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Monday, 15 July 2013

China accuses GlaxoSmithKline of paying £300m in bribes

British drugmaker under investigation by Chinese authorities for alleged bribery and price fixing

The British drugmaker GlaxoSmithKline used travel agencies and consultancies as vehicles to bribe officials and doctors and illegally boosted the sales prices of its drugs sold in China, police said on Monday.

Since 2007 the company had transferred as much as 3bn yuan (£323m) to more than 700 travel agencies and companies, Gao Feng, a police official in charge of the investigation into the company, told a news conference.

The investigation had found GlaxoSmithKline was chiefly responsible for the bribes, including instances of sexual bribery, Gao said. Four senior Chinese executives have been detained.

Police said they had taken no action against any British nationals, adding that no information had been received from GSK's UK headquarters.

GSK, which says it was only told of the grounds of the investigation in early July, has said it found no evidence of bribery or corruption in China, adding it would co-operate with the authorities.

GlaxoSmithKline research centre in Shanghai. The company is under investigation over alleged briberyThe ministry of public security said on Thursday that GSK executives in China had confessed to bribery and tax violations during one of a string of investigations into foreign firms in the world's second-biggest economy.

The ministry said the case against Britain's biggest drug maker involved a large number of staff and a huge sum of money over an extended period of time, with bribes offered to Chinese government officials, medical associations, hospitals and doctors to boost sales and prices.

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

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US blocks crackdown on tax avoidance by net firms like Google and Amazon

France fails to win backing for tough new international rules targeting online companies in run-up to G20 summit

France has failed to secure backing for tough new international tax rules specifically targeting digital companies, such as Google and Amazon, after opposition from the US forced the watering down of proposals that will be presented at this week's G20 summit.

Senior officials in Washington have made it known they will not stand for rule changes that narrowly target the activities of some of the nation's fastest growing multinationals, according to sources with knowledge of the situation.

The Organisation for Economic Co-operation and Development (OECD) has been told to draw up a much-anticipated action plan for tax reform at the gathering of G20 finance ministers this Friday, but the US and French governments have been at loggerheads over how far the proposals should go.

While the Americans concede that the rules need to be updated, they are understood to be pushing for moderate change. They are believed to want tweaks to the existing wording of international tax treaties rather than the creation of wholly new passages dedicated to spelling out how the digital economy should be taxed.

This has put the US at odds with several G20 nations, particularly France, which in January published radical proposals for new concepts in international tax treaties designed to counter some of the avoidance measures deployed by internet firms. Officials at the G20 governments have been working closely with the OECD, a club for the world's industrialised nations, over the proposals.

Google chairman Eric Schmidt and French president François Hollande, who has been targeting internet companies that pay little or no tax in France.Despite opposition from the US, the French position – which also includes a proposal to link tax to the collection of personal data – continues to be championed by the French finance minister, Pierre Moscovici.

The OECD plan has been billed as the biggest opportunity to overhaul international tax rules, closing loopholes increasingly exploited by multinational corporations in the decades since a framework for bilateral tax treaties was first established after the first world war.

The OECD is expected to detail up to 15 areas on which it believes action can be taken, setting up a timetable for reform on each of between 12 months and two and a half years.

Among the areas expected to take longest to produce results is in which jurisdiction a multinational group should pay tax on its business activity, under "permanent establishment" rules. Many internet firms' tax structures, such as those of Google and Amazon, exploit loopholes in this area.

While the case for broad reform of the international rules has been made repeatedly by top politicians around the globe, in many areas there is limited common ground on what shape new rules should take.

As a result, because of its consensus-driven nature, the OECD action plan is expected to contain watered-down recommendations in some areas.

Nevertheless, the OECD has already made clear it regards aggressive tax engineering by internet multinationals to be among six "key pressure areas" it will address.

In a report to the G20 in February it said: "Nowadays it is possible to be heavily involved in the economic life of another country, eg by doing business with customers located in that country via the internet, without having a taxable presence therein.

"In an era where non-resident [corporate] taxpayers can derive substantial profits from transactions with customers located in another country, questions are being raised as to whether the current rules ensure a fair allocation of taxing rights on business profits, especially where the profits from such transactions go untaxed anywhere."

