ApprovedBusiness and financeFINANCEFinance and economics

How the City of London hopes to navigate a hard Brexit

THERESA MAY’S speech on January 17th set Britain definitively on a path to a “hard” Brexit, in which it will leave not just the EU but the European single market. This was not what the City of London wanted to hear. The prime minister did at least pick out finance, along with carmaking, as an industry for which “elements of current single-market arrangements” might remain in place as part of a future trade deal. The City is holding out hope that a bespoke deal built on the existing legal concept of “equivalence” could still accord it a fair degree of access to Europe.

“Passporting”, which allows financial firms in one EU member state automatically to serve customers in the other 27 without setting up local operations, was always going to be difficult after Brexit. Outside the single market, says Damian Carolan of Allen & Overy, a law firm, the “passport as we know it is dead.” Already, two big banks, HSBC and UBS, this week each confirmed plans to move 1,000 jobs from London.

Financial companies all have to firm up their contingency plans. For the City, these focus on so-called “equivalence” provisions, allowing…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Republican tax-reform plans face many hurdles, including Donald Trump

AMONG other things, the start of Donald Trump’s presidency this week heralds a collision between campaigning rhetoric and legislative and economic reality. What follows will be a learning experience for all, it is fair to say. Though not perhaps the most consequential of the looming reality checks, the outcome of a brewing debate over a proposed border-adjusted tax plan could prove a taste of things to come. As Mr Trump and his Congress work to make policy, there are many ways for things to go awry.

Both Mr Trump and congressional Republicans are keen to cut taxes on corporations. America’s inefficient corporate-tax system has remarkably high rates but leaks like a sieve, yielding a pitiful tax take (see chart). As a solution, Mr Trump favours a large cut in the corporate-tax rate, from 35% to 15%, and a chance for companies to repatriate foreign profits at a tax rate of 10%. Paul Ryan, Speaker of the House of Representatives and chief Republican policy wonk, has something very different in mind.

At present American firms are assessed for tax on their global income. This encourages multinationals either to use clever…Continue reading

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