In the podcast below I discuss, and analyse, some news stories which have caught my eye recently including:
- Ireland opposes global minimum tax
- What does the European Super League, now seemingly dead, tell us about investing, the economy and much else?
- Tesla in China.
To give credit to the original authors I have copied the articles below
Paschal Donohoe says Dublin will not accept reforms that affect its ability to undercut its rivals
Ireland’s finance minister has signalled the country will resist attempts to rebalance the global tax system if they affect Dublin’s ability to undercut its rivals.
Under new tax proposals led by the US, Ireland could lose 20% of its tax revenues, according to Paschal Donohoe.
He said he would support a global agreement that allowed “appropriate and acceptable tax competition” between states, as momentum grows for an agreement to prevent Ireland and others from attracting others with dramatically lower effective tax rates.
The global tax system has failed to adapt to the rise of digital services across borders in recent decades, and critics argue that the lack of harmonised rules has triggered a “race to the bottom” on global tax.
Attempts to fix the system and prevent multinational companies from choosing an advantageous tax jurisdiction were previously stymied by the US, home of tech companies such as Apple, Google’s owner Alphabet and Microsoft, which were among the beneficiaries.
Under Joe Biden, however, the White House has made proposals to break the deadlock, including a global minimum corporate tax rate of 21% of profits and allowing countries to charge some tax based on the location of sales.
The changes could prove dramatic for Ireland, a relatively small economy which has taken an increasing role in the global tax system because of its political stability and rules that allow big companies to pay far lower corporation tax rates than in many other big economies.
Speaking at a virtual summit convened in Dublin, Donohoe said the country would seek to retain its current tax rate. Its headline corporate tax rate is 12.5%. The UK’s is 19% and is due to rise to 25% from April 2023. Many large companies end up paying a fraction of the 12.5% rate.
Apple paid an effective rate of less than 1% for many years in Ireland, falling as low as 0.005% in 2014, on revenues that were mainly derived from sales in other countries.
The European commission ruled in 2016 that Apple had to repay €13bn (£11.2bn) in back-taxes to Ireland after deciding that a secret tax deal represented illegal state aid. That decision, however, was struck down by an EU court in July. The commission is appealing against it.
Donohoe said small countries should be allowed to use lower taxes to “compensate for advantages of scale” enjoyed by larger economies. Other small territories such as the UK’s offshore crown dependencies and overseas territories also use low or zero corporation tax rates to attract business.
The Super League is “not dead”, according to Real Madrid president Florentino Perez.
Speaking on Spanish radio program El Larguero, Perez insisted that “we are going to keep working” and the clubs that had publicly announced their withdrawal from the project “have not left yet”.
The Super League was announced on Sunday but dramatically collapsed from Tuesday night when the Premier League’s Big Six clubs withdrew from the breakaway project. From the original 12 ‘founding members’ Real Madrid and Barcelona are the only side who are yet to withdraw or change their stance.
What has Perez said?
A defiant Perez, who was also appointed president of the Super league, said the clubs that had announced their departure from the project “have not left” as “nobody has yet paid the penalisation fee for leaving”.
“We are going to keep working,” he said. “We are looking for ways of getting this done. It would be a shame not to get it done.”
“I have never seen aggression greater on the part of the president of UEFA and other presidents of La Liga, it was orchestrated, it surprised us all. I have never seen anything like it — insults, threats, as if we had killed someone, killed football.”
Perez also admitted “one of the English clubs were never really convinced”.
“There was someone in the English 6 clubs who did not have much interest,” the 74-year-old said.
“That started to affect the others, there was fear.”
“I am a bit sad, disappointed. We have been working three years on this project, on fighting the current financial situation in Spanish football. It is easy to understand — you cannot touch La Liga, so you look for more money midweek and the Champions League format is obsolete.
“The problems is they (Aleksander Ceferin) killed us the very next day, with terrible aggression.
“We have made some mistakes for sure. But they knew what we were going to do, and were waiting for us. Those who do not want to lose their privileges.
“The English Prime Minister said things, then the fans — people wanted to damage us. But when all this passes, and we see the reality, lets see what happens.
“These clubs are going to lose millions of euros, and cannot do that, apart from those in England.
“The founder clubs believed in this project. It is not dead. We will keep working.”
What happened on Tuesday?
Due to widespread backlash, the six English clubs involved in plans to form a Super League all pulled out of the proposed breakaway tournament.
Manchester City became the first team to quit the project on Tuesday evening, with Chelsea also making it known that they were taking steps to end their involvement.
They were later followed by Manchester United, Liverpool, Tottenham and Arsenal, who all confirmed their withdrawal from the Super League in club statements.
United executive vice-chairman Ed Woodward also resigned from his role on a night of high drama, which saw the extremely controversial Super League plans lie in tatters.
What happened on Wednesday?