However, tensions are thought to have surfaced in the OECD working party looking at how to address the permanent establishment rules in the light of the burgeoning internet economy. This working party is being jointly led by US and French teams – representing the extremes of opinion among G20 nations.

France has been among the most aggressive in responding to online businesses that target French customers but pay little or no French tax. Tax authorities have raided the Paris offices of several firms including Google, Microsoft and LinkedIn, challenging the companies' tax structures.

In the case of Google, in 2011 French tax officials demanded €1.7bn (£1.47bn) in back taxes. In February this year Google settled the case, agreeing to paying €60m to help France with digital innovation and other issues. The French president, François Hollande, said it was "a model for effective partnership and is a pointer to the future in the global digital economy."

In the UK, outcry at internet companies routing British sales through other countries reached a peak in May after a string of investigations by journalists and politicians laid bare the kinds of tax structures used by the likes of Google and Amazon.

Margaret Hodge, the chair of the public accounts committee, called Google's northern Europe boss, Matt Brittin, before parliament after amassing evidence on the group's tax arrangements from several whistleblowers.

After hearing his answers, she told him: "You are a company that says you do no evil. And I think that you do do evil" – a reference to Google's corporate motto, "Don't be evil".

Last month, the Treasury minister David Gauke told backbench MPs who had called a short debate on multinationals and tax avoidance that the government did still hold out hope that shortcomings in international tax guidelines – specifically in what constitutes a business taxable in the UK under permanent establishment rules - would be addressed by the G20.

"We are leading the way in encouraging the OECD to look at what needs to be done to ensure that the tax rules are brought up to date for the internet world," he said.

Writing in the Observer in May, the Google chairman, Eric Schmidt, appeared to drop his previously unapologetic defence of existing international tax rules.

In the face of building public anger, he conceded that rather than taking up tax incentives offered by governments, his firm and others had built tax structures that had not been foreseen by those who drafted the rules decades ago before the advent of the internet.

"Given the intensity of the debate, not just in the UK but also in America and elsewhere, international tax law could almost certainly benefit from reform," he wrote, describing this week's OECD action plan as "hotly awaited".

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

Friday, 12 July 2013

China says GSK executives have confessed to bribing doctors

UK drugs maker GlaxoSmithKline under fire after executives in China confess to 'serious economic crimes' to boost revenue

Executives working for the UK drug maker GlaxoSmithKline in China have confessed to "serious" corruption and tax-related offences, China's security ministry said on Thursday, amid a wide-ranging series of investigations into foreign firms operating in the country.

The allegations, which the ministry classified as "serious economic crimes", include the bribing of doctors and officials in order to "open new sales channels and increase drug revenues". The employees are also claimed to have used fake receipts to violate tax regulations, according to a statement on the ministry's website. It did not reveal the employees' identities, how many were detained or when they were questioned.

"After initial questioning the suspects have admitted to the crimes, and the investigation is ongoing," the statement said, adding that police were carrying out investigations in Shanghai, Zhengzhou and Changsha, where GSK employees – whose identities have not been revealed – were detained two weeks ago on charges of fraud.

GlaxoSmithKline executives offered bribes to Chinese government officials, medical associations, hospitals and doctors to boost sales and pricesA spokesman for GSK rejected the charges, saying: "We take all allegations of bribery and corruption seriously. We continuously monitor our businesses to ensure they meet our strict compliance procedures. We have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided we will act swiftly on it."

He added: "We are willing to co-operate with the authorities in this inquiry. But this is the first official communication GSK has received from the PSB [public security bureau] in relation to the specific nature of its investigation."

A spokesman for the Foreign Office said: "We are aware of the Chinese investigation and we are in contact with GSK and the Chinese authorities."

The allegations follow similar claims that GSK sales staff in China showered doctors with money, dinners and all-expenses paid trips in promoting its Botox anti-wrinkle treatment.

The Botox allegations, reported in the Wall Street Journal following a tip-off from an anonymous source, centred on claims that GSK marketing staff in China had planned to pay doctors up to $490 (£325) for meeting prescription quotas between 2004-2010.

There is no evidence any payments were made and GSK's spokesman said the company had looked thoroughly at these allegations and had found nothing.

GSK's sales in China account for 3% of the group's turnover, but are expected to grow.

