Capability building in China

All too often in the UK we hear senior business leaders and politicians bemoaning the lack of skilled labour.  But China 30 or so years ago had very few skilled staff.  So how did they progress to be the world's leading manufacturer and exporter?

Abbreviated from: http://www.mckinsey.com/insights/asia-pacific/capability_building_in_china?cid=china-eml-alt-mip-mck-oth-1307

Article|McKinsey Quarterly

Capability building in China

Skill building must be rewards-based, rooted in real work, and tailored to local conditions.

July 2013 | byKarel Eloot, Gernot Strube, and Arthur Wang

Capability building—leadership, managerial, and team-based skills rather than technical ones—has become an urgent imperative for many companies in China. As the country loses its extreme low-cost-labor advantage, businesses must look for ways to increase productivity and internal collaboration, to better understand consumers, and to develop a more sophisticated appetite for risk.
Companies in China face many of the same challenges—a lack of up-front planning and inadequate resources—that bedevil capability-building exercises everywhere. But certain “China factors” stand out. For starters, the demand for managers with strong leadership skills and international experience is growing significantly faster than the supply of qualified candidates. That imbalance makes it more difficult to pull off successful skill-building efforts, even for multinationals that typically invest more in training than Chinese companies do. (Indeed, one implication of China’s white-hot war for talent is that outside trainers brought in by multinational companies to set up and run new programs often move on before relevant tools and internal processes are in place.) Another perennial challenge for multinationals: the Chinese context and culture, which may require local tailoring of global approaches.
Then, of course, there are China’s state-owned enterprises. Many of them only recently converted from government departments into commercial entities and are still working to adapt to a competitive environment and adopt a true business mind-set. These companies generally lack a systematic approach to nurturing employees moving up the organizational ladder. They misconstrue capability building as a classroom activity, missing the impact of linking it to actual business. And they are too inflexible either to fire underperformers or to reward and promote employees, including managers, who change their behavior and adopt the necessary mind-sets.
While the challenges facing multinationals and state-owned enterprises differ, our experience with leaders at both kinds of organizations (as well as with private-sector Chinese companies) has highlighted the importance of some common, broadly applicable principles. In this article, we describe three that should help companies overcome many of the obstacles that have frustrated capability-building efforts in the past.

1. Relate capability building to real activities

...

2. Instill incentives and create opportunities for promotion

...

3. Don’t forget China’s unique culture

...
The solutions may sound obvious: developing Chinese teaching materials to help solve problems, building day-to-day business problems around products that participants would find in the Chinese market, and localizing global training materials through culturally appropriate metaphors and examples. But we know from experience how easy it is to overlook these issues. In our own work, we routinely use a case involving a coffee machine to teach managers about the seven types of waste and how a “lean” perspective can address them. When we recently used this case at a Chinese state-owned enterprise, however, the managers couldn’t make sense of the story, because they had never used a coffee machine. We have now adapted the context to tea making.

About the authors

Karel Eloot is a director in McKinsey’s Shanghai office; Gernot Strube is a director in the Hong Kong office, where Arthur Wang is a principal.

Why do we have to trawl for the facts about Britain and the EU?

From: http://www.guardian.co.uk/commentisfree/2013/jun/02/eu-fishing-policy-british-interests

Finally, the absurd fishing quota policy that sometimes results in 50% of the catch being discarded is going to change.

With fishing policy, as with Italy's attempt to ban plastic bags, our government is terrified of appearing to allow the EU to undermine British 'interests'

For years, campaigners have been fighting against industrial fishing in European waters and last week, at long last, they had something to celebrate. Their target has been the huge factory ships that hoover up everything in their wake, discarding the dead fish they don't want – often half the catch – and returning to port with their quotas met the most profitable way. The result has not just been dwindling fish stocks – the entire marine ecosystem is under assault, including the coastal fishing communities that depend on it for their livelihood.

No one European country can make a difference by itself: fish do not respect borders. In any case, the danger for any one country acting unilaterally to husband fish stocks and ban the practice of discarding dead fish is that if others do not follow suit it will be the sucker. It will have hurt its own fishing interests just to benefit others. This is a problem that can only be solved by European countries acting together.

