Britain Ends Tank Production

Britain Ends Tank Production
May 4, 2009 | From theTrumpet.com
Future models of tanks used by the British Army may have German guns.

Britain is to give up its domestic tank manufacturing capacity. The Daily Mail reports that in future, British tanks will likely have Swedish chassis and be armed with German guns.

bae Systems, the last heavy-duty combat vehicle manufacturer in the UK, announced last week that it was closing its tank-building plant at Newcastle-Upon-Tyne and also shutting down its armor operations elsewhere. The company said it was closing the plants because it did not anticipate any new government orders.

The announcement marks a dangerous day for the nation that invented the tank. The Daily Mail reported Saturday:

They have fought alongside British soldiers for generations, playing heroic roles on historic battlefields such as the Somme, Cambrai and El Alamein. They have carried famous names such as Centurion, Churchill, Cromwell and Crusader.

But now, nearly a century after inventing the first armored warhorse—to storm through German lines in the First World War—Britain is to stop building its own tanks.

UK Defense Secretary John Hutton has indicated that the nation’s future military needs would not include the tank. Instead, he has announced “a rebalancing of investment in technology, equipment and people to meet the challenge of irregular warfare.”

Gen. Patrick Cordingley, commander of the Desert Rats in the first Gulf War, however, issued a grave warning to all Britons: “I think we have got ourselves into a real tangle here. If you look at the economic troubles of the 1930s, it ended in a terrible war.

“Are we saying it could never happen again, that we will not be drawn into a war where we will need a full range of forces and equipment?”

Allowing domestic military manufacturing to disappear or move offshore is a risky move.

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Subprime lobbyists in $370m battle

By Edward Luce in Washington

Published: May 6 2009 05:02 | Last updated: May 6 2009 05:02

The top 25 US originators of subprime mortgages – the risky assets that sparked the global financial crisis – spent almost $370m in Washington over the past decade on lobbying and campaign donations as they tried to ward off tighter regulation of their industry, an investigation has shown.

The study, which will be released today by the Center for Public Integrity, a non-profit investigative journalism organisation, is likely to strengthen public calls for much tougher financial regulation in the US.

It shows that most of the top 25 originators, most of which are now bankrupt, were either owned or heavily financed by the nation’s largest banks, including Citigroup, Goldman Sachs, Wells Fargo, JPMorgan and Bank of America. Together, they originated $1,000bn in subprime mortgages in 2005-07 – almost three-quarters of the total.

The banks, which have received the vast bulk of the $700bn in troubled asset relief funds issued since last October, also supported the lobbying effort to prevent tighter regulation of the subprime market.

Nine of the top 10 lenders were in California, one of the states badly affected by the housing crisis that emerged after a surge in lending to riskier, or subprime, borrowers, many of whom were forced to foreclose.

At least eight of the top 10 were backed at least in part by banks that have received bank bail-out money.

Eleven of the lenders on the CPI list have made payments to settle claims of widespread lending abuses, including four recipients of Tarp funds.

“Their unbridled political contributions and massive lobbying created the lack of regulation and oversight that led to this ­crisis,” said Bill Buzenberg, who headed the CPI investigation. “Despite the signs, Congress, the White House and the Federal Reserve all dithered while the subprime disaster spread.”

Top of the list was Countrywide Financial, which made $97bn in subprime loans between 2005 and 2007, and which is now owned by BofA, which has received $45bn in troubled asset relief funds from the federal government. Countrywide spent about $11m in campaign donations and lobbying in Washington between 1999 and 2008.

Among the other leading originators, which then bundled the loans to be securitised in the secondary markets, were First Franklin, now owned by Merrill Lynch, which made $68bn of subprime loans in that period and spent over $3m in Washington.

The financial industry was also one of the largest donors to election campaigns in the past decade, giving $2.2bn in contributions, according to the Centre for Responsive Politics, an independent watchdog. Among the top recipients was Barack Obama, who took $14m and whose presidential campaign broke all records by raising more than $700m in contributions.

No one has alleged any connection between Mr Obama’s campaign, which raised most of its cash from small donors, and his administration’s handling of the crisis. However, some liberal critics say the administration is too close to Wall Street and have criticised it for its policy continuity on the financial bail-out with Bush administration. George W. Bush was also a large recipient of campaign funds from the financial and real estate sectors.

The US Treasury will tomorrow release the results of its stress tests of 19 leading banks.

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Abu Dhabi multiplies investment arms

By Andrew England and Roula Khalaf

Published: May 6 2009 03:00 | Last updated: May 6 2009 03:00

On the surface, a luxury German carmaker, an English football team, a New York landmark and a troubled British bank may seem to have little in common. But in the Gulf, each one has come to represent the increasing ambitions of Abu Dhabi.

Daimler, Manchester City, the Chrysler Building, and Barclays are among a growing list of global assets that have been the target of a multibillion shopping spree by various state entities acting on behalf of the oil-rich emirate. Some $15bn has been invested overseas by the emirate's funds in the past six months.

As Abu Dhabi entities are more aggressively courted by international companies desperate for capital during the economic crisis questions have been raised about the extent of co-ordination between the various funds and also whether the diversity heightens the risk of Abu Dhabi overplaying its hand.

Some financial analysts see the burgeoning stable of investment vehicles - there are at least eight of them - not only as a reflection of different strategies but also an illustration of the influence of the various members of the ruling al-Nahyan family and their lieutenants.

Analysts consider the more traditional investors, such as the Abu Dhabi Investment Authority (ADIA), as falling under Sheikh Khalifa bin Zayed al-Nahyan, the president of the United Arab Emirates and Abu Dhabi's ruler.

The more interventionist funds are more closely associated with his younger half-brother and crown prince, Sheikh Mohamed bin Zayed. He is considered the architect of Abu Dhabi's more ambitious development in recent years, including in tourism and culture, and is dubbed the chief executive officer of Abu Dhabi Inc. He is chairman of Mubadala, a highly visible investment vehicle, and the executive council, the emirate's key policymaking body.

Meanwhile, Sheikh Mansour, the ambitious 38-year-old full brother of the crown prince, appears to be acting at times in his personal capacity but at others as part of Abu Dhabi Inc. He bought Manchester City and is chairman of the International Petroleum Investment Company (IPIC) - the most active of the funds recently.

