Tax plan could backfire, Rio Tinto warns

RIO TINTO has warned that the federal government’s plan to crack down on the tax minimisation strategies used by global companies such as Google and Amazon could ”come back to bite” Australia if other countries started doing the same.
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The comments by the mining company came as the federal Assistant Treasurer, David Bradbury, cautioned that Australia’s corporate tax base risked becoming unsustainable if authorities failed to keep pace with dramatic structural changes in the global economy.

Mr Bradbury outlined plans to convene a specialist reference group of business leaders, tax experts, academics and community representatives to examine measures to combat the practice.

He said the digital disruption brought about by the internet and changes in technology had transformed the way economic activity was occurring.

He said these changes were putting pressure on the corporate tax system in Australia.

”Increasingly, governments are discovering the lack of effectiveness in the digital age of international tax concepts created for the industrial age,” Mr Bradbury told an Institute of Chartered Accountants national tax conference.

He proposed that corporate tax should be based on profits that reflect the ”economic activity” attributable to Australia. Currently, corporate tax in Australia is levied on the source of activity.

Company documents filed with Australian, European and Asian authorities show the Australian arms of Apple, Google and eBay are part of complex networks of subsidiaries held by their US parents

through intermediary companies in tax havens.

In April, the Tax Office hit Apple with a $28.5 million bill for back taxes. Google Australia declared a loss of $3.9 million last year and paid just $74,176 in Australian tax, despite generating revenue of more than $1 billion here.

But Rio Tinto’s tax head for the Asia-Pacific region, Ross Lyons, said if the government started tinkering with the source-based tax regime, and instead focused on where income was generated to try to capture companies such as Google, then it could end up costing the government revenue.

Speaking after the event, Mr Lyons said from Rio’s perspective, the big miner did not have any income sourced in China and that’s why Rio pays a very low amount of income tax: because that’s the way a source-based tax system works and the Chinese accept that.

”[But] if the government wants to start unravelling that sort of concept in Australia to try to tax foreign taxpayers on the basis that they should be paying more tax because they’ve got sales in Australia, watch out, [because] other countries might start doing the same to us,” he told BusinessDay.

Mr Lyons said if the Chinese government suddenly said it would start taxing some of the income that Rio Tinto booked in Australia and paid tax on in Australia, then companies like Rio could make use of the double tax agreement between the two countries.

”We could claim credit relief in Australia for the Chinese tax paid, so the loser would be the Australian government at the end of the day, because the tax agreement makes it quite clear that you don’t tax income twice,” he said.

Mr Lyons said the Henry tax review offered a better alternative for what the government was trying to do.

”The Henry review actually said [to] look at a more modern expenditure-based tax that deals with e-commerce and deals with destination as to where the business spends its money.

”I think that kind of idea is what the government needs to start looking at,” he said.

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Now for the real click frenzy – US shopping marathon starts

Add this to the list of things some people are thankful for: stores open in America on Thanksgiving Day. That’s how Janet Guerrero, 24, felt when shopping on Thursday afternoon at a Wal-Mart in Westbury, Long Island, because she had nothing to wear to dinner. “It’s an emergency,” she said.
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This year, Target has joined Wal-Mart and Gap in being open at least part of the day, and some retailers will be open throughout the day, a trend that began to take hold in 2011.

Walmart’s US discount stores, which have been open on Thanksgiving Day since 1988, will offer some “Black Friday” deals at 8pm local time and special deals on some electronics at 10pm. Target has moved its opening from midnight to 9 pm on Thursday and Toys R Us is opening at 8pm.

“It’s a recognition that retailers need to be more aggressive and want to show their physical stores are important,” Moody’s senior analyst Charles O’Shea said.

While he didn’t see enormous crowds out in Vauxhall, New Jersey, he did see about 15 people lined up already at a Best Buy, which opens at midnight. At a Target in Westbury, only two lone shoppers were in line for a 9 pm opening. Still, for retailers, any crowd could make the effort worth it.

“It’s a finite pie – if you can get a bit more by being open, then do it,” O’Shea said.

Other retailers, such as JC Penney, are holding out and will not open until Friday morning, so shoppers trying to get all the deals will need a lot of stamina.

“The retailers are taking what was a very plannable sport that was four or five hours where you can get things done and turned it into a marathon,” Trutina Financial chief investment officer Patty Edwards said. “I think the retailers have diluted the sport.”

Even some higher-end retailers had select stores open on Thursday. But crowds were thin at the flagship Lord & Taylor on 5th Avenue, where workers voluntarily signed up for holiday shifts for an extra compensation day and holiday pay.