Last Thursday at 3am, EU members states finally agreed the outlines of a tough Common Fisheries Policy. First, there was a commitment for the first time to set quotas – based on hard scientific advice – that aim to go beyond stabilising fish stocks to achieving growth. Crucially, from 2015, boats will be forbidden from discarding unwanted dead fish, starting with species such as mackerel that live in the upper oceans, and extended to all fish types by 2020. Every country will have to submit a detailed plan for how it intends to meet its quota, but making its own decision about which types of fishing it will favour. But with discards effectively banned – inevitably, under British pressure, boats will still be allowed to discard 5% of their catch after 2020 – there will be an inbuilt bias against industrial fishing. This is a major move to help stocks.

Battle-hardened campaigners could only blink in semi-disbelief. Hugh Fearnley-Whittingstall, the leader of Fish Fight, who has signed up more than 860,000 supporters to work for tougher quotas and a ban on discards, hailed the deal as a "tremendous achievement". Even Greenpeace managed a grudging congratulation: "For all its loopholes and sluggish timelines the policy has the potential to turn Europe's destructive and oversized fishing industry into a sustainable, low-impact sector." The fishing industry acknowledged a corner had been turned.

It was a great example of an increasingly democratic EU beginning to work rather well. For the policy to become law, the European parliament will have to give its assent – and on this question it is very radical. EU fisheries ministers, managed cleverly by EU Commissioner Maria Damanaki, knew they had to come up with something strong, or parliament's endorsement would be impossible. But equally, the deal is only sellable domestically if governments accountable to national parliaments and electorates work out exactly which parts of their domestic fishing industry are going to shoulder the pain. Here is a policy that is democratically legitimate at EU and national levels, respects national sovereignty and solves a problem that no one country could solve itself.

However, this will be news to almost every reader of this column. No national newspaper printed it. It did break at 3am, but apart from the FTthere was not even online coverage and no follow-up the following day. Intriguingly, even the BBC's Today programme felt the story could be ignored; the juicy European news of the day was a BBC scoop that the EU Commission is going to take Britain to court over the government's alleged discriminatory withdrawal of welfare benefits from EU nationals. It was a good story, but listeners might also have been interested in hearing the fishing deal discussed – or even that it had happened. After all, the news was only hours old. Fish Fight does have 860,000 supporters: the effective ending of discards was hardly marginal news.

But the story did not fit the narrative. The British view, hardwired into the political and media class's DNA, is that the EU is a mess about to disintegrate under the weight of its absurd, anti-democratic ambitions to become a superstate, with its even more absurd single currency. It does nothing worthwhile, harms all British interests and we must stay disengaged or, at best, leave altogether. Every editor knows that no positive stories emanate from Brussels, and even if they do, there are no penalties for ignoring them.

It is utterly disabling. The technical reason why Britain fought so hard to continue to allow boats to discard 5% of their catch after 2020 is that allegedly in British waters, shoals of fish are more intertwined than in other waters, so catching fish that have to be discarded is more likely. Really? My hunch is that without the concession officials and ministers were terrified of Nigel Farage and Eurosceptic Tory MPs lining up with some disgruntled fishermen to claim the big bad EU had undermined British "interests".

Certainly, that was why Britain last week blocked Italy from implementing a ban on single-use plastic bags as discriminatory under EU law against British plastic bag manufacturers. Now no EU country can adopt what is clearly a sane environmental move – at one time supported by the prime minister – because of a reflex terror of a complaint by "wealth-creating" business that EU regulation is undermining British interests. (Both Wales and Northern Ireland have introduced a plastic bag levy.)

Nor will anybody have juxtaposed the richly comic spectacle of the British government prosecuting Italy for being discriminatory under EU law even as it protests against the injustice of being called discriminatory itself over welfare. Instead, there is synthetic outrage about Britain being singled out by a mutton-headed and politically insensitive European Commission. Yet the entire EU is based on the principle that there are common European interests, extending from how we fish our seas to how we explore space, that are underpinned by the notion that member states do not discriminate against each other. The rule of European law is universal, as it should be in rule-of-law societies. The Commission has no option but to uphold it.

