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The Morning Ledger: Brexit Could Result in Higher Taxes, Compliance Costs

19 Jun 2017 11:21 am

By Rheaa Rao

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Good morning. One consequence of Britain's exit from the European Union will be a more fragmented tax landscape for multinationals, which could result in higher tax contributions and compliance costs, Nina Trentmann writes. The country's negotiations with the European Union begin today.

The uncertainty around potential tax changes has made the job of corporate tax managers more challenging. Several directives will no longer apply to the U.K. and that will impact both British and Continental European firms.

There have been pledges from the British government to limit frictions. "We have the interests of both the British business community and all the international companies right at the center of our attention as we go into these negotiations," said Kim Darroch, the country's ambassador to the U.S., last week.

Nevertheless, businesses are preparing for potential adjustments. "We are concerned about tax changes," said Mark Wilson, finance chief at British luxury car maker Aston Martin Lagonda Ltd. "We are trying to assess the implications of this, but it is very difficult," Mr. Wilson said.


Whole Foods' month old CFO could get $4 million. Whole Foods Market Inc.'s new finance chief, Keith Manbeck, could have a short stint as his employer is in the process of being bought by Amazon.com Inc. Mr. Manbeck could be eligible to lump sum payments totaling nearly $4 million depending on how long he remains at the grocery chain, Richard Teitelbaum reports.


Tech leaders at the White House. Representatives from Apple Inc., Amazon, Microsoft Corp. and Alphabet Inc.'s Google are expected to appear at a brainstorming session held in the White House in Washington, D.C. But, previous meetings with the President have also taught executives that discussions with Donald Trump don't always translate into influence.

U.S. Federal Reserve officials deliver speeches. Federal Reserve Bank of New York President William Dudley kicks off a week of public appearances by Fed officials. The speeches come days after the central bank raised short-term interest rates for the second time this year.

U.K. begins Brexit talks. Britain's Secretary of State for Exiting the European Union, David Davis, meets in Brussels with Michel Barnier, the chief negotiator for the bloc. Despite the surprise outcome of a snap election earlier this month in which the ruling Conservative party lost its majority , the U.K. government will proceed with its plan to take the country of the EU's single market and the customs union, Philip Hammond, Chancellor of the Exchequer, confirmed on Sunday. The first round of Brexit talks will focus on the status of citizens after Brexit, financial obligations and other separation issues. Meanwhile, a round of disappointing economic data means that the U.K. is becoming less attractive for international investors.

Paris Air Show begins. Boeing Co. and Airbus SE have seen a slowdown in new orders for large aircraft. But at the Paris Air Show, which kicks off Monday, they are stressing that a years-long backlog will keep production lines busy and cash flowing in. The head of Boeing's commercial airplane unit said he sees big market potential for a new jetliner for the company but still wants more time before committing billions of dollars to the project.

EU prepares to extend Russia sanctions. On Monday, EU foreign ministers are set to extend for another year sanctions they imposed in 2014 on Russian companies and others who gained from the Kremlin's annexation of Crimea in March 2014. U.S. lawmakers are launching a fresh effort to outlaw "shell companies" amid fears that Russia is exploiting these vehicles to spread its influence, the Financial Times reports.


Trump expected to advance steel plans. President Trump's trade policy has so far been more bark than bite: dramatic rhetoric about shaking up the old order. That may change as soon as this week, when the president continues his "America First" strategy , advancing plans to curb steel imports in the name of "national security."

U.S. home sales, Europe PMI. Economists expect U.S. existing-home sales to have dropped by 0.4% in May. The National Association of Realtors will publish its most recent data on this on Wednesday.

Haruhiko Kuroda, the Governor of the Bank of Japan, will speak Wednesday, followed by Deputy Governor Kikuo Iwata on Thursday. Their appearances come after the central bank said it was keeping its interest-rate and asset-purchase policies unchanged.

Business surveys are expected to indicate that economic growth in the eurozone picked up again in the second quarter. The composite Purchasing Managers Index, a measure of activity in the manufacturing and services sectors which releases Friday, is expected to fall to 56.6 in June from 56.8 in May.

The U.S. Commerce Department releases statistics on new-home sales in May on Friday.