The allegations come as Beijing conducts a series of investigations into foreign companies across an array of industries. European and US-based companies Mead Johnson, Nestle and Danone have cut their infant milk formula prices in recent days amid a major government investigation into alleged price fixing. Earlier this year Chinese media targeted Apple and Volkswagon in scathing consumer rights investigations.

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

Invensys shares boosted by takeover approach from Schneider Electric

French power equipment maker says it is in talks to buy UK engineering group

Shares in the UK engineering group Invensys have surged 16% on news of a £3.3bn takeover approach from France's Schneider Electric.

The French power equipment maker said it was in early talks to buy Invensys to boost its industry automation business. Invensys said it was likely to recommend Schneider's offer of 505p a share, which would represent a 15% premium to the stock's Thursday close on the London Stock Exchange. The shares reached 511p in early trading on Friday.

Schneider has indicated it would pay 319p in cash and 186p in new Schneider shares, Invensys said.

Schneider said it had until 8 August to say whether it intended to make a firm offer or walk away under UK rules. This could be extended with UK takeover panel consent. The group, whose products help utilities distribute electricity and which makes automation systems for the car and water treatment industries, said last summer that it planned to step up acquisitions to boost sales and tap new markets.

Schneider had €2.8bn (£2.4bn) of operating cash flow at the end of 2012.

Invensys emerged as a potential takeover target earlier this year on speculation that the sale of its rail business could lead to substantial net cash and raise interest from suitors.

Schneider's offer of 505p a share would represent a 15% premium to Invensys's Thursday close on the London Stock ExchangeSociété Générale analysts said in late April that Invensys could be valued at 460p a share following the disposal.

Invensys said in May it planned to return £625m to shareholders after selling Invensys Rail for £1.74bn to Siemens.

Schneider said on Thursday that a takeover of Invensys would lead to "significant cost savings" and "revenue synergies".

Invensys provides software, systems and controls to clients ranging from oil refineries and power stations to mining companies and appliance manufacturers, to help monitor, control and automate products and processes.

Its Industrial Automation unit supplies control systems, safety systems and instrumentation to customers operating oil refineries, nuclear power stations and petrochemical plants.

Invensys said its advisers were Barclays and JP Morgan Cazenove.

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

Thursday, 11 July 2013

Burberry beats forecasts after 'standout' spring/summer season

Growth strongest in Asia as British luxury group reports 18% first-quarter sales rise

Strong sales of men's clothing, large leather bags and coats during dismal spring weather in Europe helped British luxury brand Burberry to a better than expected performance in the first quarter of its financial year.

Angela Ahrendts, the chief executive, said: "Spring/summer 2013 was a standout season driven by innovative marketing, cohesive monthly fashion groups and exceptional execution."

The company, which recently signed actress Sienna Miller and her fiancé Tom Sturridge to front its advertising campaign, recorded an 18% rise in sales, at constant exchange rates, to £339m, well ahead of analysts' expectations.

When the impact of new store sales were stripped out, sales rose 13%, up from 8% growth in the previous three months.

The number of staff making Burberry's signature raincoat at its British factory in Castleford, West Yorkshire, has been doubled since 2011 amid high demand, with sales of outerwear and large leather goods such as its Blaze and Orchard bags accounting for half the brand's sales growth.

A Burberry store in Beijing – the brand saw double-digit underlying sales growth in ChinaMenswear sales rose 25% over the quarter as the label brought its men's catwalk show back to London this year. One customer was tennis ace Andy Murray who wore a Burberry suit for his visit to Downing Street after his Wimbledon triumph.

Menswear now accounts for nearly a quarter of the company's sales and Carol Fairweather, chief financial officer, said it was a "significant growth opportunity" for the future.

Growth was strongest in Asia with Burberry outperforming rivals in the all-important Chinese market by harnessing the power of social media to raise the profile of the brand and by opening more large and glamorous stores. It saw double-digit underlying sales growth in the country over the quarter.

Fairweather said: "We've got a lot of self-help measures and quite a long way to go in China compared to some of our peers."

Two shops were opened in Shanghai during the quarter and another flagship store is planned to open in China later this year. The group has bounced back from a profit warning last September after sales in China had slowed.