This is a club worth staying in. It is much better for Britain's fishing industry – along with every other industry – that we are in the EU as it makes its rules. If the British are to make an informed choice about their destiny in any future referendum, then at least they deserve to know the facts. Judging by last week they will not be able to rely on their media for those or on their terrified politicians.

Fury at corporate tax avoidance leads to call for a global response

From - http://www.guardian.co.uk/business/2013/may/18/corporate-tax-avoidance

Anger over the financial affairs of multinationals such as Google, Amazon and Starbucks is gathering momentum in Westminster. Now the UK is poised to lead the debate about international tax reform at next month's G8 summit.i

Google's approach to its taxes has been branded as evil by Margaret Hodge, chair of the public accounts committee. Photograph: John G Mabanglo/EPA

Huge orange and green cranes hover over a vast building site at King's Cross, London. Over the next three years, 2.4 acres of this site will be transformed into a million square feet of an 11-storey headquarters for the internet giant Google, no doubt chock-a-block with colourful Big Brother-house-style sofas and surreal chill-out zones that mark out its other 70 offices in 40 countries.

The property deal is estimated to have cost around £1bn and was heralded by the site's development consortium as the "most significant property transaction of recent years".

"This is a big investment by Google, we're committing further to the UK where computing and the web were invented. It's good news for Google, for London and for the UK," said Matt Brittin, vice-president for northern and central Europe, when the purchase was announced in January.

Like Amazon, Google is seeing increasing success in the UK where one in every $10 of sales is now generated. Yet both firms claim they are merely touching down on UK soil, without a "permanent establishment" and therefore are not paying tax on profits from billions of pounds worth of sales made here.

On Wednesday, Google won the advertiser of the year trophy at the 54th annual Clio Awards – the Oscars for advertising professionals. Accepting the award in New York, Robert Wong, chief creative officer of Google Creative Lab, said: "At the highest order, our job is to remind the world what it is they love about Google."

That popularity has hit a serious snag. The next day the company was branded "evil" by Margaret Hodge, chair of the public accounts committee, while this weekend Ed Miliband called it "irresponsible". "If everyone approached their tax affairs as some of these companies have approached theirs we wouldn't have a health service, we wouldn't have an education system," he said.

Along with Amazon and, before that, Starbucks, Topshop, Boots, Vodafone, Goldman Sachs and Greene King, Google is the latest to have become the target of grassroots hostility towards their aggressivetax avoidance policies. The actions of these corporations are not illegal, nor underhand, but especially when we're all supposed to be in austerity together, jarring horribly with public opinion.

Something "doesn't smell right", as the Guardian's editorial said this weekend, after it ran an account of the extent of Amazon's dealings in the UK, far wider than what its tax lawyers are implying.

The debate is now raging over whether these companies are the happy beneficiaries of a tax system knitted with loopholes, or the malicious purveyors of smoke-and-mirror accounting. HM Revenue and Customs claims the former – public opinion is rolling towards the latter. Lin Homer, chief executive of HMRC, claimed the public don't understand. Asked why she was not taking a tougher line with internet giants, she told the public accounts committee: "We see, but understand more fully, some of the information that might seem to the general public to be surprising."

But campaigners say tax collectors and leading politicians have been caught out; too engrossed in austerity plans, they are scrabbling to keep up with people who point out that there are other ways to balance the books.

"Without a doubt, they are behind the curve," said Richard Murphy, a chartered accountant, economist and founder of Tax Justice Network. "They have all been caught by surprise because this has come from civil society, a campaign that has been going on for almost a decade but has only been picked up by politicians after the banking crisis when they suddenly realised they were desperately short of cash."

He said HMRC had been ducking tax avoidance completely. He said it had powers to tackle any suspect tax returns of foreign-based companies. "If the breach is blatant, then they can act. What we haven't got is politicians who will stand up to this. It's a critical point. If the state will not stand up for its right to tax big corporations then we are in deep trouble."