"If you want to optimise you need some sort of transparency and clarity on who does what," says an Abu Dhabi-based banker.

A similar trend in nearby Dubai in recent years generated fierce competition between government-backed investment funds, which went on a borrowing spree to grab high-profile deals but contributed to the emirate's recent financial woes.

Government officials in Abu Dhabi, the richest of the seven city-states in the UAE, play down the concerns, and hint that there is a higher council that keeps track of all investments by the various vehicles.

"All these companies are implementing our bigger picture, which is to leverage our experience, our money and our success," says one official. "If we have two world class companies doing this work from Abu Dhabi, what is wrong with that?"

Just a few years ago, ADIA - thought to be the world's largest sovereign wealth fund - was the focal point of businessmen and political delegations who headed to the wealthy emirate in search of a deal.

But as the emirate has embarked on a massive development plan it has cloned its best creation, to produce a multitude of investment vehicles hungry for overseas deals.

The conservative ADIA takes small stakes in largely listed companies and rarely creates noise about its deals - the exception was its ill-fated $7.5bn investment in Citigroup in November 2007.

Some of the newcomers are bolder.

One of the most notable changes has been the activity of IPIC, an old fund that once quietly invested in energy-related businesses but has taken on a new face. Displaying a new aggressiveness, it has spent billions of dollars on investments, including the €1.95bn acquisition of a 9.1 per cent stake in Daimler that it bought through Aabar, another investment company IPIC controls. It also claims the $3.5bn investment in Barclays, even though officials at the time said it was a private investment by Sheikh Mansour. That investment, however, is expected to be soon moved away from IPIC, according to Moody's, which rated the company this week, and understands that IPIC was merely the vehicle chosen to do the transaction.

But to some the IPIC/Barclays deal illustrates the difficulty understanding the relationships between individuals, the ruling family and the government.

Officials argue that investment vehicles should not be judged as like-for-like entities, with ADIA seen as the "money chest" for the future and concentrating on securing long-term returns without seeking active management in the companies it invests in. Abu Dhabi's development, the officials say, requires at times more active and nimble vehicles, particularly as the emirate tries to tap into the expertise of international groups and import their technology.

This was indeed the raison d'etre of Mubadala, set up in 2002 with a mandate not only to seek a return on investment but also to attract businesses to Abu Dhabi and help diversify the emirate's economy.

Its early deals included a project to pipe gas from Qatar to the UAE and acquiring a 5 per cent stake in Ferrari. More recently, it teamed up with General Electric to set up an Abu Dhabi-based global commercial financial services company, with each committing $4bn in the joint venture over the next three years.

But Mubadala has a particularly broad mandate and its portfolio stretches across an increasingly wide range of sectors, from health to telecoms, to aerospace and finance. Over the past six months, it has invested in US real estate, hotel and technology companies.

The strategies of several other investment funds are also difficult to pin down. For example, the Abu Dhabi Investment Council was created two years ago to focus on domestic and regional investment. It took in ADIA's holdings in local assets, including banks.

But it also raised eyebrows with the high-profile acquisition last year of New York's Chrysler Building and is now deemed to have an international mandate. It has also been linked to the battle for the ownership of the car company Opel.

Bankers in Abu Dhabi expect that after an initial period of activity, the various funds will emerge with more focused strategies.

"Our understanding is there is likely to be a clarification and a clearer segregation of the roles of the different entities during 2009," says one banker. "I think these things were given a good head start and a brief and people have interpreted the brief . . . So there is now a need for clarity."

He argues that the power structure in Abu Dhabi should not be compared with Dubai and its system of competition between an elite group of executives that form an inner circle around that emirate's ruler.

"In Dubai you have had people competing for the same attention and the same money. Down here you have got a number of people from the same family who need to agree with each other and need to act with a common vision most of the time," says the banker.

Family business

Sheikh Khalifa bin Zayed al-Nahyan Sheikh Khalifa took the reins of power in 2004 following the death of his father, Sheikh Zayed bin Sultan al-Nahyan, the UAE's founding leader.

Although Sheikh Khalifa is less hands-on than his brother Sheikh Mohamed bin Zayed, the crown prince, observers say it would be wrong to underestimate his role in the emirate.

Born in 1948, he is president of Abu Dhabi's Supreme Petroleum Council, which sets the emirate's policies for hydrocarbons - the key source of revenue for the investment funds.

Last year, he made a rare public comment about the Abu Dhabi Investment Authority - which he chairs - to say estimates that it had assets of about $800bn (€600bn, £530bn) were exaggerated. Generally, seen as more conservative than his younger brothers. Sheikh Mohamed bin Zayed The oftrepeated cliché is that Sheikh Mohamed, the crown prince, is the chief executive to Sheikh Khalifa's chairmanship of Abu Dhabi Inc. Many see him as the driving force behind the recent transformation the of emirate. The 48-year-old, who carries the rank of general, is the chairman of Abu Dhabi's executive council, its key policymaking body. Sheikh Mansour Sheikh Mansour, 38, is a full brother to the crown prince and is among six sons of Sheikh Zayed who share the same mother, a favourite wife of the late ruler. Collectively, the brothers are known as the Bani Fatima (sons of Fatima) and seen as a powerful force within Abu Dhabi's ruling elite.

Sheikh Mansour has been chairman of International Petroleum Investment Co since 1994 and is the federal minister of presidential affairs.

Yet he kept a low profile before buying Manchester City football club in September. He followed that up with a $3.5bn investment in Barclays bank.

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Bahrain to scrap sponsorship

By Digby Lidstone in Manama

Published: May 5 2009 12:32 | Last updated: May 5 2009 12:32

Bahrain plans to scrap its sponsorship system for foreign workers within three months, making it the first Arab Gulf state to abolish the controversial practice.

“We want to deal with expatriates as human beings, not as commodities,” Majeed al-Alawi, Bahrain’s labour minister, told the Financial Times on Tuesday. “The purpose of the new law is to liberalise the labour market, eliminate the black market in visas and prevent the exploitation of workers.”

Work visas currently prevent expatriates from leaving their jobs without the permission of their employers. Those who do can face arrest and deportation. Critics say the system flouts the conventions of the International Labour Organisation, to which Bahrain is a signatory.