At other stores, workers were not so happy to have early openings encroach on their Thanksgivings. A petition asking Target to “save Thanksgiving” had 371,606 supporters as of Thursday afternoon.

But shopper Pamela Herman, 54, who works in marketing at Mt. Sinai hospital, was drawn in by the extra discount of 50 percent on already reduced items and said she would not have bothered to come in without the sale.

Traditionally, retailers enticed shoppers with “doorbuster” deals early Friday morning. Then they shifted to midnight following Thanksgiving. But many shoppers lured into stores by earlier openings on Thursday may just be window shopping.

More than 50 per cent of consumers will do some form of “showrooming” during the Black Friday weekend, said Kevin Sterneckert, vice president of retail research at Gartner Group.

“They will buy things because they looked at it in the store. They will touch and feel what they are interested in and then buy it online on Monday, either from the same retailer or a different online retailer,” Sterneckert said.

At the Kmart on 34th Street in Manhattan, Charles Montague, a 55-year-old mover, was browsing the aisles just to kill time. “I don’t holiday shop,” he said emphatically. “I buy stuff all year long, not during some man-made holiday.”

That window shopping has not put a crimp into online sales, however. Online Thanksgiving 2012 sales are already up 16.4 per cent over Thanksgiving 2011 for the same period, according to IBM.

The stakes are high for US retailers, which can earn more than a third of their annual sales in the holiday season. Investors hope holiday sales will help retail stocks cap a strong year. The Standard & Poor’s retail index is up almost 27 per cent this year, compared with a 10.6 per cent increase for the broader S&P 500.

The National Retail Federation, an industry trade group, forecast a 4.1 per cent increase in retail sales during the November-December holiday period this year, down from the 5.6 per cent increase seen in 2011.

Consumers heading into the holiday shopping season remain worried about high unemployment and possible tax increases and government spending cuts in 2013. Also, lasting effects of Sandy, the storm that lashed the densely populated East Coast in late October, could cut into how much shoppers can spend on the holidays.

According to a Reuters/Ipsos poll, two-thirds of shoppers said they were planning to spend the same amount as last year or were unsure about spending plans, while 21 per cent intend to spend less and 11 per cent plan to spend more.

“My family decided not to buy (Chanukah) presents this year – only for the kids. It’s too expensive,” said graduate student Danielle Slade, 29, from Jericho, Long Island.


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EU leaders enter bitter fight over budget

European Union leaders have begun what is expected to be a long and bitter session on a long-term budget for the region.
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With each of the 27 nations having the power of veto over the 2014-20 budget, the summit negotiations that began late on Thursday could stretch over the weekend, perhaps without result as leaders staked out starkly different visions of Europe’s future.

While British Prime Minister David Cameron is seeking to keep payments into EU coffers down as low as possible, French President Francois Hollande called for sustained subsidies for farming and development programs for poorer nations.

Mr Cameron voiced the concerns of several other countries that do not want to see an increase in the bloc’s spending plan at a time when many member states are cutting budgets at home.

‘‘No, I’m not happy at all,’’ Mr Cameron said about EU President Herman Van Rompuy’s latest offer to cap spending for 2014-20 at 1 trillion euros ($1.25 trillion).

‘‘Clearly, at a time when we’re making difficult decisions at home over public spending, it would be quite wrong – it is quite wrong – for there to be proposals for this increased extra spending in the EU,’’ Mr Cameron said.

The EU budget primarily funds programs to help farming and spur growth in the bloc’s less developed, and it amounts to about 1 per cent of the EU’s gross domestic product.

France’s Hollande said that was worth fighting for, adding he would be happy to walk away from the meeting if his demands were not met.

‘‘No country should have a privileged position,’’ Mr Hollande retorted. ‘‘I come here to find a compromise, not to set an ultimatum.’’

The European Commission, the EU’s executive arm, supports more spending, arguing that cross-border initiatives will help create the economic growth and jobs that the bloc of a half-billion people needs, particularly during a financial crisis that has pushed some countries into recession.

The amount of work Mr Van Rompuy has to do to bring the conflicting views closer together was highlighted earlier on Thursday as the bilateral meetings preceding the summit overran, forcing the opening discussions to be delayed by 2.5 hours until about 10.30pm local time.

Calling on all for a compromise, Mr Van Rompuy said ’’it is necessary and, I am convinced, it is within our reach. So, dear colleagues, let’s get down to business.’’

Several leaders were already anticipating the possibility of failure and the need to hold another summit in the new year to negotiate a deal.

‘‘Germany wants to reach a goal, but there might also be the need for yet another stage,’’ Chancellor Angela Merkel said.


