.”

Understanding the industry
The Dubai Solar Show is an ideal platform for businesses and institutions to learn about the latest technologies and trends in the growing solar industry. DEWA expects to welcome research and education institutions, manufacturers, suppliers, distributors and engineers to the show.

Al Tayer has called on all parties responsible for solar energy projects to participate in the Dubai Solar Show due to the benefits offered to exhibitors and participants. The show enables companies to present their products and brands, communicate with pioneers of solar energy and build relationships with decision makers, entrepreneurs, investors and buyers. Furthermore, exhibitors will gain a greater understanding of the existing and planned solar projects in the region, the latest market trends and legislation set by the authorities.

Yousef Al Akraf, Executive Vice President of Business Support and Human Resources and Chairperson of the Sales, Logistics and Sponsorship Committees at WETEX, said: “The Dubai Solar Show offers exclusive benefits to participants, such as free registration for DEWA’s products, letters of recommendation for products participating in the show and exclusive field visits to the Mohammed bin Rashid Al Maktoum Solar Park.

“Participating companies are able to speak to the public and review products appearing at the show. Organising the show in conjunction with WETEX 2018 and the fifth World Green Economy Summit provides those attending with a unique opportunity to extend the scope of their work to include other forms of renewable energy, water services and green economy projects. In addition, visitors have the opportunity to attend conferences, workshops and specialised activities. They can also meet experts from around the world.”

Diamond Brothers: a market leader in the recycled diamonds industry

Posted on by Ashton Wenborn

Over the last decade, the demand for recycled diamonds has increased rapidly. Indeed, in 2017, it was estimated that trade in recycled diamonds is now worth five and 10 percent of the global market (approximately $1bn). This is partially due to the financial crash of 2008, which resulted in a huge flurry of people trying to trade in their finest pieces in a quest to raise cash quickly. In addition, traditional diamonds had something of a difficult year in 2015, as Chinese demand dropped quickly as a result of an anti-corruption crackdown that slowed economic growth. Reduced oil prices in Russian and the Middle East also had a detrimental effect on demand.

These developments have cemented the recycled diamonds industry in the global arena. One organisation that has consistently thrived in this sector is Diamond Brothers, which was founded in 2014 by LD Gems. It has become a multi-million-dollar business thanks to the combined expertise of its founders, who have over forty years cumulative experience in diamond trading.

In general, Diamond Brothers has found that recycled diamonds brings a whole host of benefits for both company and seller. There are various reasons why people want to do this, whether that’s a break-up, a desire to make a bit of money, or create something completely new out of old diamonds.

Diamond Brothers has found that recycled diamonds brings a whole host of benefits for both company and seller

Diamond Brothers currently buys a range of diamonds – including certified and non-certified diamonds, old cuts, semi-cuts, broken stones, diamond parcels with small stones (melee) – which the company repurposes for new creations.

Selling diamonds is easy with Diamond Brothers. The company regularly travels around the world to meet people who are thinking about whether to sell their items, with announcements on its Facebook as to when and where these free evaluations will be. The other main way in which it evaluates diamonds is through a FedEx service, which picks up each item for free, with insured and reliable shipping. Products are sent across within 24 hours for evaluation, and there is no obligation to sell for those who speculatively partake in the process.

Diamond Brothers also sells certified diamonds that have been graded in a laboratory depending on their qualities of Cut, Colour, Clarity and Carat Weight (the “4 Cs”). The company can source everything from small diamonds to larger stones to fit what a customer wants. These can be the perfect gift for Christmas, birthdays, as well as many other occasions.

Diamond Brothers is highly regarded, overall, for its excellent customer service, commitment to the best prices, and connections to global diamond recycling experts. Diamond Brothers’ head office is based in the easily accessed location of Antwerp in Belgium, and the business can be contacted online, too, at the web address diamondbrothers.com.

To sell or buy diamonds, you can also click on this link.

FTSE stock index remains unchanged for first time since 2006

Posted on by Ashton Wenborn

For the first time in 12 years, the FTSE 100 is set to remain unchanged, with no promotions or demotions announced in the Q3 reshuffle, which will be finalised on 21 September. The index, which lists the top 100 blue-chip companies on the London Stock Exchange, has seen more than 400 changes since its launch in 1984. However, thanks to stable market capitalisations within the FTSE 100, no changes are to be made in Q3.

Reshuffles in the FTSE 100 take place on a quarterly basis. The previous restructuring, which took place in June, saw new entries from sports betting group GVC Holdings and online supermarket Ocado, and exits from Mediclinic and G4S.