“The sponsorship system puts migrant workers at the mercy of their employers,” said Beverley Hamadeh of the local Migrant Workers Protection Society. “The majority of workers who come to us have suffered abuse, from non-payment of salary to sexual abuse.”

The new law, which is due to come into effect on 1 August, will allow foreign workers to change jobs without penalty. It also prevents employers from withholding passports or pay, a common complaint by menial workers.

“A Bahraini can pass freely from job to job, so why not an Indian or an Englishman? There is no logic to the current system,” said Mr Alawi. “The ministries of labour across the Gulf have been watching each other to see who will scrap the system first. We decided to make the first move.”

Like many of its neighbours, Bahrain relies heavily on expatriate workers, many of them manual labourers from India, Pakistan and Bangladesh. Only 25 per cent of the country’s workforce of 552,000 are nationals, according to the Labour Market Regulatory Authority, and the number of foreign workers is growing by 13 per cent a year.

The influx of workers is resented by poorer Bahrainis, who complain of a lack of jobs and affordable housing. Recent reforms aim to redress the balance. Tamkeen, the national labour fund, has introduced a BD10 monthly tax on foreign workers which it will use to train Bahrainis for private sector jobs.

The government first announced plans to abolish the sponsorship system in 2006, but was opposed by hardliners in parliament. A bill drafted by MPs in February added a BD500 fine to the list of punishments faced by “runaway workers”, but was quashed by the upper house before it could become law.

An additional law reinforcing workers’ rights and establishing a dedicated court for employment disputes will be submitted to parliament later this year, said Mr Al-Alawi. It is expected to come into effect in 2010.

The US State Department placed Bahrain on a human trafficking watch list last year for failing to prevent the illegal trade in people for forced labour or the sex industry. But it praised the country for its ongoing labour reforms.

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Riyadh set as Gulf region’s central bank base

By Abeer Allam in Riyadh

Published: May 6 2009 00:52 | Last updated: May 6 2009 00:52

Leaders of the oil-rich Gulf Cooperation Council on Tuesday agreed to base any future regional central bank in the Saudi capital of Riyadh, pushing forward efforts to establish a regional monetary union.

However, while an agreement on where the central bank will be located – which had been a point of contention – will be seen as some progress, the GCC states are still far from forming a single currency. Oman has said it is not ready to join a monetary union, Kuwait unilaterally delinked its peg to the US dollar in 2007 and it is widely accepted that the Gulf states will not meet a 2010 deadline for the proposed single currency.

“This will definitely be a catalyst for making progress toward the GCC union,” said John Sfakianakis, chief economist at the SABB Bank. “Riyadh is not a regional financial centre, but it has the highest concentration of capital in the broader region.’’

The GCC which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, approved a draft agreement in September on monetary union without giving a specific timetable.

The choice of Riyadh highlights the growing regional and international prominence of the kingdom, whose economy, including the banking sector, has shown itself to be relatively resilient in the face of global economic turmoil.

Saudi Arabia, the world’s largest oil exporter, has amassed $500bn in foreign reserves in recent years as oil prices skyrocketed. The Arab world’s biggest economy is now throwing further weight behind efforts to unify the currency, analysts say.

Some GCC countries have been criticised domestically for pegging their currencies to the US dollar, particularly as its value fell last year and inflation in the Gulf reached unprecedented highs. Property and currency speculation, and a massive petrodollar influx led to widespread pressure to lift the peg or revalue the local currencies.

In 2002, the GCC committed itself to enhanced economic integration by voting to establish a customs union in 2003, a monetary union in 2005, and to adopt a single currency in 2010. However, when Kuwait revalued its currency in 2007 and shifted to pegging against a basket of currencies rather than the US dollar, and when Oman pulled out entirely, the plan fell into some doubt.

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Prince Al-Walid sells Egyptian hotel stake

By Abeer Allam in Riyadh

Published: May 5 2009 14:15 | Last updated: May 5 2009 14:15

Kingdom Hotel Investments, in which Prince Al-Walid bin Talal, the Saudi investor, holds 56 per cent, said on Tuesday that it has sold its stake in an Egyptian hotel for $70m.

The company said that selling its 39.3 percent stake in the Four Seasons Resort in Sharm el-Sheikh on the Red Sea is in line with its strategy of “portfolio rationalisation”.

The disposal is the lastest in a series of divestments of minority positions. Most recently Kingdom Holding, the prince’s umbrella investment vehicle, said it earned around $60m from the sale of a stake in a Four Seasons hotel in Geneva in Switzerland and some land in Jeddah, Saudi Arabia.

“We want to move away from minority investment and focus on controlled investment. It is a good time for us to use the money proceeds to find another opportunity,“ a KHI spokesman said from Dubai on Tuesday.

Prince Al-Walid, whose Kingdom Holding reported a 83.4 per cent drop in profit in the first quarter, said in January that he is reviewing his portfolio.

“The sale might indicate that Kingdom Holding is in real distress for cash,” an analyst, who asked not to be named, said on Tuesday. “But it is a good time to sell smaller investments – and it was sold at a good valuation.”

Kingdom Holding has previously been linked to the sale of Raffles hotel in Singapore to raise cash to make up for investment losses in the past year. However last month the company said that it was upgrading and expanding luxury hotels in Singapore and London, including Raffles Singapore.

It also said that it will spend £118m to renovate the Savoy in London with plans to reopen the property in late 2009.

Kingdom Holding, in which Prince Al-Walid has a 94 per cent stake, posted a loss of $8.26bn in the fourth quarter last year because of the drop in the value of its global investments, including a 3.4 per cent stake in Citigroup. Kingdom Holding’s stake in Citigroup represents roughly 40 per cent of the total value of the company.

In November last year, the prince pumped $350m into the ailing bank, along with other investors including the Kuwait Investment Authority, who injected a total of $5bn.

Kingdom Holding has sold minority stakes in other companies, though at losses, including 5 per cent stake in Samba Financial Group and reduced its stake in Saudi Savola Group to less than 5 per cent.