Following the departure of the English contingent, Juventus chairman and Super League vice-chairman Andrea Agnelli sensationally backtracked on the proposals, saying they could no longer go ahead.
Agnelli had previously said on Tuesday the Super League “has a 100 per cent possibility of success”.
However, on Wednesday morning he told Reuters that “evidently, that is not the case” when asked if the project could continue.
And, moments later, both Atletico and Inter announced their departure from the Super League — deepening the project’s sudden collapse.
AC Milan, shortly followed by Juventus, were next to address the breakaway competition on Wednesday. Neither club explicitly walked away from the Super League, instead acknowledging the failures of the project and concerns of the fans.
Tesla Inc (TSLA.O) has had a terrible week in China, but sentiment against the U.S. electric car company in its second-biggest market had been building as it struggled to keep pace with rapid growth.
The pile-on by media and scolding by regulators show how precarious China can be for big foreign brands, and how a company’s handling of an incident can turn into a crisis if the country’s tightly-controlled news outlets turn against it.
Tesla’s defiance of industry convention, embodied by founder Elon Musk and a corporate culture that rarely admits mistakes, has won fans in the United States, but has backfired in China. Musk had such cachet that China’s government allowed Tesla to be the first foreign carmaker not forced to team up with a partner to make cars locally. Now, Tesla is learning lessons its longer-established rivals got years ago.
Tesla’s troubles in China also underscore a problem Musk and senior Tesla executives have acknowledged, though mainly in relation to the company’s North American business. Tesla’s rapid sales growth has outrun its capacity to repair vehicles when hardware goes bad.
“Service expansion is really important to the future strategy of the company,” Tesla Chief Financial Officer Zach Kirkhorn told investors in January.
When a Tesla customer, angry over the handling of her complaint about malfunctioning brakes, climbed on top of a Tesla in protest on Monday at the Shanghai auto show, videos of the incident went viral.
The incident escalated after Grace Tao, Tesla’s vice president for external relations – a former anchor at state broadcaster CCTV – questioned whether the angry customer, surnamed Zhang, was acting on her own.
In an interview with a local news outlet, Tao said, “maybe she … I don’t know, I think she is quite professional, there should be (someone) behind her.”
“We have no means to compromise, it’s just a process in the development of a new product,” she added.
Tesla scrambled into damage-control mode, asking the online news outlet to withdraw the report, the outlet said on Tuesday on WeChat.
Tesla issued a series of increasingly contrite late-night statements, from Monday’s “no compromise” to Tuesday’s “apology and self-inspection.” By Wednesday night, Tesla said it was “working with regulators for investigation.”
The official Xinhua news agency said Tesla’s apology was “insincere” and called for removal of a “problematic senior executive,” while the Global Times cited Tao’s comments in calling Tesla’s “blunder” a lesson for foreign firms in China.
Tao, who joined Tesla in 2014, could not be reached for comment. Tesla did not reply to a request for further comment.
“There have been consistent complaints on social media with Tesla in China regarding its quality and service issues, which seem to have been largely ignored by the local team until Tuesday,” said Tu Le, analyst at research firm Sino Auto Insights.
“It’s a delicate dance, though, since Tesla helps highlight the entire EV sector helping ALL companies grow their sales and raise their profiles,” he said.
Tesla cars, made at its own Shanghai factory, are highly popular in China, which is by far the world’s biggest EV market and accounts for 30% of Tesla’s sales.
Investors have not shown worry. Tesla shares rose this week.
Pressure on Tesla had been building.
Last month, it came under scrutiny when the military banned Teslas from entering its complexes, citing security concerns over vehicle cameras, sources told Reuters. Days later, Musk appeared by video at a high-level forum, saying that if Tesla used cars to spy in China or anywhere, it would be shut down.
Tesla appeared to have scrapped much of its public relations team in the United States last year, although it has been hiring public relations staff in China.
For communications, it relies heavily on Musk’s Twitter feed, which has over 50 million followers. As of Thursday, he had been silent on the China situation, which remained a hot topic, as Tesla owners took to Weibo to complain about quality issues such as sudden acceleration or steering failure.
On Thursday, Global Times Editor-in-Chief Hu Xijin said the intent is not to force Tesla from China.
“Our ultimate goal is to make foreign companies adapt to the Chinese market, seriously abide by Chinese laws and regulations, respect Chinese culture and consumers, and become a positive element in the Chinese economy. Whether it is a lesson or help, it all points to the same goal.”
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In the answer below, taken from my online Quora.com answers, I spoke about the following issues and topics:
- Why would creating your own index fund with only high quality companies (founder led, high employee/customer satisfaction, etc.) underperform the S&P 500 over the long run?
- What are the pros and cons of living in Shanghai as a European expat with a family? I go over some of the more unexpected pros and cons alongside the obvious ones.
- What is the best city to live in Asia for Western people?
- What is the best Index Fund that pays dividends, if such a thing exists in reality.
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