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French Wine Could Face 100% Tariffs as Trump Confronts France Over Tech Taxes

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WASHINGTON — The Trump administration said on Monday that a new French tax that hit American technology companies discriminated against the United States, a declaration that could lead to retaliatory tariffs of as high as 100 percent on French wines.

It could also jeopardize international efforts to negotiate a truce on so-called digital taxes.

The announcement from the Office of the United States Trade Representative ended a monthslong investigation into the French tax, which hits companies like Facebook and Google even though they have little physical presence in France. The investigation concluded that the tax “discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy and is unusually burdensome for affected U.S. companies.”

It recommended tariffs as high as 100 percent on certain French imports valued at $2.4 billion, including cheese, wine and handbags.

The administration suggested it could open similar investigations into digital taxes proposed by Italy, Austria and Turkey.

The finding does not immediately impose tariffs on French products such as wine, which was already hit with a 25 percent tariff in October in a separate dispute, but it allows the president to impose them if and when he chooses. It could also upend an effort led by the Organization for Economic Cooperation and Development to unite 135 countries around a shared system of taxing technology companies and other multinational corporations, which leaders had hoped would come together in 2020.

An escalation of tensions between France and the United States would complicate any resolution to those negotiations.

The French government approved a new “digital service tax” this year on online economic activity, which would hit large American tech companies widely frequented by French citizens. French leaders have expressed concern that their government has not been able to capture revenue from companies that sell or advertise online in France, a concern that is shared by a growing number of countries, including Britain and India.

President Trump’s trade representative responded to the French tax by opening the investigation into whether it unfairly targeted American companies. In July, the president threatened to impose tariffs on French wine as a response to the new tax.

But in August, French and American leaders reached a 90-day agreement to pause the dispute and allow multinational negotiations to proceed on an ambitious global agreement on taxes that would extend well beyond technology companies.

Those talks, which include an array of countries and multinational corporations, are making progress, said Bart le Blanc, an Amsterdam-based partner and tax adviser at the Norton Rose Fulbright law firm. But such an agreement would require countries like France to scrap their individual digital taxes, he said.

“There seems to be room for everybody to agree to this proposal,” Mr. le Blanc said, “if everything falls into place.”

While past administrations have treated European leaders as close economic allies, the Trump administration has taken a more adversarial approach. Mr. Trump has accused the Europeans of manipulating their currency and the terms of trade to export more goods to the United States than they import from it. He has threatened a variety of tariffs to block European goods from American markets.

In October, his administration slapped tariffs on French aircraft, wine and cheese and a range of other European products after the World Trade Organization gave the United States permission to impose levies on up to $7.5 billion of European exports annually. That decision was part of a long-running trade case about subsidies provided to the European plane maker Airbus.

On Monday, the World Trade Organization issued another ruling saying that Europe’s efforts to reform its subsidies had been insufficient and that its aid to Airbus still ran afoul of global trade rules. In a statement, the Office of the United States Trade Representative said it was starting a process to assess whether to increase its tariff rates or place levies on new European products.

The Trump administration has also considered other types of tariffs that do not have the approval of the World Trade Organization. Mr. Trump threatened to tax European cars, but chose to let a Nov. 13 deadline to impose those tariffs lapse last month.

Some in the administration have discussed opening a new investigation into European trade practices, under a legal authority known as Section 301 of the Trade Act of 1974, that could allow Mr. Trump to levy more tariffs, people familiar with the discussions said. That is the same sort of investigation that the administration conducted in the case of the French digital tax.

But there is no concrete sign that the administration has begun those machinations yet.



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Airport van service SuperShuttle going out of business at the end of the year

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LOS ANGELES — SuperShuttle, the shared van service that has carried passengers to and from airports across the U.S. and in Latin America, Canada, Europe and Asia, is going out of business, according to a newspaper report Thursday.

