Azure Global : 05/22/13

Wednesday, 22 May 2013

UK retail sales slump as shoppers balk at higher prices and cold weather

ONS said food shops were the worst affected as retailers reported a 1.3% decline in the amount of goods sold

Retail sales slumped in April after shoppers balked at rising prices and were reluctant to venture out to the high street in one of the coldest springs on record.

The Office for National Statistics said retailers reported a 1.3% decline in the amount of goods sold, with food shops the worst affected. Sales of food plunged 4.1% on the month, the weakest showing in almost two years. Shops also suffered a 0.2% contraction in the amount of money spent on the same month a year ago, which was the biggest year-on-year fall in retail spending since the turn of the century.

The cold weather was the biggest factor as the sale of barbecue food, garden furniture and summer dresses was put on hold. April was also a terrible month for garden centres following the big chill that effectively delayed spring by a month.

Cold weather was the biggest factor as the sale of barbecue food, garden furniture and summer dresses was put on hold

Several major stores have announced a significant bounce back in May, with garden centre sales reportedly up 70% in the first three months of the year, but the overall contraction, and especially the deterrent of rising food inflation, will concern the Treasury.

Ministers are hopeful of a bounce back in consumer confidence during 2013 to increase high-street sales and boost economic growth.

The ONS said consumer prices data showed that food prices had steadily been increasing and that a wide variety of food types contributed to the rise, including staple goods.

"This rise in prices will have squeezed consumers' disposable income, possibly resulting in them buying less or substituting cheaper goods for their normal purchases," it said.

Chris Williamson, chief economist at financial data provider Markit, said the weather-related drop in sales was a reminder that the economy remains in a fragile state.

"It is likely that spending will revive again in coming months, helping keep the country out of another downturn, though recovery will be only gradual as incomes continue to be squeezed," he said.

He pointed out that the underlying picture was more likely one of modest growth of sales following a 0.7% rise in the latest three months sales on the previous three-month period, which was the strongest rate of increase since last September.

"Households' views on their finances are the brightest for three years, according to Markit's household finance index for May. Being busier at work, rising house prices, news of the country having avoided another recession and buoyant equity markets have all helped generate more of a 'feel-good factor'."

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Article source : http://www.guardian.co.uk

Apple chief calls on US government to slash US corporate tax

Tim Cook warns Congress that he would refuse to repatriate $100bn stashed offshore unless US severely reduced its 35% tax rate

Apple has called for US corporate tax rates to be slashed after it admitted sheltering at least $30bn (£20bn) of international profits in Irish subsidiaries that pay no tax at all.

In a dramatic display of how threats from multinational corporations are driving down taxes across the world, chief executive Tim Cook warned Congress that he would refuse to repatriate a total of $100bn stashed offshore unless it acted to slash the 35% US rate.

Cook said the tax rate for repatriated money should be set "in single digits" to persuade companies to bring it back. Standard tax for US profits should be, he said, in the "mid 20s".

He also revealed that Apple had struck a secret deal with the Irish government in 1980 to limit its domestic taxes there to 2%.

Three subsidiaries based in Ireland are also used to shelter profits made in the rest of Europe and Asia but are not classed as resident in any country for tax purposes – a tactic dubbed the "iCompany" by critics.

Cook's testimony to a Senate sub-committee investigating multinational tax practices largely confirmed its findings that Apple had taken tax avoidance to a new extreme by structuring these companies so they did not incur tax liabilities anywhere.

Phillip Bullock, the California company's head of tax, estimated that just one of these subsidiaries – Apple Operations International – had channelled $30bn in global profits over the last five years without filing a single income tax return.

Lower, lower: Apple CEO Tim Cook testifies before senators about his company's tax affairs.

The only taxes paid were on the interest earned by the cash pile and small sums in local markets. Senate investigators allege a total of $70bn has been sheltered this way in four years.

Despite heated exchanges with committee chairman Carl Levin, Apple largely shrugged off criticism of the practice, insisting it was acting "in the letter and the spirit of the law".

An independent tax professor, Richard Harvey, testified that its tax avoidance was "probably legal" and could have been much more aggressive.

The Apple chief used his appearance to renew lobbying for Congress to cut a deal with multinationals to encourage them to bring back, or repatriate, the billions of dollars kept offshore to avoid tax.