The company said "soft" trading at its high street stores was offset by strong growth online, partly helped by the use of iPads by shopfloor staff to help customers order goods that were not immediately available.

Burberry is also experimenting with allowing shoppers to pick up goods ordered via the internet at flagship stores including outlets in London in Knightsbridge and Regent Street.

But Ahrendts, who topped the UK's pay league with a total package of £16.9m last year, almost £5m more than the next highest paid chief executive, warned that the macroeconomic outlook remained "uncertain" and that first half profits would fall below those of last year, partly because of the cost of bringing Burberry's fragrance and beauty business back in-house.

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

Royal Mail privatisation will not affect postal delivery – Vince Cable

Business secretary says postal service sell-off will not threaten universal service obligation to deliver to 29m UK homes

The Royal Mail's duty to deliver to all 29m homes in the UK will survive privatisation, the government has said, as it unveiled plans for the most significant state sell-off since the railways in the 1990s .

The pledge came as business secretary Vince Cable announced long-awaited plans to float the Royal Mail on the London Stock Exchange this year, and confirmed that postmen and women would be entitled to free shares in the business.

Critics argued that the privatisation of an institution first opened to the public 378 years ago would mean post office closures, the erosion of six-day delivery in rural areas and worse pay and conditions for postal workers. Speaking in the House of Commons, Cable said privatisation was "an irreversible course" that would secure the future of Royal Mail in the face of competition.

"The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services," he said. "Now the time has come for government to step back from Royal Mail, and allow its management to focus wholeheartedly on growing the business."

The Communication Workers Union (CWU), which represents two-thirds of the Royal Mail's 150,000 workforce, vowed to fight the sell-off and accused the government of ignoring the views of the public.

The Labour party, which attempted to part-privatise the service in 2009, accused ministers of pushing ahead with the sale to dig the chancellor out of a financial hole caused by a rise in government borrowing. Market analysts expect Royal Mail will be valued at £3bn when it floats later this year. The public will be able to apply for shares, although Royal Mail workers will be allowed first in the queue if they want extra shares on top of the 10% share guaranteed to them.

Cable said the "overarching objective" of privatisation was to secure the universal service obligation that requires mail deliveries to any UK home six days a week, which has been threatened by a slump in profits in the wake of a 25% decline in letters over the last decade.

But Dave Ward, the CWU's deputy general secretary, said the business secretary was "off the pace" on the economic reality of the six-day universal service, which he predicted would not survive in rural areas and remote regions under privatisation.

Warning that privately-owned companies will seek a relaxation of the obligation if they offer their own doorstep delivery services around the UK, he said: "We are talking about an economic reality. These [delivery] companies will lobby against the six-day service. It simply will not make the money to secure their investment."

The national network of 11,780 Post Offices, a separate company from Royal Mail, will remain in public hands, a promise that failed to reassure the National Federation of SubPostmasters', who accused the government of taking "a reckless gamble" with the network that would lead to post office closures.

"If privatisation goes ahead, we have very real fears that the Royal Mail will rip up its the current agreement with Post Office Ltd [to provide Royal Mail products and services] in an aggressive bid to maximise profits for its shareholders," said NFSP general secretary George Thomson.

Chuka Umunna, shadow business minister, said the recent doubling in profits at Royal Mail to £403m also called into question the assumptions behind the "fire sale". "They now want to privatise the profits at the time it is making money. How can this policy make sense?"

Cable pledged that private ownership would not trigger any change in post office workers' terms and conditions, while the Royal Mail promised "a legally-binding and enforceable contract with the CWU" to enshrine these rights.

Dave Ward at the CWU said Cable's guarantees "are not worth the paper they are written on", while existing agreements with were "completely inadequate". Strike action was inevitable, he said.But the government hopes that giving away shares to employees – the largest worker share offer in nearly 30 years – will soften opposition to the sale. Under the scheme, eligible employees would be entitled to free shares, but would be unable to sell them for at least three years.

Moya Greene, Royal Mail's chief executive, who has been courting potential investors in the UK, North America and continental Europe, said the sale would give employees "a meaningful stake in the company" and the public "the opportunity to invest in a great British institution".