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UK economy shrinking at fastest since 1931

By Norma Cohen, Economics Correspondent

Published: May 6 2009 00:01 | Last updated: May 6 2009 00:01

The economy is expected to decline more sharply in 2009 than at any time since 1931 and is already contracting faster than in the early 1930s, according to the National Institute for Economic and Social Research.

The NIESR, issuing its quarterly economic outlook for the year, predicts that national income will decline by 4.3 per cent this year – much more than the 3.5 per cent forecast by Alistair Darling, the chancellor, in last month’s Budget, and even more than the 3.8 per cent estimated by the European Commission.

The gloomier assessment – the NIESR predicted contraction of 2.7 per cent for 2009 just a few months ago – is due to the unexpectedly sharp fall in global trade, which is hitting UK manufacturing with particular ferocity.

The NIESR’s central projection is for successively lower levels of contraction for the second and third quarters of this year, with modest growth in the final months. Consumer spending is likely to be brought forward somewhat by households hoping to beat the deadline when value added tax will revert to its higher level, it says.

“World trade has collapsed by more than forecast,” said Simon Kirby, economist at the NIESR. “If net trade fails to pick up, we could see a second year of economic contraction.”

Government debt would rise to about 100 per cent of gross domestic product – much more than the Treasury was projecting – and output would be permanently scarred by 4-5 per cent.

National output was not likely to return to its peak in the first quarter of 2008 until the first three months of 2012, with a peak-to-trough decline of 5.5 per cent. On a per capita basis – adjusted for population – this means the contraction in output will be sharper even than that seen in the recession of 1979-81.

Unemployment, however, while likely to peak at more than 3m in 2011, would remain lower than during the recession of the early 1980s when population growth was taken into account. That was because wages have fallen sharply in order to preserve jobs.

The NIESR’s estimates cast doubt on the chancellor’s fiscal projections, which require much higher levels of economic activity than the institute expects. For example, in order for the chancellor’s forecasts of tax revenues to prove accurate, housing activity would have to return to its levels of 2002-03 at the height of the housing boom.

The NIESR no longer expects to see deflation this year as measured by the consumer price index. A weaker pound was driving up prices of imported goods, it says, and recent rises in oil prices were likely to prop up prices.

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Low-tax countries angry at Obama's reforms

By Vanessa Houlder in London and Michael Steen in,Amsterdam

Published: May 6 2009 03:00 | Last updated: May 6 2009 03:00

The proposed US crackdown on corporate tax avoidance has provoked an angry response from low-tax countries used heavily by the multinationals that are the target of the Obama administration's reforms.

The US administration, in publishing the plan on Monday, highlighted the Cayman Islands, Bermuda, the Netherlands and Ireland. The US proposals are also likely to be felt in Luxembourg, Switzerland and Singapore where profits reported by US subsidiaries often appear disproportionately high, given the size of those countries.

"We're not happy," said Jan Kees de Jager, the Netherlands' finance secretary. "We have a very transparent policy and we'll work with the US. I expect there'll be a clarification [by the US administration] and we'll not end up on lists like this in future, between Bermuda and Ireland."

Officials and tax experts pointed to the "very average" corporate tax rates in the Netherlands, which has corporation tax of 25.5 per cent, and noted the country had successfully attracted foreign investors partly because of its location and educational achievements.

But the Netherlands has no taxes on capital gains and low taxes on dividends, which can make it an attractive location for the subsidiary holding companies of foreign firms.

The Cayman Islands warned the proposed changes could have unintended consequences. Alden McLaughlin, a minister, defended the islands' role in forming "efficiencies" that benefited business. "Blocking access to the Cayman Islands may have very real unintended negative consequences for international trade and the economies of large countries," he said.

Paula Cox, Bermuda's finance minister, said the announcement was not unexpected. She added: "Bermuda will continue to put forth its views in an appropriate manner and at the appropriate level with decision-makers on Capitol Hill."

Critics of President Barack Obama's proposed reforms said such action would impede US multinationals' ability to compete abroad, as most other countries exempt foreign profits from tax. Companies also stepped up their lobbying against the plan by warning US multinationals could become more vulnerable to takeovers by foreign competitors.

The reduced attraction of the US as a base for multinationals could make them more likely takeover targets, if the acquirer were to restructure the business to remove foreign subsidiaries from the US tax net, tax experts said.

Catherine Schultz of the National Foreign Trade Council, which represents multinationals, said: "If there's a reasonable business and strategic reason for the investment anyway, taxes may very well be the factor that speeds the transaction along."

Dave Camp, lead Republican on the House ways and means committee, said: "Ironically, what the president proposes will make it more likely that American companies will be bought by their foreign competitors."

International business focused on changes designed to "level the playing field" by restricting what the US administration described as tax advantages for forming jobs overseas. That would tighten the system that allows US multinationals to defer paying US taxes on profits made overseas. Multinationals would no longer be able to claim tax deductions on most foreign expenses, such as interest costs, until they repatriated earnings.

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How tax havens helped to create a crisis

By Sol Picciotto

Published: May 5 2009 20:04 | Last updated: May 5 2009 20:04

Banks employ large teams of highly paid people to devise transactions mainly for the purpose of avoiding tax. These activities seem to be far more profitable than the humdrum business of managing payments and channelling savings towards investment. Why?

The answer shows the close link between tax avoidance and the speculation that has fuelled financial instability for 30 years. There were clearly other causes of the current crisis but the faults of the international tax system were a big contributory factor.

International tax co-ordination depends on treaties based on a model devised 80 years ago. To prevent double taxation, the treaties generally give governments the right to tax returns from an investment in the investor’s country of residence. Business profits, meanwhile, are taxable in the “source” country where the activity takes place.

But for most of the past century, international investment was dominated by multinational corporations, which could choose the location of their sources of funds and organise their affiliates’ capital structures. This enabled them to devise techniques to ensure that they were not taxed unfairly, as they saw it, exploiting ambiguities in the concepts of residence and source using legal entities formed in convenient jurisdictions. Such methods were also pioneered, with rather less legitimacy, by wealthy people resentful of high income taxes.