A letter obtained by the Los Angeles Times from the company to a Los Angeles-area franchisee says: “SuperShuttle plans to honor all reservations and walk-up requests for service” through Dec. 31.

Founded in 1983 to serve Los Angeles International Airport, SuperShuttle has lost ground to competitors such as Uber and Lyft. In recent weeks it has pulled out of airports serving many cities, including Phoenix, Baltimore and Minneapolis, the Times said.

Attempts by the newspaper to reach Mark Friedman, identified as general manager in the letter’s signature line, were unsuccessful Thursday. SuperShuttle executives could also not be reached for official comment. But two SuperShuttle reservations agents reached by telephone confirmed to the Times that the company was going out of business, as did a company executive who was not authorized to speak publicly.

SuperShuttle is one of the few services that can still pick up riders curbside at LAX after the airport’s recent changes to help ease congestion. In November, Lyft, Uber and taxis were relegated to a pickup lot next to Terminal 1. Travelers can either walk to the lot or wait for an airport shuttle to ferry them.

The letter to the franchisee cited “a variety of factors” for the company’s closure, “including increasing costs and changes in the competitive and regulatory landscape” that “have called into question the economic and operational viability of the company’s operations.”

The company stopped operations at Hollywood Burbank Airport at the end of November, terminating the contract with the airport’s authority, airport spokeswoman Lucy Burghdorf wrote in an email Thursday.

SuperShuttle is owned by an affiliate of Blackstreet Capital Holdings, a private investment firm based in Bethesda, Maryland, court documents show. Blackstreet describes itself as specializing in acquiring small or mid-size firms “that are in out-of-favor industries or are undergoing some form of transition.”



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Japan vs. China : Why does Japan see China as a threat not as an opportunity?h

China and Japan are two vastly different countries with a difficult past and history with each other. Both are super powers in Asia, but are very different in almost every way imaginable.

In geopolitical terms China is a nightmare for Japan.

China occupies the whole continental East Asia and puts Japan in a corner. Imagine a Europe in which France, Germany, Italy, Benelux get united and leave only Britain outside. Britain will have no chance to bargain or influence the continental Europe (what is happening now).

Historically Japan’s strategy was to block, undercut, or keep China divided so much as possible.

In 1905 after the first Sino-Japanese war Japan demanded the annexation of Liaodong Peninsula, which would block the whole Chinese northern plains and broke the barrier of the Bohai sea, which otherwise was a Chinese domestic lagoon. This was found by the Western powers to be too much, under whose pressure Japan exchanged Liaodong for Taiwan, which in its term would block the Yangtze estuary, the most prosperous region of China.

During 1912 – 1931 Japan tried all its best to keep China divided under several equally strong warlords and keep them kill each other.

In 1931 Japan found Manchurian warlord was launching a very promising industrialization program, it annexed Manchuria.

In the following years it encouraged the splitting of North China and Inner Mongolia.

In 1937 Japan sensed that China’s Yangtze Delta was experiencing a boom of economy, it started the second Sino-Japanese war.

Eventually due to a series of misstep, the China adventure landed Japan in a disaster.

Up to 2001 China’s WTO entry ; Japan has an informal investment ban on China. On several occasions Chinese side sought the industrial co-operations from Japan, which were categorically rejected. At the same time Japan provided a huge amount of Overseas Development Aide to China, only to encourage China to stay in raw materials, timber, and agricultural goods production (for which many Japanese think even today that China should be thankful).

But since the economic crisis of 1997 when the Japanese business in Southeastern Asia was flattened, the rise of China as a manufacturing hub has become inevitable. Most Japanese companies entered China reluctantly only when they realized that, if they stayed out, they would be rolled over by the bus. But when they came to China, the Chinese market was largely occupied by other developed countries, mainly the Europeans, later also the Americans.

Until today China is the largest overseas automobile market for Germany, France, and the US. German VW, French Citroën, and American Buick, which are hardly seen elsewhere Asia, are ubiquitous in Chinese cities. China’s market is the major reason that German VW has become the largest automobile manufacturer of the world since 2016.