British Petroleum, October 1979

Now a publicly traded company with a large number of US shareholders and institutional investors including BlackRock

British Aerospace, February 1981

Now BAE Systems, the company is traded on the FTSE 100 and major institutional investors include Invesco and AXA

British Telecom, December 1984

Now a publicly traded company with institutional investors including Invesco, BlackRock and Legal & General, and more than a million small shareholders

British Gas, December 1986

Following a demerger in 1997, British Gas became part of the newly formed Centrica, which is publicly listed and whose shareholders include Invesco and Legal & General

British Airways, February 1987

A listed business, merged with Spain's Iberia and owned by International Airlines Group

BAA, July 1987

Now called Heathrow Airports Limited and owned by a consortium including Spain's Ferrovial and China's sovereign wealth fund

British Steel, December 1988

After it merged with a Dutch steel producer and became Corus, it was bought by India's Tata Steel

Water (10 regional companies), December 1989

Thames Water is part of Kemble, which is owned by a number of institutional investors and pension funds, including China's sovereign wealth fund and funds managed by Australian group Macquarie. Southern Water is owned by Greensands Investments, a consortium of pension and infrastructure funds

Vince Cable issues his Commons statement on the Royal Mail privatisation plans. He said this was 'an irreversible course' that would secure the future of Royal Mail in the face of rising competition

British Coal, 1994

Its administrative functions were transferred to the government's Coal Authority, while its mines were transferred to UK Coal, which went into administration this week.

British Energy, 1996

Part of French state-owned group EDF

Stage in process: a 10-year contract has been awarded to US-based company Bristow, which will take over duties from the RAF and Royal Navy from April 2015

Student loan book/Student Loans Company

Stage in process: Vince Cable has already announced the sale of a £900m book of loans. It is possible that the rest of the £45.9bn loan book could follow. Bidders could include banks, funds and financial institutions

Urenco

Stage in process: the government put its one-third stake up for sale in April, after securing agreement from its Dutch and German partners. Bidders could include consortia of financial buyers – most likely infrastructure investors and sovereign wealth funds – and trade buyers

Plasma Resources UK

Stage in process: the government announced in January it was examining a partial or whole sale of its blood plasma business. Possible bidders include bioscience and healthcare companies, as well as private equity firms

Lloyds Banking Group and Royal Bank of Scotland

The bailed-out banks will be fully privatised, but the government has not indicated when. It is likely to sell its shares to investors on a phased basis, starting with Lloyds. The government would like to see them fully returned to the private sector by the next election in 2015

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

GlaxoSmithKline executives in China 'confess to bribery and tax violations'

China's security ministry says GSK suspected of trying to bribe officials, hospitals and doctors to boost sales and prices

Executives of British drug maker GlaxoSmithKline in China have confessed to charges of bribery and tax law violations after initial questioning by Chinese police, according to the country's security ministry.

The company is suspected of offering bribes to government officials, medical associations, hospitals and doctors to boost sales and prices, China's security ministry said in a statement on its website on Thursday.

GSK is also suspected of using fake receipts in unspecified tax law violations, the ministry added.

"After initial questioning the suspects have admitted to the crimes, and the investigation is ongoing," the statement said.

The statement did not give details on the number of executives questioned, their identities or when the questioning took place.

A pharmacist checks stocks of medicine at a hospital in Hefei, central ChinaGSK said it would co-operate with the authorities but said Thursday's announcement was the first official communication it has received about the investigation.

"Corruption has no place in our business," said a company statement. "If evidence of such activity is provided we would of course act swiftly on it."

In recent months China has targeted foreign firms on multiple fronts including alleged price-fixing, quality controls and consumer rights, forcing companies to defend their reputations in a country where international brands often have a valuable edge over local competitors in terms of public trust.

Police in the south-central Chinese city of Changsha said last week they were investigating high-level Chinese staff at GSK on suspicion of unspecified economic crimes.

GSK said on Monday it was investigating new allegations that its staff had used improper tactics to market Botox in China, but had so far found no evidence of bribery or corruption.

GSK, Merck and other foreign and domestic drugmakers were also being investigated by China's top economic planning agency on cost and pricing issues.

China is an increasingly important market for international pharmaceutical companies, which are relying on growth in emerging markets to offset slower sales in western markets where many former blockbuster drugs have lost patent protection.

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