UK Uncut began campaigning on the issue in 2010 and it was its legal challenge that revealed how HMRC waived a £20m bill for Goldman Sachs, as well as a £6bn bill to Vodafone. Journalists, tax experts and campaigners have been investigating and exposing the tax scams being perpetrated by big businesses for far longer – pointing out glaring loopholes in Britain's tax system.

When Matt Brittin of Google told the public accounts committee in November 2012 that Google did not have a sales presence in the UK, it was the news agency Reuters that quickly uncovered evidence to the contrary, resulting in Brittin being recalled in front of the committee on Thursday, where his company's behaviour was described as "devious, calculated and, in my view, unethical" by Margaret Hodge.

"You are a company that says you 'do no evil'. And I think that you do do evil," said Hodge, referring to Google's motto, "Don't be evil".

Amazon may also be recalled, after numerous whistleblowers from among its employees approached journalists to contest official accounts of its trading practices within Britain.

For the moment the government's line is that this is a global problem that cannot be solved unilaterally. On Monday, Google's executive chairman, Eric Schmidt, will meet David Cameron, a meeting No 10 insists is not about tax, but to do with Schmidt's role on the prime minister's business advisory group.

Labour leader Ed Miliband, who is due to give a speech to Google employees on Wednesday, has backed a "country by country" international scheme on tax declaration but says that he is concerned that no firm proposals have so far been put forward for the G8. "You have to have much greater transparency. Tax offices have to know country by country how much profit people are making, how much tax they are paying. Unless you know that you won't get to the bottom of what is happening. You have to deal with tax avoidance schemes. You have to deal with tax havens.

"We are saying there has to be a big, big push on this. It has to be done internationally and if it is not done internationally, Britain should act on its own."

All eyes will be on what, if anything, can be agreed at next month's G8 meeting in Scotland, where, as host of the event, David Cameron has pledged to put tax avoidance at the top of the agenda as he insists it is an issue for international co-operation rather than unilateral action.

And it would not be just the wealthy who would be watching the progress of the talks, said Melanie Ward, head of advocacy at ActionAid UK.

The art of hiding the loot

From - http://www.chinadaily.com.cn/sunday/2013-05/19/content_16509693.htm

According to the air bill on the crate that arrived at New York's Kennedy International Airportfrom London, an unnamed painting worth $100 was inside. Only later did investigators discoverthat it was by the American artist Jean-Michel Basquiat and worth $8 million.

This painting, known as "Hannibal," was brought into the United States in 2007 as part of aBrazilian embezzler's elaborate effort to launder money, the authorities say.

The painting's seizure was a victory in the economy-rattling, billion-dollar fraud and money-laundering case of Edemar Cid Ferreira, a former Brazilian banker who converted some of hisloot into a 12,000-piece art collection.

Law enforcement officials in the United States and elsewhere say "Hannibal" is just one ofthousands of valuable works of art being used by criminals to hide illicit profits and illegallytransfer assets around the globe. As other traditional money-laundering techniques have comeunder scrutiny, smugglers, drug traffickers, arms dealers and the like have increasingly turnedto the opaque art market, officials say.

The Basel Institute on Governance, a nonprofit research organization in Switzerland, warnedlast year of the high volume of illegal and suspicious transactions involving art.

It is hard to imagine a business more custom-made for money laundering, with million-dollarsales conducted in secrecy and with virtually no oversight. What this means in practical terms isthat "you can have a transaction where the seller is listed as 'private collection' and the buyer islisted as 'private collection,'" said Sharon Cohen Levin, chief of the asset forfeiture unit of theUnited States attorney's office in Manhattan. "In any other business, no one would be able toget away with this."

Governments around the world have taken steps to bring illegal activity to light. In February, forinstance, the European Commission passed rules requiring galleries to report anyone whopays for a work with more than 7,500 euros in cash, and to file suspicious-transaction reports.

The United States similarly requires all cashtransactions of $10,000 or more to be reported.

In a forthcoming book, "Money Laundering ThroughArt," the Brazilian judge who presided over theFerreira case, Fausto Martin De Sanctis, argues formore regulation, saying if businesses like casinos andgem dealers must report suspicious financial activity,so should art dealers and auction houses.

