Economic history has a way of shifting in life cycles. The Bretton Woods era and the Marshall Plan set the stage for the post-Second World War economic order. The launch of the World Trade Organisation and the Brady Plan for debt shaped the post-Cold War Golden Era of globalisation.
Ms Yellen’s push for a baseline on corporate taxation comes as policymakers seek to lay the foundations for a post-Covid-19 and increasingly carbon-neutral economy.
While a global standard for corporate taxes may sound dry, it in fact represents a step change from capitalism as we know it. Taken in a context of rising progressive pressure for reparations for colonial economic exploitation, the move lays the groundwork for something quite dramatic.
The intellectual sands within the economic profession have rapidly shifted. Many think Ms Yellen’s idea is far too modest. Some propose new variations on transaction taxes, such as a levy on all share price values or on digital activity.
Resistance should be straightforward for Ms Yellen to overcome. The private economy is benefiting from the second mass mobilisation of resources to stabilise and recapitalise the economy in less than 11 years.
When the finance ministers of the International Monetary Fund and World Bank met recently, Washington proposed a global plan for uniform rates. The kicker is that countries would be able to apply the taxes if earnings in other states were taxed at a lower rate to make up the difference. That would effectively reduce incentives for US corporates to shift profits to low-tax nations that have prioritised development over government revenues.
Some developed countries have already responded to the pandemic by reversing the trend towards lowering corporation taxes, such as the UK. The 37 members of the Organisation for Economic Co-operation and Development are looking to seal a deal on a digital services tax and corporate taxes by the middle of this year.
International agreement is necessary because the existing cross-border taxation treaties only allow countries to impose taxes on businesses with a permanent presence in their borders. This allows plenty of booking of revenues or profits offshore, effectively eliminating the taxman.
The signing of the Bretton Woods Agreements in July 1944. The Bretton Woods era and the Marshall Plan set the stage for the post-Second World War economic order. Getty Images
European countries have been embroiled in a tariff war with the US over their attempts to impose Digital Sales Taxes on companies. Washington believes these discriminate against the mighty US presence in the sector.
Abandoning this approach would not have any great cost for the Europeans, as the digital taxes imposed so far have not raised much revenue for governments. In a report last week, the Centre for European Reform said “a deal broadly around the current US proposal is a realistic possibility and is in the EU’s interest”.
The direction of travel is moving to a burden-sharing ethos by taking from privately held wealth to the governments.
A study by Emmanuel Saez and Gabriel Zucman, who work at University of California in Berkeley, calls on companies to pay 0.2 per cent of stock market valuation in taxes. "As the G20 stock market capitalisation is around $90tn, the tax would raise approximately $180 billion each year," their report said. That is, of course, puny compared to the $2tn infrastructure proposal Mr Biden is pushing in the US alone.
French economist Thomas Piketty has called for a historic set of payments between colonial exploiters and the developed countries.. Alamy
The direction of travel is moving to a burden-sharing ethos by taking from privately held wealth to the governments
Thomas Piketty, the leftist French economist, asks why not also look at making a historic set of payments between colonial exploiters and the developed countries. This healing gesture would chime with those who have protested outside institutions and businesses with ties to slavery and other global ills.
The godfather of "social tax justice" sees much greater challenges ahead. He sees the benefits of tax reforms accruing in developed countries and cutting out the developing nations. Using a case study of Haiti, Mr Piketty wants Paris to hand over 300 per cent of that country’s GDP, or $30bn. Such a sum is one per cent of French public debt but would make a massive difference to the stricken Caribbean country’s outlook.
He argues that inequality of wealth and poverty must be addressed on an international basis and within countries.
Government spending is a means of intervening against these trends. By internationalising the issue, Washington would give new respectability to a much greater rebalancing of the global wealth scales.
Damien McElroy is the London bureau chief at The National
First Test: New Zealand 30 British & Irish Lions 15
Second Test: New Zealand 21 British & Irish Lions 24
Third Test: New Zealand 15 British & Irish Lions 15
Rooney's club record
At Everton Appearances: 77; Goals: 17
At Manchester United Appearances: 559; Goals: 253
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
Specs
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The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
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COMPANY PROFILE
Name: Grubtech
Founders: Mohamed Al Fayed and Mohammed Hammedi
Launched: October 2019
Employees: 50
Financing stage: Seed round (raised $2 million)
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How to turn your property into a holiday home
Ensure decoration and styling – and portal photography – quality is high to achieve maximum rates.
Research equivalent Airbnb homes in your location to ensure competitiveness.
Post on all relevant platforms to reach the widest audience; whether you let personally or via an agency know your potential guest profile – aiming for the wrong demographic may leave your property empty.
Factor in costs when working out if holiday letting is beneficial. The annual DCTM fee runs from Dh370 for a one-bedroom flat to Dh1,200. Tourism tax is Dh10-15 per bedroom, per night.
Check your management company has a physical office, a valid DTCM licence and is licencing your property and paying tourism taxes. For transparency, regularly view your booking calendar.
While the taste of beans and freshness of roast is paramount to the specialty coffee scene, so is sustainability and workers’ rights.
The bulk of genuine specialty coffee companies aim to improve on these elements in every stage of production via direct relationships with farmers. For instance, Mokha 1450 on Al Wasl Road strives to work predominantly with women-owned and -operated coffee organisations, including female farmers in the Sabree mountains of Yemen.
Because, as the boutique’s owner, Garfield Kerr, points out: “women represent over 90 per cent of the coffee value chain, but are woefully underrepresented in less than 10 per cent of ownership and management throughout the global coffee industry.”
One of the UAE’s largest suppliers of green (meaning not-yet-roasted) beans, Raw Coffee, is a founding member of the Partnership of Gender Equity, which aims to empower female coffee farmers and harvesters.
Also, globally, many companies have found the perfect way to recycle old coffee grounds: they create the perfect fertile soil in which to grow mushrooms.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Hotel Data Cloud profile
Date started: June 2016
Founders: Gregor Amon and Kevin Czok
Based: Dubai
Sector: Travel Tech
Size: 10 employees
Funding: $350,000 (Dh1.3 million)
Investors: five angel investors (undisclosed except for Amar Shubar)
