Home » Entries posted by DAVID MCHUGH AP Business Writer

Mercedes sketches out all-electric scenario by decade's end

Mercedes sketches out all-electric scenario by decade's end

Luxury carmaker Mercedes-Benz is stepping up its move into electric carsBy DAVID McHUGH AP Business WriterJuly 22, 2021, 9:48 PM• 3 min readShare to FacebookShare to TwitterEmail this articleFRANKFURT, Germany — Daimler AG’s luxury car brand Mercedes-Benz says it is stepping up its transition to electric cars, doubling the share of sales planned by 2025 and sketching out a market scenario in which new car sales would “in essence” be fully electric by the end of the decade.The shift to electric vehicles “is picking up speed — especially in the luxury segment, where Mercedes-Benz belongs,” said Ola Kallenius, CEO of Daimler AG and also head of the Mercedes-Benz division. ”The tipping point is getting closer and we will be ready as markets switch to electric-only by the end of this decade.”The company plans to invest 40 billion euros ($47 billion) in battery-driven vehicles between 2022 and 2080. It says it also intends to work with partners on setting up eight factories producing battery cells — the individual components that are assembled into larger battery packs in different vehicles.The company said Thursday it foresaw half its sales as battery-only or plug-in hybrid cars by 2025, up from a quarter in previous forecasts. In the first six months of this year, such vehicles were 10.3% percent of total sales. The company sold 39,000 battery cars and 121,500 plug-in hybrids, which combine a battery with internal combustion.The company’s statement updating its electric-vehicle strategy portrayed going all-electric as a “market scenario” the company intended to be ready for, rather than as a fixed deadline for abandoning sales of diesel or gasoline cars. The company said it was “getting ready to go electric by the end of the decade, where market conditions allow.”In Europe, the share of electric cars is increasing, heavily driven by regulation and government incentives. Last year, electrically chargeable cars made up 10.5% percent of the European market.Mercedes said Thursday that from 2025 all newly launched vehicle architectures would be electric only, referring to mechanical structures that can be shared among different models.The company has said that its model lineup will be climate neutral by 2039 throughout its chain of production, but had not specified any date for halting sales of internal combustion engines. For now, sales of highly profitable gasoline and diesel sedans and SUVs are providing the cash to invest in the changeover to electric cars.Other carmakers including Volkswagen’s Audi, General Motors and Volvo have also indicated they are moving away from gasoline and diesel engines over the long term.The new Mercedes electric strategy follows proposals from the European Union’s executive commission to tighten limits on carbon dioxide emissions, the primary greenhouse gas blamed by scientists for global warming and climate change. The latest proposal envisions eliminating C02 emissions from cars by 2035. China is also imposing regulations requiring more zero-local emission cars, while the shift to electric cars has moved more slowly in the United States.“We applaud the high ambition” in the EU climate proposals, chief executive Kallenius said, adding that they would help bring about “a new era of CO2-free living, and we are going to do our part.”

Daimler: $4.3 billion quarterly profit despite chip shortage

Daimler: $4.3 billion quarterly profit despite chip shortage

Luxury cars are good business even during the pandemicBy DAVID McHUGH AP Business WriterJuly 21, 2021, 7:02 AM• 3 min readShare to FacebookShare to TwitterEmail this articleFRANKFURT, Germany — German auto maker Daimler reaped strong profits in the second quarter as demand for its Mercedes luxury cars continued to rebound from the depths of the pandemic, generating cash that the company can invest in its shift to electric vehicles.Profit margins reached into double digits for the third quarter in a row at 12.8% thanks to rising sales numbers and vehicles carrying higher profits dominating the sales mix, the Stuttgart-based company said Wednesday. That helped boost the company’s cash pile to 20.9 billion euros ($24.6 billion) at the end of the quarter, from 20.1 billion euros at the start.CEO Ola Kallenius said the company would use its cash to invest in electric car technology and developing a more software-focused company. Those are key fields as the industry is disrupted by regulatory demands for zero-emission cars in the next few years, and by the longer-term development of partly or fully autonomous vehicles as well as software-driven services enabling people to use cars only when they need them, such as through smartphone apps.“Our transformation towards emission-free and software-driven mobility is supported by a high level of free cash flow in the industrial business,” Kallenius said in a statement. “We are implementing our strategy at full speed.”Kallenius said vehicle production was still hampered by the shortage of semiconductor components that has hit the auto industry worldwide. The company said the shortage would continue to affect the business in the second half of the year.The company is introducing new electric vehicles and has said it aims to have a carbon-dioxide neutral lineup by 2039 although it hasn’t specified a date for exiting production of internal combustion vehicles — which are generating the profits for the transition to zero local emission vehicles in any case. The company is set to overhaul its strategy for Mercedes-Benz on Thursday.The update comes in the wake of newly ambitious targets proposed by the European Union’s executive commission to reduce emissions of carbon dioxide, the main greenhouse gas blamed by scientists for global warming and climate change. The commission called for a 100% reduction in CO2 emissions from cars by 2035, meaning a de facto end to gasoline and diesel engines in Europe.The company plans to spin off its truck division later this year, in part because cars and trucks are moving toward different technologies, with cars expected to use batteries while long-haul trucks in some cases will rely on hydrogen fuel cells to achieve zero local emission transport in coming years.For the second quarter, Daimler’s net profit came in at 3.7 billion euros, up from a loss of 1.9 billion euros in the April-June period in 2020 when the company had to shut down plants during the early phase of the COVID-19 pandemic. Revenue rose 44% to 43.5 billion euros.