But to dealers and their clients, secrecy is crucial tothe art market's mystique and practice. The ArtDealers Association of America dismissed the ideathat using art to launder money was even a problem.

In Newark, New Jersey, federal prosecutors in a civilcase recently announced the seizure of nearly $16million in fine art photographs as part of a fraud andmoney laundering scheme that prosecutors say wasengineered by Philip Rivkin, a Texas businessman.

Mr. Rivkin, who has not been charged with any crimes,was last thought to be in Spain and had arranged to have the photos shipped there.

In New York, victims of the scams of the disbarred lawyer Marc Dreier are still in court fightingover art he bought with some of the $700 million stolen from hedge funds and investors. At themoment 28 works by artists like Matisse, Warhol, Rothko and Damien Hirst are being held bythe federal government.

"Hannibal" also sits in storage. That 1982 Basquiat work was part of a spectacular collectionthat Mr. Ferreira assembled while he controlled Banco Santos in Brazil.

In 2004 Mr. Ferreira's financial empire, built partly on embezzled funds, collapsed, leaving $1billion in debts. A court in Sao Paulo sentenced him in 2006 to 21 years in prison for bankfraud, tax evasion and money laundering, a conviction he is appealing. Before his arrest,however, art worth more than $30 million, owned by Mr. Ferreira and his wife, Marcia, wassmuggled out of Brazil, Judge De Sanctis said.

According to court papers, "Hannibal" was bought for $1 million in 2004 by a Panamaniancompany called Broadening-Info Enterprises, which later tried to sell the painting for $5 million.It was sent to New York in 2007, passing through the hands of four shipping agents in twocountries before landing at Kennedy International.

Since merchandise valued at less than $200 may enter the United States without customsdocumentation, duty or tax, "Hannibal," labeled as worth $100, was cleared for entry before theplane landed.

Philip Byler, Broadening's lawyer in New York, said the inaccurate invoices were just ashortsighted attempt by the art dealer that Broadening hired to save importation fees. "It wasnot done with the intention of smuggling," he said. He also challenged the Brazilian authorities'claim, saying that "Hannibal" was legally purchased from a company owned by Mr. Ferreira'swife.

Mr. Byler said that Broadening intends to appeal the forfeiture.

Amazon paid £3m tax on £4bn UK sales

From: http://www.guardian.co.uk/business/2013/may/15/amazon-uk-tax-3m

Online retailer's tax charge brings to £6m the total corporation tax raised from Amazon.co.uk in a decade

Amazon.co.uk paid £3m in tax. Photograph: Chris Radburn/PA

Amazon's main UK subsidiary paid just £3.2m in tax last year, according to accounts filed on Wednesday, despite overall UK sales of £4.2bn.

Amazon's taxes for last year are only marginally higher than the £2.5m the company received in government grants during the year, according to the annual accounts published at Companies House.

The revelation comes amid public unrest over the minimal contribution of Amazon and fellow digital giants Apple and Google to the British public purse, despite the important contribution UK sales make to their international revenues.

The online retailer's tax charge brings to £6m the total corporation tax raised from Amazon.co.uk Limited in a decade. The company's tax bill was £1.9m in 2011, but these sums may not actually be paid to HM Revenue and Customs because of cumulative losses across the Amazon group.

Amazon employed 4,191 people at the end of 2012 in the UK, and thousands more in its warehouses via contracting agencies, but reduced payments to the British government by routing sales via a subsidiary in Luxembourg.

The UK company declared a turnover of £320m for 2012, up 50% on 2011. However, its income is largely raised from other Amazon companies in return for services such as warehousing and distribution and negotiating purchasing deals with book publishers.

Amazon gives a fuller picture of its UK revenues on regulatory filings to US investors, and this data showed a growth in UK turnover of 20% during 2012, to $6.5bn (£4.2bn).

The company's UK filing states: the company recorded a profit before taxation of £10.8m in the current year and "is expected to remain profitable for the foreseeable future".

Liberal Democrat MP John Hemming said the figures showed the inadequacy of existing rules to tackle the problem of profit shifting by major corporations.

"The government clearly needs to do a detailed study on how to handle the tax implications of e-commerce," he told Reuters.