U.K. firms less able to shoulder pension obligations. The 350 biggest publicly-listed companies in the U.K. are less able to fulfill their defined pension obligations in 2017 compared to the previous year, a new study by PricewaterhouseCoopers LLP has found. The firm's pension support index gave a reading of 69 out of a possible 100 this year, down from the 82 recorded in 2016, and the lowest since 2009, Nina Trentmann writes. A fall in long-term gilt yields is one of the reasons for the pressure on company pension schemes, PwC said in a note.

"The last time we saw a fall this big was because of company performance, " said Jonathon Land, head of the pension credit advisory practice at PwC. "This time it's because of [plan] size. If a combination of political uncertainty following the election and Brexit leads to another economic jolt to company performance, this would be a double-whammy for pension [plan] support," Mr. Land said. The deficit of FTSE 350 defined benefit pensions stood at GBP134 billion ($171.2 billion) at the end of May, according to data provided by Marsh & McLennan Companies Inc.'s Mercer.


Amazon-Whole Foods deal unites maverick CEOs. If Amazon.com Inc.'s acquisition of Whole Foods Market Inc. goes through, it will unite two businessmen--Amazon's CEO Jeff Bezos and Whole Foods CEO John Mackey-- with two very different approaches. Mutual-fund giant Neuberger Berman Group LLC thinks Amazon has spurred a bidding war for Whole Foods.

Profit, the next frontier for shale. Big oil companies including Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC are piling into the Permian Basin, the oil-rich region straddling Texas and New Mexico that is the epicenter of the second wave of U.S. shale drilling. One question looms above all: Will they make money?

Lockheed Martin to wrap up $37 billion deal. Lockheed Martin Corp. is in the process of wrapping up negotiations on a deal worth more than $37 billion, Reuters reports. The detail entails selling fighter jets to 11 countries including the United States.

Activist takes stake in Hudson's Bay. An activist investor is pushing Hudson's Bay Co., the parent of Saks Fifth Avenue, to consider strategic alternatives, including possibly taking the company private or redeveloping its vast real estate holdings, in the latest sign of the challenges facing the department-store industry.

Saudi Aramco fixes financials. Saudi Arabian Oil Co. is fixing its financials before presenting to investors in advance of its initial public offering, the Financial Times reports. This includes shifting some of its liabilities from the company's accounts to government accounts.

Jaguar Land Rover to create 5,000 jobs. Car maker Jaguar Land Rover, a subsidiary of India's Tata Group, is expected to hire 5,000 employees to boost its expertise in autonomous and electric technology, the BBC reports. Most of the jobs will be based in the U.K.

PerkinElmer snaps up German firm. Scientific instruments maker PerkinElmer Inc. said it would buy Germany's Euroimmun Medical Laboratory Diagnostics AG for about $1.3 billion in cash, Reuters reports.


Private-equity firms could benefit from curb on SEC. A decision by the U.S. Supreme Court that curbed the Securities and Exchange Commission's enforcement powers over Wall Street could hinder efforts to penalize private-equity managers over fees.

White House to name FDIC chair. The White House announced President Trump's intent to nominate a longtime Republican congressional staffer to chair the Federal Deposit Insurance Corp., lining up another pick for a key regulatory post.

CFPB chief fires back at GOP lawmaker over Wells Fargo probe. A fight between Richard Cordray, the head of the Consumer Financial Protection Bureau, and a Republican lawmaker escalated Friday as Mr. Cordray made a rebuttal to a GOP report that criticized the agency's role in investigating alleged sales misconduct at Wells Fargo & Co.

China lifts restrictions on foreign investment in free-trade zones. China has lifted more than two dozen restrictions on foreign investment in its free-trade zones, although analysts say too many sectors of the country's economy remain off-limits.


Eurozone current-account surplus shrinking: ECB. The eurozone's large current-account surpluses have started to shrink as oil prices recover, the European Central Bank said on Monday, wading into a debate over global trading relations that has raised tensions between Washington and Berlin.


Era Group Inc., a Houston, Texas, helicopter operator, named Jennifer Whalen its acting chief financial officer. Ms. Whalen is the company's chief accounting officer and vice president. Her annual base salary will be adjusted to $250,000 from $210,000. Era Group also announced the departure of Andrew Puhala, its finance chief and senior vice president.

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June 19, 2017 07:21 ET (11:21 GMT)

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