The relaxation and final abandonment of exchange controls in the 1970s led to the blossoming of “offshore” finance and a boom in tax havens. These depend on both outright tax evasion and the exploitation of grey areas by tax avoidance. Since large multinationals are as much financial as business entities, they have freedom to devise complex financial structures – financial institutions, such as banks, even more so: in recent separate surveys by the US Government Accountability Office and the Tax Justice Network, the largest user of tax havens in every country surveyed was a bank. Tax authorities have enormous problems puzzling out these structures. If they can, it is often hard to characterise them as shams.

The leading countries themselves are also host to major financial centres, from which most of these activities are directed. The revenue authorities in these countries, not least the US and the UK, have been cowed into accepting these activities for fear of losing finance business.

Take hedge funds, for example. The tax authorities in the US and the UK have accepted a lax interpretation of residence and source rules, accepting that these funds are resident and their profits sourced offshore (mostly in the Cayman Islands) – even though they are effectively managed from London and New York. Not only are the funds’ gains treated as realised in Cayman, and hence not taxable, but their distributions are not subject to withholding tax – a great benefit for their investors. The funds’ location in a secrecy jurisdiction facilitates tax avoidance and is an open invitation to evasion.

For multinationals and rich investors the point is the same: returns on financial transactions are ultimately taxed at a low or zero rate, making them far more profitable than genuine business endeavours. This distortion of the tax system has greatly fuelled the excess of liquidity channelled into largely speculative financial transactions. The offshore secrecy system has been a main element of the opacity that has undermined corporate and financial regulation.

The remedies lie in fundamental reforms of international fiscal and financial regulatory co-operation, and their co-ordination. International tax co-operation requires a comprehensive, multilateral system for both obtaining and exchanging information for all tax purposes, with proper safeguards for taxpayers. Requiring multinationals to break down their accounting information by each country in which they do business would inject much-needed transparency into the system. Reform should include a shift towards unitary taxation, which most international tax specialists recognise is long overdue. This would be preferable to the Obama administration’s new proposals to tinker with US rules on tax deferral.

These reforms would make the international tax system more effective and fairer, and remove a major rationale for tax havens. They would produce large cost savings for business and perhaps even close down the departments in banks that conjure up wasteful and distorting tax-driven schemes.

The author is an emeritus professor at Lancaster University and a senior adviser to the Tax Justice Network.

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Investors seek to shift away from tax traps

By Elaine Moore

Published: May 1 2009 19:09 | Last updated: May 1 2009 19:09

Wealthy earners are already seeking advice on ways to manage their tax liabilities ahead of next year’s increase in income tax.

From next April, individuals will have to pay 50 per cent tax on earnings over £150,000 and relief for pension contributions will be reduced. Any gains made from fixed-interest investments such as cash and bonds will also be subject to the new higher rate of tax.

As a result, investors with annual earnings above £150,000 are being advised to move into assets that will be liable to capital gains tax (CGT) at 18 per cent, rather than income tax at the new top rate.

Some financial advisers believe such investments will be more tax-efficient than pensions when pension tax relief is reduced to 20 per cent for high earners, effective from April 2011.

Adrian Lowcock, senior investment adviser at Bestinvest, says: “For anyone earning over £150k, pensions are pretty much a turn-off now. You get 20 per cent tax relief on the way in, but, potentially, if you’re a higher earner, you’re paying 50 per cent on the way out and your capital is tied up – which pretty much makes pensions a definite ‘no’ for a lot of people.”

Tax experts expect to see more clients using individual savings accounts (Isas) and growth funds in order to mitigate their tax liabilities. But experts say altering portfolios to reduce taxation can be difficult.

Dominic O’Connell, head of tax at Coutts, takes property as an example: “A rental property is a capital asset and when it is sold the proceeds will be subject to capital gains tax at 18 per cent. Any rent from the property counts as income and will be taxed at 40 per cent.” The tax treatment cannot be swapped around.

This tax distinction extends to losses. Losses incurred on the sale of an asset can be set against gains in future years, but not against income made.

Louise Somerset, tax director at RBC Wealth Management, expects to see clients moving away from alternative investments such as hedge funds, where returns are taxed as income, and towards growth investments, such as unit trusts and open-ended investment companies (Oeics), where returns are taxed as capital gains.

The difference in taxation between the asset classes means funds may also reposition themselves to create capital gains rather than income, she says, by introducing vehicles that wrap around income investments.

But advisers warn that converting income investments is not straightforward. HM Revenue & Customs is alert to the possibility of individuals attempting to avoid taxation. Any solution that looks too clever is unlikely to have a very long shelf-life.

Richard Proctor, tax partner at Grant Thornton, says vehicles that incur capital gains tax rather than income tax have become the holy grail. Proctor advises the self-employed to take less profit from their business as salary and dividends, and instead build up the value of the business. Not only will gains be taxed as capital, but those selling up are eligible for one-off entrepreneurs’ relief on proceeds up to £1m.

However, investors and the self-employed have been advised to think carefully about the lifestyle changes and investment risk they are willing to accept in return for a smaller tax bill.

Although growth investments may incur lower tax, fixed-interest investments that guarantee a return of capital may still be more suitable for many investors in volatile market conditions.

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Coca-Cola, Oracle, Intel Use Caymans to Avoid Taxes (Update1)
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By David Evans

May 5 (Bloomberg) -- Seagate Technology, the world’s largest maker of hard disk drives, is headquartered in Scotts Valley, California. Yet the documents it files with the Securities and Exchange Commission list its address on South Church Street in George Town, the capital of the Cayman Islands.

Seagate is just one of the companies that may be affected by President Barack Obama’s proposal yesterday to raise about $190 billion over the next decade by outlawing techniques used by U.S. companies in offshore locations to avoid paying taxes. While the U.S. corporate tax rate is 35 percent, Seagate paid an effective tax rate of 5 percent in the year ended June 2008, according to data compiled by Bloomberg.

The Caymans have no corporate income tax for companies incorporated there. The Caribbean island has helped scores of U.S. companies, including Coca-Cola Co. and Oracle Corp., to legally avoid billions in tax payments to the U.S. government, says U.S. Senator Byron Dorgan.

“Our Main Street businesses are working hard during this economic downturn to pay their fair share of taxes,” says Dorgan, 66, a North Dakota Democrat. “Some of the country’s largest corporations are using these loopholes to avoid paying their fair share of taxes. It is my hope that the Congress will quickly take action to pull the plug on tax breaks that subsidize runaway plants that move U.S. jobs overseas.”