Yellen: Compete on economic strengths, not low tax rates

Yellen: Compete on economic strengths, not low tax rates

U.S. Treasury Secretary Janet Yellen says a proposed global minimum corporate tax would let countries compete on the strength of their economies rather than on who can offer the lowest tax rateBy DAVID McHUGH AP Business WriterJuly 11, 2021, 12:30 PM• 3 min readShare to FacebookShare to TwitterEmail this articleU.S. Treasury Secretary Janet Yellen said Sunday that deterring the use of tax havens will let countries compete on economic fundamentals — instead of by offering ever-lower tax rates that deprive governments of money for infrastructure and education.Yellen spoke after finance ministers from the Group of 20 major economies endorsed a global minimum corporate tax of at least 15%, a measure aimed at putting a floor under tax rates and discouraging companies from using low-rate countries as tax havens.“This deal will end the race to the bottom,” she said at a news conference after the end of the meeting in Venice.“Instead of asking the question: ‘Who can offer the lowest tax rate?,’ it will allow all of our countries to compete on the basis of economic fundamentals – on the skill of our workforces, our capacity to innovate, and the strength of our legal and economic institutions.””And this deal will give our nations the ability to raise the necessary funding for important public goods like infrastructure, R&D, and education.”The global minimum proposal faces political and technical hurdles before it would take effect. Details are to be ironed out in coming weeks at the Organization for Economic Cooperation and Development in Paris, followed by a final endorsement by presidents and prime ministers of the Group of 20 at an Oct. 30-31 meeting in Rome.Countries would then need to legislate the rate into their own laws. The idea is for headquarters countries to tax their companies’ foreign earnings at home if those earnings go untaxed in low-rate countries. That would remove the reason for using complex accounting schemes to move profits to subsidiaries in low-tax nations where the companies may do little or no actual business.The U.S. already has such a tax on overseas profits, but the rate is below the 15% minimum. Congressional Republicans have expressed opposition to President Joe Biden’s proposal to raise the rate on overseas corporate profits to 21% to help pay for infrastructure and investments in clean energy. The Democratic president has only a narrow majority in Congress.Three European Union countries that took part in talks over the minimum tax have refused to endorse the proposal. Ireland, Hungary and Estonia could obstruct adoption in Europe, where tax matters at the EU level require unanimity. Ireland, whose low tax rates are part of its pro-business economic model, has said its 12.5% headline rate is a fair rate.The tax proposal would also give countries the right to tax part of the profits of big global companies that earn money in their jurisdiction but have no physical presence. Examples would include online retailing and digital advertising.Some countries, led by France, have already started imposing such taxes on U.S. tech companies such as Google and Amazon. The U.S. considers such taxes to be unfair trade practices and has threatened retaliation through tariffs on imported goods. Under the tax deal, countries would drop those taxes in favor of a single global approach.