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Investors find life in RIM ahead of BlackBerry 10 launch

Shares of Research In Motion surged 17.3 per cent in Toronto on Thursday on rising optimism around RIM’s soon-to-be-launched BlackBerry 10 devices that will vie against Apple’s iPhone and Android-based smartphones.
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The rally in RIM shares was sparked by National Bank analyst Kris Thompson, who boosted his price target on RIM shares to $US15 from $US12. Thompson believes that there is more money to be made in the stock ahead of the early 2013 launch of the make-or-break new line of devices.

It was the second vote of confidence this week for the Canadian company, which has struggled to compete with the iPhone and with devices running on Google’s market-leading Android operating system. On Tuesday, Jefferies & Co analyst Peter Misek, who has been one of RIM’s most influential critics, raised his rating and price target on the stock.

RIM shares, which have now risen in the last seven straight trading sessions, rose to their highest level since May on the Toronto Stock Exchange on Thursday and ended the day at $C12. The US market, where trade volumes usually top those in Toronto, was closed for Thanksgiving on Thursday.

It was the biggest percentage gain in the stock since April 2009, when RIM shares rallied after the company’s results topped market expectations.

Thompson, who has an “outperform” rating on RIM stock, said he raised his price target due partly to the “positive sentiment building in the industry” ahead of BB10’s launch.

“The new management team is executing by maintaining the BlackBerry subscriber base, managing costs and cash, and seemingly readying a February 2013 BB10 global platform launch,” he said in a note to clients.

Earlier this week, Misek said a favorable reaction from telecom carriers to the new devices and the BB10 operating system that runs them was behind his decision to lift his rating and price target on RIM.

The BlackBerry maker, a smartphone pioneer, hopes BB10 will rescue it from a prolonged slump. RIM shares peaked at over $US148 in 2008 before diving more than 90 per cent.

The stock is up more than 90 per cent in the past two months as the launch date for the BB10 devices nears. The stock has now enjoyed seven straight days of gains.

RIM promises its new devices will be faster and smoother than previous smartphones, and will have a large catalog of applications, which are crucial to the success of any new line of smartphones.

Thompson said he now expects RIM to ship about 35.5 million devices in fiscal 2014, up from an earlier estimate of 31.6 million. RIM, whose sales slump has been particularly pronounced in North America, shipped 7.4 million devices in its most recent quarter, ended September 1.

RIM has said it plans to roll out a touchscreen version of its BB10 smartphone initially. Phones with the mini QWERTY keyboards that many long-time BlackBerry users rave about will come a few weeks later, while lower-end versions of both devices will be launched later in the year.

“The shipments boost reflects about one more month of BB10 product availability plus a little extra for the positive sentiment building in the industry from our discussions,” Thompson said.

Analysts had expected the new devices to go on sale in March. But RIM said earlier this month it plans to launch them on January 30, leading many to speculate they will hit store shelves around mid-February.

Chief executive Thorsten Heins told Reuters last week he is confident that the new BB10s will provide RIM with a framework for growth over the next decade.

Earlier this month, the new platform and devices won US government security clearance, which would allow both US and Canadian government agencies to deploy the new smartphones as soon as they are available.


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Smith takes new tack in outing stingy bankers

Guest speaker at the Hands Across Canberra luncheon Dick Smith at the Gandel Hall, National Gallery of Australia.Entrepreneur Dick Smith would throw the country’s richest bankers out of the country if he could, saying they’re the ”height of capitalism”.
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The self-starter, speaking at a Hands Across Canberra function on Thursday, accused his millionaire counterparts of being ruthless and greedy.

”In America you’re a social pariah if you’re wealthy and not known as a philanthropist, whereas here many of my very wealthy friends donate nothing at all,” he said.

The accusations didn’t stop there, with the businessman saying Australian executives lied to the public about their charity handouts. ”I believe most of them are lying or telling fibs … I’ve asked the big charities whether they get large amounts of money anonymously and they say never,” he said.

Mr Smith’s earlier plan to name and shame Australia’s richest people into donating both time and money was unsuccessful and he has now taken a new path.

His strategy, which has the working title ”Undermine Your Bank Executive”, involves encouraging staff to boycott working overtime until their bosses donate to charity.

”Maybe it might make bank executives fulfil their obligations to give publicly and generously, because the only reason they get $10 million or $20 million a year is because there are 22 million people here running this fantastic country,” he said.

Mr Smith explained the joy that giving can have on a person. ”I do it for selfish reasons: it makes me feel good,” he said.

Hands Across Canberra is aimed at building bridges between community organisations and members of the business community on a one-on-one level. ”Although the event was not directly about raising funds, we were pleased to receive more than 50 donations of support and Dick Smith was spotted filling out a card,” an event spokesman said.

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