Largest Companies

One quarter of the 100 largest contractors with the U.S. federal government, including Altria Group Inc. and Tyco International Ltd have had subsidiaries in the Caymans, according to a study by the Government Accountability Office. At least 10 of the 30 companies listed in the Dow Jones Industrial Average have had units with addresses in the Caymans.

As of November 2007, 378 U.S. publicly traded companies had at least one significant subsidiary in the Cayman Islands, a GAO study found. Altria, Tyco, Coke and Oracle still have subsidiaries in the Caymans, according to their most recent SEC filings. Seagate lists its headquarters in Grand Cayman.

One of the Dow 30 companies using offshore sites to reduce its U.S. taxes is Santa Clara, California-based Intel Corp., the world’s largest chipmaker.

Intel’s then vice president of tax, licensing and customs, Robert Perlman told the U.S. Senate Finance Committee in March 1999 that Intel would have been better off incorporating in the Cayman Islands when it was founded in 1968.

“Our tax code competitively disadvantages multinationals simply because the parent is a U.S. corporation,” Perlman testified.

‘The Details’

Intel spokesman Chuck Mulloy said yesterday his company is reviewing the president’s speech on offshore tax havens. “We’re studying the Obama proposal,” Mulloy said. “Particularly with taxes, the devil’s in the details.”

Intel pays U.S. taxes on interest earned by its Cayman Island subsidiaries, Mulloy said.

Seagate spokesman Brian Ziel said yesterday that his company incorporated in the Caymans to reduce its taxes. “The competitive benefits relate both to taxes saved on certain income earned outside of the United States and the ability to efficiently deploy assets around the globe to remain competitive,” he said.

Eighty-five percent of Seagate’s employees work outside the U.S. and more than 70 percent of the company’s revenue comes from sales overseas, Ziel said.

“Officially, our administrative headquarters is in the Caymans,” Ziel said. “That’s how it’s listed in our annual report.”

18,857 Cayman Corporations

Altria spokesman Bill Phelps said his company is in the process of dissolving its Cayman subsidiary. Coke spokeswoman Kerry Kerr said, “We don’t comment on tax strategies, for competitive purposes.”

Tyco’s Paul Fitzhenry and Oracle spokeswoman Karen Tillman didn’t return calls requesting comment.

A five-story office building on South Church Street in the Caymans serves as the official address for 18,857 corporations. That building, called Ugland House, is listed in SEC filings as Seagate’s headquarters. About half those Cayman companies had billing addresses in the U.S., according to a 2008 GAO study.

President Obama referred to Ugland House yesterday.

“On the campaign, I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claim this building as their headquarters,” Obama said. “And I’ve said before, either this is the largest building in the world or the largest tax scam. And I think the American people know which it is: The kind of tax scam that we need to end.”

Maples and Calder, the law firm that occupies all of Ugland House in Grand Cayman, said Obama is mistaken.

No Financial Misconduct

“I’m sorry to disappoint anyone, but our office is neither the largest building in the world nor a center of financial misconduct,” said Charles Jennings, joint managing partner of Maples and Calder.

“Having a registered office address in the Cayman Islands is driven by commercial considerations, not by tax avoidance,” Jennings said. “It allows companies to raise capital and conduct global business.”

The firm, which provides services for the corporations that use its address, has incorporated more than 6,000 new companies over the past five years. Back in 2004, the building served as home to 12,748 companies using the same address in the Caymans, a British crown colony 150 miles south of Cuba.

Del Monte Fresh Produce Inc., whose corporate headquarters is in Coral Gables, Florida, lists another address -- Walker House on Mary Street in George Town, Grand Cayman -- in its SEC filings. That’s around the corner from Ugland House.

Del Monte’s effective tax rate for 2008 was 3 percent, up from 1 percent the year before. Del Monte spokeswoman Vidya Samsundar had no immediate comment on why the company is incorporated in the Caymans.

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日本のレジャーはＴＶが半分　ＯＥＣＤ調査
2009.5.5 23:10

　経済協力開発機構（ＯＥＣＤ）は５日までに、加盟国中１８カ国を対象とした社会生活に関する調査結果を発表、日本人が１日のうちでレジャーにあてる時間は２１・３％で最も少ないメキシコに次いで低かった。

　レジャー時間の過ごし方では、テレビの視聴が４７％と半分近くを占め、最高のメキシコに次いで高かった。

　調査によると、日本人の平均睡眠時間は７時間５０分と韓国と並んで最も短かった。最もよく眠るのはフランス人で、８時間５０分と群を抜いて長い。

　１日のうちで飲食に費やす時間は、日本が１２０分弱とフランス、ニュージーランドに次いで３番目に長かった。最も短いのはメキシコで、６０分強。

　過去１年間に犯罪に遭遇した人の割合では、日本が１０％とスペインに次いで低かった。（共同）

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日産・オリックス、危機対応融資を追加打診　1000億円規模

　日産自動車とオリックスが政府・日本政策投資銀行に追加の危機対応融資を打診していることが5日、明らかになった。業績低迷による資金繰り悪化に備え、ともに1000億円規模の借り入れを要望している。政投銀は国民負担につながる可能性もある融資の性格を念頭に置いて、厳格に審査する方針。追加支援を巡る官民の調整では、明確な事業再生計画の有無や経営責任のあり方などが焦点になりそうだ。

　日産はすでに同融資で500億円を借り入れているが、政府・政投銀に借り増しの要望を伝えた。コマーシャルペーパー（ＣＰ）などで調達している運転資金の一部を振り替える狙いとみられる。同社は資金流出を抑えて2010年3月期のフリーキャッシュフロー（純現金収支）を黒字化する考えだが、資金の借り換え需要などを見越して融資交渉を進める。(14:39)

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アジア経済、「来年中には回復」　黒田ＡＤＢ総裁会見

　【バリ＝遠西俊洋】インドネシア・バリで開いていたアジア開発銀行（ＡＤＢ）の年次総会が5日、閉幕した。黒田東彦総裁は記者会見で「アジア経済は来年中には回復している」と語り、域内が世界的な金融・経済危機の影響を脱しつつあるとの認識を示した。今後、加盟国への財政支援などを通じ、より確実な域内経済回復を目指す。