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Europe’s ‘Green Deal’ opens door to economic renewal–and risks

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Europe is taking a green gamble for its economy. The European Commission unveiled a plan this week to put its economy in line with the needs of the planet by imposing stricter caps on greenhouse emissions, changing taxation and creating new rules for companies.

With a target of being climate-neutral by 2050, Europe may
even change how it taxes trade with states that don’t meet its new green
criteria.

If the so-called Green Deal works, advocates say investment
could deliver the kind of transformation not seen for half a century. But there
are risks it stumbles below lofty targets, or even raises uncertainty, costs
and trade tensions.

In its plans to accelerate the reduction of greenhouse gas
emissions, the commission said an extra €260 billion ($290 billion) in
investment will be needed every year. That would be a significant boost,
equivalent to 1.5 percent of 2018 economic output.

With euro-area growth and inflation stuck in a low gear, it’s
the kind of systemic rethink that could change the economy’s course. Plus,
record-low interest rates provide an opportune moment for massive investment.

Yet, it’s not that simple. Changes to regulation and taxes
will steer spending away from some industries. Jobs will likely be lost in some
areas, with no simple transfer of workers to new sectors.

The key will be whether governments get on with structural
reforms, particularly education and training so that workers can quickly retool
with the necessary skills.

“In the short term we should expect it to be a headwind to
growth,” said Societe Generale Chief Economist Michala Marcussen. “But that’s
not to say we shouldn’t do it because the alternative of kicking the climate
change can down the road is that the cost to GDP will far outstrip any
short-term costs today.”

The climate plan could allow for a change to fiscal rules so
states can unleash the kind of public investment the European Central Bank has
championed. The commission said it will look at “green public investment in the
context of the quality of public finance.”

However, the chance of a dramatic step, such as excluding
green spending from deficit and debt calculations, seems unlikely. The document
also noted the need for “safeguards against risks to debt sustainability.”

All of that will happen in a review by the commission and EU
member-countries.

“It’s postponing this decision, watering it down into a
bureaucratic procedure. So basically, nothing is going to happen soon,” said
Simone Tagliapietra, a research fellow at Bruegel.

With limited and uncertain margins of public finances, the
key may be the private sector. Bloomberg Economics estimates that the
additional annual investment to meet emission targets may be more like €400
billion a year, far higher than the EU estimates.

“Where will the money come from? As things stand, the
spending commitments by EU leaders seem tiny relative to the scale of the task,
placing a significant burden on the private sector to do the heavy lifting.
That’s a risky approach,” said Bloomberg’s economists Maeva Cousin and Jamie
Rush.

To stand any chance of getting the level of investment needed, the EU will have to provide better visibility on regulation and carbon pricing. To that end, the promise of a climate law is crucial. For a sign of how uncertainty crimps investment, one need only look at the UK and Brexit, where business spending has fallen in six of the last seven quarters.“There is macroeconomic potential that can be favorable,” said Jean Pisani-Ferry, visiting fellow at the Peterson Institute for International Economics. “But it’s not clear it’s possible to mobilize it if we are not credible.”

Trade tensions

One of the most eye-catching shifts from the commission was
opening the door to a “carbon border adjustment mechanism.” That could consist
of taxes on imported products that do not meet the same stringent criteria as
those made in Europe.

The idea is to prevent companies outsourcing production to
avoid financial penalties, particularly to countries that, as the EU puts it,
“do not share the same ambition” on climate change. Without such a tool,
efforts to reduce emissions could come to nothing.

But such mechanisms could also be seen as protectionist. If any tariffs were to hit US goods, that probably wouldn’t go down well with Donald Trump, who’s already pulling out of the 2015 Paris Agreement on climate change.“It’s probably the most controversial thing because if the EU starts doing it then there might be a retaliation from other countries,” said BNP Paribas economist Raymond Van Der Putten. (Bloomberg)



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