Nick Smith, a Labour MP, said he wanted the tax authorities to take a close look at Amazon, describing its tax payment as "pathetic".

"HMRC should be going through this company's tax arrangements with a fine-tooth comb," he said.

Osborne: G7 agree to target tax evasion and avoidanc

From: http://www.bbc.co.uk/news/business-22476233

The G7 group of industrialised nations have agreed that there must be collective action against tax evasion and avoidance, the UK's finance minister has said.

Chancellor George Osborne said after the talks that it was "incredibly important" that firms and individuals paid the tax they owed.

The members agreed on more policy issues than had been assumed, he added.

The G7 comprises the US, Germany, the UK, Japan, Italy, France and Canada.

In a news conference held jointly with Bank of England governor Sir Mervyn King, Mr Osborne said the finance ministers and central bank governors of the G7, meeting in Aylesbury, Buckinghamshire, had also agreed no bank should be "too big to fail".

Kofi Annan turns up heat on ENRC and Glencore in pursuit of Africa’s lost tax

From: http://www.thetimes.co.uk/tto/business/industries/naturalresources/article3760812.ece

Kofi Annan has called on Britain to use its presidency of the G8 to stamp out the “unconscionable” business practices of companies such as Glencore Xstrata and ENRC in Africa.

The Africa Progress Panel, chaired by the former Secretary-General of the United Nations, wants an international crackdown on tax avoidance with a particular push for transparency in the mining and oil sector, it said in a report.

ENRC and Glencore strongly deny any wrongdoing and said that they were not contacted by the Africa Progress Panel before the publication of its report. The panel estimates that Africa lost $63 billion (£40 billion) in tax revenues through illicit practices between 2008 and 2010 alone.

“It is unconscionable that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximise their profits, while millions of Africans go without adequate nutrition, health and education,” the report said.

It highlights recent deals by ENRC, the miner being investigated by the Serious Fraud Office for “fraud, bribery and corruption”, and Glencore Xstrata in the Democratic Republic of Congo.

The report claims that assets were undervalued, costing the country an estimated $1.4 billion, a figure close to 10 per cent of its GDP.

The panel counts prominent executives and policymakers among its members, including Tidjane Thiam, the chief executive of Prudential, Robert Rubin, the former US Treasury Secretary, and Michel Camdessus, the former managing director of the IMF. Its donors include the UK Department for International Development and the Bill & Melinda Gates Foundation.

The panel’s criticism could focus the spotlight on Britain’s regulatory regime. Kevin Watkins, author of the report, asked why it had taken British authorities so long to investigate ENRC’s dealings in the DRC.

“We call on the G8 and the G20 to step up to the mark to show leadership,” the report read.

The net closes in on super rich tax dodgers: Spies expose how hundreds of Britons are 'hiding billions' in foreign tax havens

From: http://www.dailymail.co.uk/news/article-2322212/The-net-closes-super-rich-tax-dodgers-Spies-expose-hundreds-Britons-hiding-billions-foreign-tax-havens.html?ito=feeds-newsxml

Hundreds of ultra-wealthy Britons are being investigated for tax evasion following the exposure of their secret offshore accounts.

International spy agencies are thought to have helped obtain a 'goldmine' of data that names high-profile multi-millionaires and their financial advisers.

The files show how the rich have hidden billions in Singapore, the British Virgin Islands and the Caymans. 

Ultra-wealthy Britons are being investigated over claims they are hiding cash in secret offshore accounts in places like the Cayman Islands (pictured)

More than 100 individuals have been identified so far – and have already been sent warning letters by HM Revenue & Customs.

'You're talking about super-rich people,' said one source, who added that many of the names on the list were well known.

Offenders face paying the tax they have dodged along with massive fines.

More...

• London really is THE millionaires' playground: More 'ultra-high net worth' individuals live in English capital than any other city on Earth, new figures reveal
• Debt crisis for over-60s: Number unable to cope rises by 40% in three years
• Almost HALF of parents admit to taking money from their children's savings - and 51per cent do not even feel guilty about it
• Labour plots 'Bridget Jones tax': Party accused of demanding an end to council tax discounts for singletons
• Immigration crackdown, boosts for business, help for pensioners and High Speed rail unveiled in Queen's Speech to 'fire up' Britain

Officials are unsure what sums are at stake but pointed out that a crackdown on millionaires who hid money in Liechtenstein is expected to raise £3billion.