　黒田総裁は域内経済について「（域内大国の）中国は底を脱しつつあり、韓国も回復の兆しが出ている」と指摘した。一方、「景気後退で内需拡大が必要ないくつかの国から、財政出動を支援する融資を求める動きがある」と語った。

　ＡＤＢは総会に合わせ、2年で100億ドル（約1兆円）増やす新規融資枠のうち、30億ドルを「財政出動支援融資」として創設する。融資申請から1カ月程度の短期間で審査を終了し、市中で調達するより低利で貸し出す。前月末に決まった増資により潤沢になる資金を生かし、今年3.4％を見込む域内成長率が来年6％と2008年水準に回復することを探る。(05日 23:01)

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三越池袋店と鹿児島店、歴史に幕

　三越伊勢丹ホールディングス傘下の三越は6日、池袋店（東京・豊島）と鹿児島店（鹿児島市）を閉店する。他の商業施設との競合による売り上げ不振などが理由。池袋店は開業から半世紀の歴史に幕を閉じることになる。

　池袋店は1957年10月にオープンしたが、近隣の西武百貨店などとの競争で苦戦した。大手百貨店が東京都心の店舗を閉めるのは2000年のそごう東京店（東京・千代田）以来。鹿児島店は84年の開業。売り上げ低迷に加え、店舗の老朽化から撤退を決めた。(07:00)

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裁判員に参加、56％が前向き　働く読者１万人調査

　5月21日に始まる裁判員制度について、日本経済新聞を読んでいる全国約1万人の有職者を対象に実施した調査で、56.5％の人が裁判員として「参加したい」または「参加してもよい」と前向きに考えていることがわかった。約半数が裁判員従事中も週末などに仕事をすると答えており、仕事との調整が課題である実態も浮かんだ。

　調査は4月、日本経済新聞社が日経リサーチの協力を得てインターネットで実施した。日経新聞を閲読し、働いている全国の成人男女1万537人が対象で、4967人（47.1％）から有効回答を得た。(07:00)

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ポスドク：１人採用で５百万円…文科省が企業に「持参金」

　博士号取得後に任期付き研究員（ポスドク）として大学や公的研究機関で働く人たちの民間企業への就職を増やそうと、文部科学省が、ポスドクを採用した企業へ１人につき５００万円を支給する。国策としてポスドクを増やしながら受け皿不足が指摘される中、「持参金」で企業側の採用意欲を高める狙い。文科省が企業対象の事業を実施するのは珍しく、０９年度補正予算案に５億円を計上した。

　政府は９０年代、高度な研究人材を増やそうと、大学院を重点化し博士号取得者を増やした。博士の受け皿となるポスドクは１万６０００人を超えたが、企業への就職は進んでいない。日本経済団体連合会の０６年調査で、技術系新卒採用者のうち博士は３％だ。

　文科省の調査によると、ポスドクの６割以上は企業への就職も視野に入れているが、企業側の技術系採用は修士が中心で、８５％が「過去５年にほとんど採用していない」と答えている。企業側が「食わず嫌い」している状態だ。

　文科省の新施策では、まず企業からポスドクの活用方針や業務内容、支援策などの採用計画を募集。科学技術振興機構で審査した上で、採択された企業に対してポスドク１人につき５００万円の雇用経費を支払う。支援期間は１年間だが、「使い捨て」にならないよう、終了後のキャリア構想も審査するという。文科省は「実際に採用した企業からのポスドクの評価は高い。何とかよい出会いを増やしたい」と話している。

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難民保護費：外務省が支給の要件を厳格化　予算不足で

　日本で難民認定申請した外国人に国が生活費を支給する「保護費」について、外務省が今月から支給対象の要件を厳格化することがわかった。難民が急増し、予算が足りないことが理由。従来の「生活困窮」だけでなく、重篤な病気▽妊婦や１２歳未満▽観光ビザなどを持ち合法的に滞在しているが就労許可がない－－のいずれかに当てはまることとし、受給者を現在の半分に絞り込む狙い。全国で１００人以上が支給対象から外れるとみられる。

　保護費は８３年から支給。今年度予算は年１億数千万円。難民認定申請をし、審査結果が出るまでの間、収入がないなど、生活困難な外国人に支給する。１２歳以上の場合、１日１５００円の生活費と、月４万円（単身者）の住居費などが支払われる。

　法務省によると、難民認定の申請者数は近年増加。保護費の受給者も、１カ月平均で０７年度が９５人だったのに、０８年度（２月まで）は２０４人と倍増した。

　外務省人権人道課は「予算内でしか対応できず、他に方法がない。昨年下半期から受給者が急増したが、見通せなかった」と説明。国際人権擁護団体、アムネスティ・インターナショナル日本の寺中誠・事務局長（４９）は「保護費打ち切りは、国連難民条約に違反」と指摘している。

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白雲木が見ごろ…ラストエンペラーの弟・溥傑の千葉の旧邸

　中国・清朝最後の皇帝、愛新覚羅溥儀(あいしんかくらふぎ)の弟の溥傑(ふけつ)（１９０７～９４）が新婚時代を過ごした千葉市稲毛区稲毛の旧邸で、かつて宮中にしか植えることが許されなかったといわれるハクウンボク（白雲木）が見ごろを迎えている。

　溥傑の妻、浩(ひろ)さんが、当時皇太后だった貞明皇后から「日中をつなぐ新しい命の花を咲かせてほしい」と贈られた種を親族が育て、１０年目の今年、初めて満開となった。

　溥傑は３７年４月、旧侯爵・嵯峨家の浩さんと結婚した。陸軍歩兵学校に通うため、稲毛の浅間(せんげん)神社脇にある一軒家で新婚生活を送った。

　満州国の皇帝となった溥儀に跡継ぎがなかったため、関東軍が画策した政略結婚だったが、夫婦仲は良かったといい、二人が仲むつまじく肩を組んでいる写真も旧邸に残っている。

　日中戦争が発生し、同年９月、溥傑は満州国の首都・新京（現在の吉林省長春市）へ戻った。浩さんも翌月、夫の元へ向かうことになり、貞明皇后にあいさつに赴くと、赤坂御所に植えられている白雲木から採った３粒の種を手渡されたという。