Analysts have attributed the current stability to the relatively peaceful summer blue-chip stocks have experienced. Despite this, Laith Khalaf, a senior analyst at stockbroker Hargreaves Lansdown, advised that the market was not a “flat lake with no ripples”. He added: “There’s not a blanket lack of movement – we are seeing movement down in the FTSE 250 and SmallCap, but not enough to remove big names.”

Historical rarity
The lack of change in the FTSE 100 is a rare phenomenon and has only occurred six times since the index was launched in 1984. Previous incidences of such stability include March and June 1995, when a dramatic drop in the rate of inflation and recovery from a deep recession led to a sustained period of economic prosperity for much of the FTSE 100, and March 2006, when a lengthy period of economic growth allowed many key members of the FTSE 100 to cement their positions within the index.

The lack of change in the FTSE 100 is a rare phenomenon and has only occurred six times since the index was launched in 1984

This is also the first time since the 2008 financial crisis and the 2016 Brexit vote that the FTSE 100 is to remain constant. A significant proportion of the FTSE 100 is made up of multinational firms, and 40 percent of FTSE 100 CEOs are not British nationals, making this stability particularly surprising given the international uncertainty surrounding Brexit.

In fact, the index has enjoyed a successful few months, and in January this year hit a record closing high of 7,724. This prosperity would suggest that the FTSE 100 has remained relatively immune to the impact of Brexit. However, Albrecht Ritschl, Professor of Economic History at the London School of Economics, suggests that it is not immunity but rather “paralysis due to considerable uncertainty” that is responsible for the lack of change.

He added: “There is limited movement in any direction; rather, the economy has been moving sideways, or treading water. That’s perhaps reflected in the stable composition of the FTSE. We can expect quite a bit more change once the perimeters of Britain’s future trade arrangements become clearer.”

Although stability in itself is positive, the reasons behind it are not so. An economy that is treading water, as Ritschl put it, can only survive for so long, and while there’s a chance it may progress into a period of economic growth, there’s also a risk that it will head in the opposite direction.

Russ Mould, Investment Director at AJ Bell, warned of an end to the period of stagnation and significant fluctuations to come. “The lack of change shows that the market has been largely directionless over the past few months, but the summer can be a quieter time for markets and three months is a short period of time, so we shouldn’t read too much into it.

“Given this is the first quarter without a change since before the financial crisis, it is unlikely the period of calm will last too long, particularly with the uncertainty surrounding Brexit and global trade wars likely to have disproportionate effects on businesses depending on the sector they are in and where they operate.”

Volatility at the top
Stability in the FTSE 100’s market capitalisation has not extended to its leadership. This year has seen no less than 17 chief executive exits, the most recent being the unexpected resignation of Sage’s CEO last Friday.

Stability in the FTSE 100’s market capitalisation has not extended to its leadership. This year has seen no less than 17 chief executive exits

Stephen Kelly’s departure wiped over £500m ($647m) off the value of the software giant. He claims to have departed over concerns about moving customers to cloud-based solutions. Other significant appointments in 2018 include Mark Read, who succeeded Martin Sorrell as CEO of WPP, and Carolyn McCall, who joined ITV from EasyJet.

Khalaf stressed that the departure of a CEO does not necessarily equate to trouble within the firm: “A CEO leaving can be a sign of distress, or a natural progression.”

FTSE 100 CEOs have come under fire in recent months for exceedingly high salaries, rapid wage growth and the underrepresentation of women. A report from The High Pay Centre and CIPD published last month revealed that the total pay for all FTSE 100 CEOs topped £550m ($711m), and median pay rose by 11 percent between 2016 and 2017, taking the average CEO salary to £3.93m ($5.08m).

The highest paid FTSE 100 CEO in the 2016/17 financial year was Jeff Fairburn of domestic construction firm Persimmon. Fairburn took home £47m ($60.78m), 22 times his salary the previous year.

Safeguarding legacies
Although the current stability in the FTSE 100 is unlikely to be long lasting, it has significant implications for the global economy. The FTSE 100 is a London-based index, but the proportion of global companies within it means it also provides a barometer of the state of international trade relationships.

Not only that, to gain automatic entry to the FTSE 100, a company must reach the market capitalisation of the 90th firm; this is currently £5.5bn ($7.11bn). Demotion occurs if a firm’s value falls to that of the 111th company on the FTSE 250, currently £4.2bn ($5.43bn). For a company in the upper quartile to risk demotion, they would have to suffer significant losses.

Therefore, stability is evidence that key players are standing strong and doing all they can to protect themselves from the potentially damaging effects of Brexit and global trade wars; for many, such future-proofing has included strengthening leadership by appointing a new CEO.

As the November deadline for Brexit negotiations draws closer, those firms on the periphery of the FTSE 100 are increasingly at risk and will be keenly considering their corporate strategy before the next reshuffle.