Archive

Reuters blog archive

from Breakingviews:

Japan’s corporate tax cut could harm Abenomics

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Shinzo Abe wants to prove his reform credentials by cutting Japan’s 36 percent corporate tax rate. But the prime minister’s plan could backfire and end up harming his anti-deflation campaign.

The Japanese government on June 24 announced a plan to slash the rate to less than 30 percent over the next several years. There’s no clarity yet on the final rate, or how the largesse will be funded.

The plan’s vagueness is disconcerting, but its rationale is dubious, too. Japan’s overall tax-to-GDP ratio is low among rich countries. Less than a third of companies pay any taxes, and the effective rate for large conglomerates is just 13 percent. Although the burden will rise with improving profitability, the increase won’t be dramatic: companies will use past losses to keep their payouts low for years.

from Hugo Dixon:

Is Greece losing its reform drive?

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own. 

Is Greece losing its reform drive? Prime Minister Antonis Samaras has stuck to a harsh fitness programme for two years. But just as it is bearing fruit, he has sidelined some reformers in a reshuffle. There is only one viable path to redemption for Athens: stick to the straight and narrow.

from Breakingviews:

Medtronic-Covidien deal is marriage of convenience

By Jeffrey Goldfarb and Robert Cyran

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The marriage of Medtronic and Covidien looks to be one of convenience. The $42.9 billion deal includes a premium that exceeds the estimated cost savings. Stents and sutures aren’t an obvious fit. And moving Medtronic’s headquarters from Minneapolis to Covidien’s Dublin base won’t obviously cut the U.S. company’s tax bill. Freeing up overseas cash is too shallow a reason to tie the knot.

from Hugo Dixon:

Six solutions for the UK housing crisis

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

Britain’s main economic problem is that the supply of homes isn’t rising nearly as fast as demand. This doesn’t just create the risk of a new housing bubble; young people are finding it increasingly hard to find places to live, especially in crowded London and southeast England. So I make no apologies for returning to the topic after only three weeks.

from The Great Debate UK:

Why Antwerp is under threat as the world’s diamond trading centre

--Vashi Dominguez is the founder of Vashi.com. The opinions expressed are his own.--

When the European Union and the U.S. took action against Russia over the invasion of Crimea and the crisis in Eastern Ukraine, alarm bells immediately rang for the diamond industry. Russia is one of the biggest suppliers ($2.8 billion last year) of rough diamonds for Belgium, through which 80% of all rough diamonds and 50% of all polished stones pass. If Antwerp were to lose access to Russia’s diamonds, it would be the latest in a string of challenges facing the world’s diamond trading centre.

from MuniLand:

Puerto Rico stumbles on tax collections

Puerto Rico

Puerto Rico’s April tax collections suffered a big collapse. The projections were missed by 27 percent, or $442 million. The data was released last Friday. The April shortfall, caused mostly by reduced corporate income taxes, imperils year-end budget figures. It also jeopardizes the recently proposed fiscal year 2015 budget that was proposed by Puerto Rico Governor Alejandro García Padilla.

If tax collections continue to taper, either substantial additional taxes must be levied or cuts larger than the anticipated $1.5 billion will need to be made for the 2015 budget to be balanced. Bondholders have been promised that the 2015 budget will be balanced and that it will not rely on debt borrowing to fill budget shortfalls. April’s tax collections, if not made up in May and June, will make this promise hard to keep.

from Breakingviews:

Tax steroids justify Bayer’s $14 bln Merck deal

By Olaf Storbeck
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Bayer’s $14.2 billion acquisition of Merck’s consumer care business is less pricey than it looks. Non-prescription pharmaceuticals are among the most sought-after assets in global healthcare. Demand for “over the counter” drugs, driven by emerging markets, is growing at 4 percent to 5 percent a year. Revenue is unthreatened by patent cliffs and less vulnerable to regulatory interference. Strong OTC brands earn EBITDA margins of 30 percent and more.

from MuniLand:

California’s housing crisis hit local government revenues

California

California’s real estate market experienced some wild swings that pushed housing prices up faster than anywhere in the nation before plummeting in response to the financial crisis. Local government revenues rode the same boom-bust cycle.

After the housing crash, a California state law, Proposition 8, allowed temporary property tax reductions for 3.2 million properties -- about 2.6 million homes and 600,000 other properties. Under Prop 8, property assessments were allowed to be lowered to match the market value of the property. According to a recent legislative report, these reductions dragged down local government revenues by approximately 15 percent. As the housing market has rebounded, property assessments that had special treatment under Prop 8 have increased, providing a positive impact on local government budgets. The Sacramento Bee reports:

from Breakingviews:

Rob Cox: Solving America’s homegrown Putin dilemma

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

As the eagle flies, it's a long way from Bunkerville, Nevada to Slovyansk, Ukraine. Right now, though, the two places have something insidious in common: armed vigilantism. That parallel sadly seems to escape the many American policymakers who have accused President Barack Obama of adopting the logic of appeasement in his dealings with Russian President Vladimir Putin. They're missing a big point. If the United States can't uphold the rule of law at home, it can have no credibility abroad.

from Breakingviews:

Silicon Valley exceptionalism only travels so far

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Airbnb isn’t finding New York very hospitable. The room-sharing site squared off in court last week with Attorney General Eric Schneiderman over information he has subpoenaed about the many Airbnb customers his office suspects are breaking the Empire State’s laws. It’s a good example of what happens when tech entrepreneurs stray from their more accommodating Silicon Valley environs.

  •