　その後、溥傑一家は、満州国崩壊で離ればなれになった。溥傑はソ連での抑留と、中国での戦犯管理所暮らしを経て、１６年ぶりに北京で妻子と再会した。晩年は日中友好に尽力し、９４年２月に亡くなると、浩さんと長女の遺骨がまつられている山口県下関市と北京に分骨された。

　旧邸はその後、市に買い上げられ、９７年から「ゆかりの家」として無料で一般公開されている。

　次女、福永コ生(せい)さん（６９）によると、溥傑夫妻は「稲毛での生活が一番楽しかった」とことあるごとに言っていたといい、ゆかりの家の一般公開を記念して、自身が育てていた白雲木の苗木を寄贈した。（「コ」は女ヘンに樗のつくり）

　苗木は裏庭に植えられた。ゆかりの家のガイドボランティアをしている同区小仲台の奥井貞男さん（６８）によると、３年前からこの季節に花を付けるようになり、今年、初めて満開となったという。

　花は、スズランのような小さな白い房状で、雲のように連なっていることからこの名が付いたという。コ生さんは「白雲木を見て、両親の日中友好への思いをしのんでほしい」と話している。

　ゆかりの家についての問い合わせは、０４３・２４８・８７２３へ。

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Panic in the Pentagon: The Taliban may obtain nuclear weapons
05.05.2009 Source: Pravda.Ru URL: http://english.pravda.ru/world/asia/107500-pentagon_taliban-0

At the end of April, the American establishment was anxiously watching the redeployments of the Taliban movement, the fighters of which are now within about 100 kilometers from Islamabad. If the Pakistani army does not stop the Talibs, they will be able to seize the nuclear arsenal of the country in about two weeks.

General David Petraeus, the head of the U.S. Central Command, reported at the closed meeting with US congressmen and senators that it would be clear in the next weeks whether the Taliban could overthrow the Pakistani government. According to GZT.ru, which quotes FoxNews and The Daily Telegraph, the General said that despite the excuses from the Pakistani authorities he hoped that they would strike a shattering blow on the Taliban’s positions.

Petraeus supposes that Islamad has taken the necessity to eliminate the threat from the Taliban and Al-Qaeda extremists, which are based in the northwest regions of Pakistan, seriously at last.

If we believe the Washington insiders, General Petraeus and other top-ranking officials of Barack Obama’s administration deem that the Pakistani army under command of General Ashfaq Kayani takes a more correct stand than the civil government.

The divisions of the Pakistani security forces have lately done their best to push them back having seized the control over the strategically important stations in the Buner Valley . However, the Talibs have put up a stubborn resistance and captured tens of policemen and soldiers.

U.S. Secretary of State Hillary Clinton stated last week that the United States could not let the Pakistani government under the President Asif Ali Zardari be overthrown by the Taliban. “In this case they will get the key to the nuclear arsenals of Pakistan. The consequences will be unpredictable. We just cannot let it go on”, she said.

The anxiety, with which the US officials follow the developments in Pakistan, is growing stronger because of the discord in Washington on the subject of which is the best way to help Pakistan. Some congressmen and senators suggest imposing strict limits on any supporting deliveries to Islamabad , though the members of Obama’s administration do not approve it. Others insist that the control over the main financial flows should be transferred from the Department of Defense to the Department of State, though this idea has no advocates in the White House.

According to FoxNews, no one in the US is aware of what the Taliban really strives for. The Washington-based experts do not know, whether the Talibs want to overthrow Zardari’s government or if they just try to win back a piece of the Pakistani territory, on which they could feel safe, impose Islamic laws and plan strikes on outer targets.

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Little girl stuck between two countries as her own parents kidnap her three times
04.05.2009 Source: Pravda.Ru URL: http://english.pravda.ru/russia/politics/107495-little_girl-0

Russia’s most publicized child kidnapping case is likely to be closed if the child’s parents – a Russian mother and a French father – will sign an amicable agreement.

“No charges have been brought against anyone as of today. The case is under investigation,” a senior spokesman for the Moscow Police Department told RIA Novosti news agency. The case was filed on September 23, 2008. If the case comes to trial, the perpetrator may face from 6 to 15 years in prison.

Elise Andre is the three-year-old daughter of Russian citizen Irina Belenkaya and French citizen Jean-Michel Andre. The parents divorced and could not decide who would be in custody of their child afterwards. They abducted their own daughter from each other three times. The mother, Irina Belenkaya, took the girl from France to Russia, but the French father brought the girl back to France in the fall of 2008.

The mother kidnapped the child again this year, at the end of March. The ex-husband was attacked and beaten by two strangers when it happened. The French authorities put Belenkaya on the wanted list. Irina and her daughter were detained on April 13 in Hungary, on the border with Ukraine. Elise was delivered to her father, while the child’s mother had to go to trial.

France seeks for the extradition of Belenkaya claiming that she violated the ruling of the French court about the child’s place of residence. Belenkaya declined the simplified extradition procedure. A Hungarian court will now consider new documents from the litigants before it makes a final decision on the case.

The lawyers for Belenkaya and Andre will meet in Moscow to discuss a possibility of the amicable agreement between the parents. The French father said previously that he did not want to see his ex-wife in jail.

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08:12 GMT, Wednesday, 6 May 2009 09:12 UK
Vatican army 'may recruit women'

- APRIL 27: Members of the Swiss Guard stand to attention

Women may be allowed to join the exclusive ranks of the world's smallest army, the head of the Vatican's Swiss Guard says.

"I can imagine them for one role or another," Commander Daniel Anrig told Italian television.

Such a move would represent a significant departure from tradition.

The 500-year-old force, devoted to protecting the pope, customarily recruits only young, single, Catholic soldiers from Switzerland.

Previously logistical problems, such as the cramped living quarters for the forces, had been cited as an obstacle to allowing women to join.

But Commander Anrig said he believed such problems could be overcome. His predecessors have fiercely opposed such a move.

The comments came on the eve of an annual swearing-in ceremony for new recruits held on May 6 .

The Swiss Guard were founded in 1506 when Swiss mercenaries marched into Rome to serve under Pope Julius II, known as the "warrior pope".