Last night George Osborne said: 'The message is simple: if you evade tax we're coming after you. This data is another weapon in HMRC's arsenal.'

The Chancellor has previously expressed shock at the extent to which the wealthy were exploiting tax loopholes.

Read more: http://www.dailymail.co.uk/news/article-2322212/The-net-closes-super-rich-tax-dodgers-Spies-expose-hundreds-Britons-hiding-billions-foreign-tax-havens.html#ixzz2SsdiSVhL
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We pay £6m tax on £2.6bn UK profits, but that's OK because we help start-ups: Google

From the Independent: http://www.independent.co.uk/news/uk/home-news/we-pay-6m-tax-on-26bn-uk-profits-but-thats-ok-because-we-help-startups-google-boss-eric-schmidt-under-fire-over-comments-on-corporate-tax-8582605.html

Senior MPs called on David Cameron to consider stripping the boss of Google from his role as a government adviser tonight after he suggested that his company’s contribution to the British economy was more important than paying its fair share of tax.

Politicians from all three parties rounded on Google’s executive chairman, Eric Schmidt, after he defended its use of loopholes to minimise its UK tax bill. He insisted that Google would comply only with the letter of the law – despite paying only £6m of taxes on £2.6bn of revenue generated in the  UK in 2011. Google uses anomalies in international law to move profits into low-tax jurisdictions even if they have been generated by business carried out in Britain. Chancellor George Osborne has made tackling the practice a priority for Britain’s chairmanship of the G8.

But in an interview with the BBC, Mr Schmidt defended his company’s practice, suggesting that its contribution to the UK economy was more important than the tax it paid to the Exchequer. “We are investing heavily in Britain,” he said. “We power literally billions of pounds of start-ups through advertising networks and so forth, and we’re a key part of the electronic commerce expansion of Britain, which is driving a lot of economic growth for the country. So from our perspective, I think, you have to look at it in a totality.

“The people we employ in Britain are certainly paying British taxes, and more importantly, they’re British citizens and they’re driving a lot of GDP. I think the most important thing to say about our taxes is that we fully comply with the law, and well, obviously, should the law change we’ll comply with that as well.”

His comments were condemned by MPs, who pointed out that much of the investment in broadband internet infrastructure that had allowed Google to grow had been paid for by taxpayers.

Margaret Hodge, the chairman of the powerful Commons Public Accounts Committee (PAC), which carried out an investigation into the tax practices of multinational companies, said the Government should consider whether Mr Schmidt was an appropriate person to remain on its Business Advisory Group if Google maintained its tax position. “I think we should be careful who we talk to, and I think if people want to have the voice of Government, they have a responsibility to pay their fair share,” she said.

A government source also questioned Mr Schmidt’s position, claiming Google was “not really investing very much in Britain” and that the company had a “disproportionate influence” on Mr Cameron. “It’s a bit like The Wizard of Oz,” the source said. “From the outside, they appear terribly important and powerful but, when you look closely at what they are actually investing in Britain, it is pretty insubstantial.”

France's President Hollande: Eradicate tax havens

From - http://www.bbc.co.uk/news/world-europe-22094194

French President Francois Hollande has called for "eradication" of the world's tax havens and told French banks they must declare all of their subsidiaries.

He was speaking after presenting a draft law aimed at "moralising" French public life - a response to the tax scandal that has shaken his presidency.

France's ex-Budget Minister Jerome Cahuzac has been charged with fraud over a secret Swiss bank account.

Mr Hollande said a new central agency would fight fraud and corruption.

Earlier the French Socialist government set a deadline of 15 April for ministers to declare their assets, as part of the new transparency drive.

Mr Cahuzac admitted last week that he had hidden about 600,000 euros (£509,000; $770,000) in a Swiss bank account, causing shock in France. He has now been expelled from the Socialist Party for lying about his financial affairs.

