Chancellor argues the case for digital services tax

The UK will continue to push for a solution for taxing international tech companies, despite the US abandoning negotiations for a global digital tax. In a letter to US Treasury Secretary Steven Mnuchin, Chancellor Rishi Sunak and finance ministers in France, Italy and Spain have stressed the importance of tech giants such as Google, Amazon and Facebook paying a “fair share” of tax. The letter says that the coronavirus crisis “has confirmed the need to deliver a fair and consistent allocation of profit made by multinationals operating without – or with little – physical taxable presence.” Arguing that such firms will emerge from the crisis “more powerful and more profitable”, the letter says it is “fair and legitimate” to expect those benefitting from free access to the European market to “pay their fair share of tax within countries where they create value and profit.” A Treasury spokesperson commented: “We have always been clear that our preference is for a global solution to the tax challenges posed by digitalisation, and we’ll continue to work with our international partners to achieve that objective.” In France, finance minister Bruno Le Maire labelled the US decision to suspend the OECD-led talks a “provocation”, and said Paris would apply a tax on big technology companies “whatever happens”. Editorials in the FT and Times both detail the importance of an agreement on taxation for digital firms.

The Times, Page: 35 The Guardian, Page: 33 Financial Times, Page: 4 Financial Times, Page: 22 The Times, Page: 27 The Sun, Page: 2 City AM BBC News

IFS in tax warning

The Institute for Fiscal Studies (IFS) has suggested that the Chancellor may have to increase taxes to address a hole in public finances brought about by the coronavirus crisis. IFS analysis suggests Government borrowing will stand at £158bn next year, and about £130bn up to as late as 2024/25. The report from IFS and Citi says Chancellor Rishi Sunak would need to find £30bn to £40bn of tax increases or spending cuts to stabilise public debt levels at 100% of GDP. The Office for Budget Responsibility estimates that public borrowing will hit almost £300bn in 2020/21.

The Daily Telegraph, Business, Page: 2

Opinion: VAT cut not the way to go

Ryan Bourne, who holds the R Evan Scharf chair for the public understanding of economics at the Cato Institute, considers reports that Chancellor Rishi Sunak is mulling a temporary cut to VAT to boost consumer confidence as Britain moves into the post-lockdown recovery phase. Mr Bourne argues against the move, saying US data show that pent-up demand will see retail sales jump as shops reopen, even without intervention.

The Daily Telegraph, Business, Page: 3


Wirecard auditor questions cash balances

Wirecard has said that its auditor has raised questions over cash balances worth £1.7bn, with EY refusing to sign off on the payments company’s accounts, saying it was unable to confirm the money existed. EY’s refusal to publish the accounts marks the fourth delay this year. The missing sum amounts to about a quarter of the fintech firm’s total balance sheet. Wirecard has said there was evidence of “spurious” figures intended “to deceive the auditor”. It appointed KPMG to conduct a special audit last year and the report in April said the firm was unable to identify what of Wirecard’s profits reported from 2016 to 2018 were real.

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Casual dining chains brace for pandemic aftermath

Dominic Walsh in the Times looks at the challenges being faced by casual dining chains, noting that many have hired restructuring advisers as the sector braces for a wave of CVAs, insolvencies and administrations amid the COVID-19 crisis. Mr Walsh looks at the work of Will Wright, head of KPMG’s regional restructuring team, while noting that PwC, Deloitte, RSM, Alvarez & Marsal and FRP Advisory “are also working flat out” to support chains. Figures from consultancy CGA show that the UK has just over 6,600 casual dining outlets, down 3.1% on last year and 5.7% on three years ago.

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DfT calls in KPMG for TfL review

The Department for Transport (DfT) has hired KPMG to review Transport for London’s (TfL) finances and business plan, with London Mayor Sadiq Khan having to secure a £1.6bn bailout to keep the capital’s Tube and bus services afloat until September. A DfT spokesperson said that as part of the funding package, KPMG has been called in to conduct an independent review so the Government can understand TfL’s needs, “now and in the future.”

The Guardian, Page: 17 Daily Express

All Saints in rent talks

All Saints is seeking to shake up the way it pays its rent after warning that “a small number” of branches are set to close. The retailer will launch a CVA to switch most of its stores to a model where rent is based on how much money the store makes. All Saints says the turnover-based arrangement would prevent it from shutting a string of stores. UK landlords will vote on the plan on July 3.

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English shoppers’ return points to a gradual retail recovery

The FT considers the climate for retailers, with KPMG’s Yael Selfin saying reopening stores means businesses that were viable are more likely to survive, while warning of job losses.

Financial Times

AIM reporting and governance improves

Writing for City AM, BDO’s head of audit, Scott Knight, looks at the AIM as it marks its 25th anniversary, saying the junior market is proving “remarkably resilient and adaptable”. He notes that while the FTSE all-share index dropped 21% of its value in the first five months of 2020, the AIM all-share index lost just 9%. Mr Knight considers standards that firms on the junior market adhere to, saying there “have been vast improvements in the standards of reporting and corporate governance” in recent times.

City AM


Northern towns lead property surge

Eight of the ten places in England recording the biggest jumps in buyer demand since the housing market reopened were towns in the North, according to Rightmove. Hereford took the top spot, with a 77% jump in buyer demand between June 1 and 14 compared to the first two weeks of March. It was followed by Wigan (71%), while Rochdale, Wilmslow, Scarborough and Bolton saw spikes of between 66% and 59%. Overall, Rightmove found that buyer demand in England was 32% higher between June 1 and 14 than in the first two weeks of March.

The Daily Telegraph Daily Mail


BoE pumps an extra £100bn into the economy

The Bank of England (BoE) has announced a new stimulus package for the economy in an effort to mitigate against the impact of the coronavirus crisis and lift inflation from the current 0.5% and closer to the 2% target. The Bank confirmed a fresh £100bn in quantitative easing, with this following a £200bn boost announced in March. The £100bn added yesterday takes the BoE’s asset-purchasing programme to £745bn, a figure equivalent to around a third of GDP. BoE governor Andrew Bailey said the pace at which bonds would be purchased will be slower than in the previous period as financial markets are far calmer than three months ago, saying: “We are slowing from warp speed to something that by historical standards still looks fast.” The Bank’s Monetary Policy Committee (MPC) also voted to keep interest rates at the historic low of 0.1%. On the immediate state of the economy, the Bank said there are signs of a post-lockdown increase in consumer activity, with this coming in the current quarter when the Bank had anticipated it would be Q3 before evidence of an upturn. The Bank said it now expects the economy to contract by 20% in the first half of the year, having previously suggested a 27% reduction was on the cards. Andy Haldane, the Bank’s chief economist, said if the recovery in demand and output continues, the loss of output due to the pandemic may be half that previously envisioned by the Bank, “boosting inflation prospects”. Meanwhile, Ben Broadbent, the BoE’s deputy governor for monetary policy, voiced concern over future unemployment rates as the job retention scheme is unwound.

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Divorce row could spark tax probe

A judge has warned that a £12m divorce battle could see both parties facing an investigation into possible tax evasion. Marine magnate Paul Crowther is arguing that a fleet of ships is not beneficially owned by him, his ex-wife Caroline or their company and should be ignored in their divorce, while Mrs Crowther says they are assets of the marriage and ought to be considered when their wealth is split. Lord Justice Males, in the Court of Appeal, has warned the former couple that if Mrs Crowther’s position is deemed the correct one, details of the ships’ ownership could see both parties implicated in a “criminal conspiracy… to evade tax properly due” on their earnings.

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Contact Paul Southward