Risk & Economy » 5 things FDs need to know this week

1. Ireland ‘not the global tax collector’ in latest in Apple tax case saga

Ireland’s finance minister Paschal Donohoe, who took office in June, has told the German Frankfurter Allgemeine (FAZ) newspaper that Ireland is “not the global tax collector for everyone else”, in an interview in which he discussed the ongoing Apple case.

In August last year, the European Commission ruled that Ireland had granted €13bn undue tax benefits to the US multinational, which the EU considered illegal under state aid rules, as the benefits allowed Apple to pay “substantially less tax” than other businesses.

The commission said that the benefits resulted in Apple paying an effective corporate tax rate of 1% on its European profits in 2003, reducing to 0.005% in 2014.

Following the ruling, the commission requested that Ireland recover the “illegal aid”.

However, speaking to the FAZ, Donohoe said that there was no specific agreement with Apple, and that the company had reduced its tax bill in line with tax legislation.

The Irish government has said that it will collect the tax, to be held in a fund while it appeals against the commission’s decision.

 

2. CEO of Infosys resigns

Vishal Sikka has resigned from his position as MD and CEO of Infosys.

In a blog post written on Thursday, he posted a copy of the letter sent to employees earlier that day, saying that despite business success over the past three years, he was unable to carry on as CEO while “constantly defending against unrelenting, baseless/malicious and increasingly personal attacks”.

Summarising his successes, Sikka said the company’s revenue had grown from $2.13bn in Q1 of 2015 to $2.65bn in Q1 this year. Revenue per employee has increased over six consecutive quarters, and the number of $100m clients has grown from 12 in 2014 to 19. He also said he was “proud” of the company having upheld its values, culture and integrity throughout the transformation.

Sikka’s resignation follows criticism of the Infosys board by its founders regarding governance at the company. In a statement from Infosys on Friday, the company said that a letter penned by co-founder Narayana Murthy “attacking the integrity of the board” along with Murthy’s “continuous assault” was the “primary reason” for Sikka’s departure. The statement said that Sikka had “strong support” from the board and that the company would continue its path despite Murthy’s campaign to “undermine the company’s efforts to transform itself”.

Sikka will serve as executive vice chairman on the board to ensure a “smooth transition” of management. Pravin Rao, chief operating officer, will take up the position of interim MD and CEO.

 

3. Brexit policy papers released by government

The government has published a series of Brexit policy papers, outlining its position for a future partnership with the EU. A paper released on Monday pushed for a “highly streamlined” customs arrangement with the EU post-Brexit with customs requirements that are “as frictionless as possible”.

Two models have been presented. The first would involve implementing “new negotiated and potentially unilateral facilitations to reduce and remove barriers to trade”. The arrangement would introduce technology-based solutions to simplify compliance requirements for businesses.

The second model would remove the need for a UK-EU customs border, with the UK aligning its approach to EU requirements, and the UK and EU trading as third parties. The government has proposed “mirroring the EU’s requirements for imports for the rest of the world” to enable the arrangement to work.

The government has also proposed a transitional period whereby the UK would follow a “model of close association with the EU Customs Union” for approximately two years. The period would end before the next General Election in 2022.

The EU responded to the proposals with a reminder that the divorce settlement must be agreed before any trade negotiations can take place.

 

4. UK retail sales record 0.3% growth in July

The Office of National Statistics (ONS) has published estimates of retail sales in July, with 0.3% growth recorded compared to June results. The ONS said that the increase could be attributed to a strong month in sales at food stores, with sales increasing by 1.5% following a fall of 1.1% in June.

However, with the exception of food and household goods stores, all other sectors were down in July for the quantity bought in retail sales.

Online sales experienced an increase of 15.1% year-on-year and 0.3% compared to June. Sales online represented 16% of all retail spending.

 

5. Amazon to open new UK warehouse

Amazon has announced plans to open a new warehouse in Bristol. The fulfilment centre is scheduled to open in 2018, creating 1,000 new jobs in the area. The electronic commerce company said that the warehouse will help to meet growing customer demands and expand selection.

The new warehouse will house advanced Amazon Robotics technology – a robotic slide that can lift and move products throughout the centre.

The announcement follows a period of fulfilment centre expansion at Amazon with a new site opening in Daventry earlier this year. Further centres in Doncaster, Warrington and Tilbury will open over the coming months.

Amazon said that it has invested £6.4bn in the UK across research and development, and head office, fulfilment and logistics infrastructure since 2010.