Addressing a news conference on Wednesday, Mr Hollande said "tax havens must be eradicated in Europe and worldwide".

"I won't hesitate to consider as a tax haven any country that refuses to co-operate fully with France."

He said French banks "will have to publish every year the full list of their subsidiaries in the world, country by country". They will also have to explain their business, he said.

"In other words it won't be possible for a bank to hide transactions carried out in a tax haven."

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Will work if only other major countries do the same.  Will they?

Horsemeat scandal: Dutch uncover large-scale meat fraud

From - http://www.bbc.co.uk/news/world-europe-22098763

Some 50,000 tonnes of meat supplied by two Dutch trading companies and sold as beef across Europe since January 2011 may have contained horsemeat.

The meat is being recalled where possible, the Dutch authorities say.

There was no evidence that the meat was a threat to human health, the Netherlands Food and Consumer Product Safety Authority said.

In total, 132 companies in the Netherlands and some 370 more around Europe are affected by the discovery.

The suspect meat was supplied by Wiljo Import en Export BV and Vleesgroothandel Willy Selten.

The two companies are owned by one man who has already previously been investigated by food safety officials, the BBC's Matthew Price reports.

The latest find was made as part of EU-wide tests to trace horse DNA in processed beef foods and to detect a veterinary drug used on horses.

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Are there no honest people left in the world?

Small, micro firms in China are hungry for long-term loans

From - http://www.chinadaily.com.cn/china/2013-04/07/content_16379110.htm

China's small and micro enterprises are still struggling with lackluster business, and most badly need long-term rather than short-term loans, said a report based on a survey released on Saturday at the Boao Forum for Asia.

Of the 1,000 small and micro enterprises surveyed across China, 56.7 percent said their order numbers declined or stayed flat last year compared with 2011, and 57.7 percent said profit dropped or kept flat in 2012. In addition, 49.9 percent complained about an unstable workforce.

One-third of SMEs need medium- and long-term loans to upgrade their equipment or invest in new products, the survey found, yet 63.3 percent of loans they got were short-term, less than a year.

Zhang Xuyang, general manager of the retail department of China Everbright Bank, is interviewed about the "Report on Small and Micro Business Financing Development". [Huang Yiming / China Daily]

"This stands in conflict with the fact that driven by fiercer competition, 39.3 percent of SME shave considered improving their product quality, 43.9 percent of SMEs have considered extending their product chain and 27.7 percent have considered upgrading their technology,"said Ba Shusong, a banking expert with the Development Research Center under the State Council, who led the research.

A revelation of the report is that though 66.7 percent of SMEs regard bank loans as a primary financing measure, 62.1 percent of them do not now have them.

Yao Wang, executive president of the Research Institute of the Boao Forum for Asia, said SMEs have little expectation of getting bank loans.

"The survey showed most SMEs don't have bank loans. They don't expect to get a loan from big banks. This is pathetic," Yao said.

In consequence, SMEs sought financing from family members and friends - 24.3 percent of micro enterprises and 7.5 percent of small enterprises. They are much less aware of the multiple new financing methods: 38.8 percent of SMEs, for example, do not know about intangible assets mortgages.

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So it's not only British banks who are shy of lending to SMEs!

Documentary: Inside Job

Charles Ferguson’s film – Inside Job – won the Academy Award for Best Documentary in 2011. It narrates the conflicts of interest between the finance industry, politicians, academics and regulators, which eventually led to the trillion-dollar collapse of 2008. Narrated by Matt Damon. From: http://www.theotherschoolofeconomics.org/?p=2499 - which screens the film on-line.

This documentary exposes the facts behind the 2008 global economic disaster. It was triggered by derivatives, primarily based on sub-prime mortgages in the US.  But the roots go back to the Regan deregulation of financial services. What is shocking is that many of the investment banks were betting against their own products and deliberately lying to their own customers. Several lawsuits are still pending.

It is fascinating viewing, but deeply disturbing as many of the key personalities are still in play in various companies and governments and regulatory bodies today.

For a write up see - http://en.wikipedia.org/wiki/Inside_Job_(film)