Cook said he had no plan to bring back the $102bn built up by Apple at current tax rates, and recently opted to return money to shareholders by borrowing money instead. "I have no current plan to do so at the current tax rates.

"Unlike some technology companies, I am not proposing a zero rate," he said. "My proposal is that we have a reasonable tax for bringing back money from overseas.

"A permanent change is materially better than a short term tax holiday."

Cook said he "personally doesn't understand the difference between a tax presence and a tax residence".

He was even defended by some members of the committee who accused Levin and Republican John McCain of "bullying" Apple. "I am offended by the tone and tenor of this hearing," said fellow Republican and presidential hopeful Rand Paul.

The hearing was seen as a watershed in the increasing tense clashes between governments and multinationals, particularly technology groups such as Apple, Amazon and Google.

Edward Kleinbard, professor of law at USC Gould School of Law, said: "Apple is not an outlier in its efforts to produce 'stateless income' – income that is taxed neither in the United States nor in the countries where its foreign customers are located – but it is an outlier in the baldness of its strategies. Apple shifted tens of billions of dollars of income without even breaking into a sweat.

"The hearing will forcefully remind policymakers that international tax reform will require the implementation of really thoughtful anti-abuse rules, ideally developed in conjunction with other OECD member states.

Every country is the worse off when they facilitate multinationals aggressively pursuing stateless income strategies, just as every country is worse off when they all engage in trade wars."

Corporate tax expert Jennifer Blouin at University of Pennsylvania's Wharton business school said the Apple revelations were "extraordinary but not surprising".

"We have seen versions of this with Microsoft and with Google," she said. "I hope it gooses the notion that we need to fix the worldwide system."

She said Apple was working within the law but that the law was written before huge profits could be made by companies that trade not in goods and manufacturing but in ideas.

"I have worked in this area for years and it's been largely an obscurity. But it's at the forefront now, and it needs to get fixed."

Article source : http://www.guardian.co.uk

SSE fuels consumer anger as retail profits rise 30% to £410m

Scottish and Southern Energy posts results under the heading Earning the Right to Make a Profit

Scottish and Southern Energy saw a near 30% rise in profits from its retail customers last year, fuelling accusations that the big energy firms are profiteering at the expense of UK households.

Under the heading Earning the Right to Make a Profit, SSE announced operating profits of £410m from its retail arm in the year to the end of March.

SSE was hit by a mis-selling scandal that saw it fined a record £10.5m in April. The SSE chairman, Lord Smith of Kelvin, said on Wednesday: "Like everyone else associated with SSE I have no hesitation in apologising unequivocally for the breaches that occurred; but while the breaches were clearly wrong, the response has been absolutely right."

He said the company had reformed its retail operations since 2011 and introduced a sales guarantee to reimburse any losses experienced by customers joining the company.

The huge rise in profits will cause further outrage among fuel poverty campaigners and householders struggling to pay their bills. Speaking ahead of the results, Elizabeth Ziga, of the Fuel Poverty Action group, said: "While SSE customers were skipping meals to keep the heating on, the company continued to rake in bumper profits. To end this chilling profiteering, we have to break the big six's grip over our energy."

It will also heap more pressure on both the government and Ofgem, who have been accused of standing by as the big six suppliers profit at their customers' expense.

Last October SSE, which supplies 9.6m households with gas and electricity, raised domestic energy prices by 9% to coincide with the start of the coldest and longest winter of recent years. The company said on Wednesday that average household gas consumption in the UK rose by 21% last year, while electricity consumption was 5% higher.

The retail business helped drive adjusted profits before tax for the group – which includes SSE's networks and wholesale units – up 5.6% to £1.4bn.

The company did, however, write down the value of certain investments by almost £400m and was hit with charges related to claims from outages in prior years, while movements in derivative contracts dented profits by around £200m. That left total profits before tax at £601m for the year.

SSE upped its full-year dividend by 5.1% to 84.2p. It added that it will maintain annual dividend increases above inflation – as measured by the retail prices index – this year and beyond. Data out on Tuesday showed annual RPI fell from 3.3% to 2.9% last month.

The company confirmed that chief executive Ian Marchant would step down at the end of next month, after a decade at the helm of the company. He will be replaced by his deputy, Alistair Phillips-Davies.