G-20 finance ministers back plan to stop use of tax havens

G-20 finance ministers back plan to stop use of tax havens

The world’s top finance officials have endorsed plans for a global minimum corporate taxBy DAVID McHUGH AP Business WriterJuly 10, 2021, 7:40 PM• 4 min readShare to FacebookShare to TwitterEmail this articleTop finance officials representing most of the world’s economy have backed a sweeping revision of international taxation that includes a 15% global minimum corporate levy to deter big companies from resorting to low-rate tax havens.Finance ministers from the Group of 20 countries endorsed the plan at a meeting Saturday in Venice.U.S. Treasury Secretary Janet Yellen said the proposal would end a “self-defeating international tax competition” in which countries have for years lowered their rates to attract companies. She said that had been “a race that nobody has won. What it has done instead is to deprive us of the resources we need to invest in our people, our workforces, our infrastructure.”The next steps include more work on key details at the Paris-based Organization for Economic Cooperation and Development and then a final decision at the Group of 20 meeting of presidents and prime ministers on Oct. 30-31 in Rome.Implementation, expected as early as 2023, would depend on action at the national level. Countries would enact the minimum tax requirement into their own laws. Other parts could require a formal treaty. The draft proposal was approved July 1 in talks among more than 130 countries convened by the OECD.Italy hosted the finance minister’s meeting in Venice because it holds the rotating chair of the G-20, which makes up more than 80% of the world economy. The event also attracted around 1,000 protesters under the banner “We Are The Tide,” an umbrella group of environmental and social justice activists, including opponents of large cruise ships and the hordes of tourists they bring to the lagoon city. A small group scuffled Saturday with police after breaking away from an approved demonstration area.The U.S. already has a minimum tax on overseas earnings, but President Joe Biden has proposed roughly doubling the rate to 21%, which would more than comply with the proposed global minimum. Raising the rate is part of a broader proposal to fund Biden’s jobs and infrastructure plan by raising the domestic corporate tax rate to 28% from 21%.Yellen said she was “very optimistic” that Biden’s infrastructure and tax legislation “will include what we need for the United States to come into compliance” with the minimum tax proposal.Republicans in the Congress have expressed opposition to the measure. Rep. Kevin Brady of Texas, the top Republican on the tax-writing Ways and Means Committee, has blasted the OECD deal, saying, “This is an economic surrender to China, Europe and the world that Congress will reject.”The international tax proposal aims to deter the world’s biggest firms from using accounting and legal schemes to shift their profits to countries where little or no tax is due — and where the company may do little or no actual business. Under the minimum, companies that escape taxes abroad would pay them at home. That would eliminate incentives for using tax havens or for setting them up.From 2000-2018, U.S. companies booked half of all foreign profits in seven low-tax jurisdictions: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland.A second part of the tax plan is to permit countries to tax a portion of the profits of companies that earn profits without a physical presence, such as through online retailing or digital advertising. That part arose after France, followed by other countries, imposed a digital service tax on U.S. tech giants such as Amazon and Google. The U.S. government regards those national taxes as unfair trade practices and is holding out the threat of retaliation against those countries’ imports into the U.S. through higher import taxes.Under the tax deal, those countries would have to drop or refrain from national taxes in favor of a single global approach, in theory ending the trade disputes with the U.S. U.S. tech companies would then face only the one tax regime, instead of a multitude of different national digital taxes.———McHugh reported from Frankfurt, Germany.

EXPLAINER: Deterring tax avoidance by global companies

EXPLAINER: Deterring tax avoidance by global companies

Negotiators from 131 countries have agreed on a major overhaul of how the world’s biggest multinational companies are taxed. It’s an effort to deter complex international avoidance schemes that have cost governments billions in revenue.The sweeping proposals are meant to better cope with a world where globalization and an increasingly digital economy mean profits can move easily from one jurisdiction to another. The agreement sealed last week in global talks in Paris is up for discussion Friday and Saturday among the Group of 20 finance ministers meeting in Venice.The key feature of the complex package is a global minimum corporate tax of at least 15%, following the broad outlines of a proposal from U.S. President Joe Biden.While the tax deal is complex in its details, the idea behind the minimum tax is simple: If a multinational company escapes taxation abroad, it would have to pay the minimum at home.Here’s why it was proposed and how it would work.THE PROBLEM: TAX HAVENS AND THE ‘RACE TO THE BOTTOM’Most countries only tax domestic business income of their multinational companies, on the assumption that the profits of their foreign subsidiaries will be taxed where they are earned.But in today’s economy, profits can easily slide across borders. Earnings often come from intangibles, such as brands, copyrights and patents. Those are easy to move to where taxes are lowest — and some jurisdictions have been only too willing to offer reduced or zero taxation to attract foreign investment and revenue, even if companies do no real business there.As a result, corporate tax rates have fallen in recent years, a phenomenon dubbed a “race to the bottom” by U.S. Treasury Secretary Janet Yellen.From 1985 to 2018, the worldwide average corporate statutory tax rate fell from 49% to 24%. From 2000-2018, U.S. companies booked half of all foreign profits in just seven low-tax jurisdictions: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland. The OECD estimates tax avoidance costs anywhere from $100 billion to $240 billion, or from 4% to 10% of global corporate income tax revenues.That’s money governments could use as they see deficits rise from spending on pandemic relief.THE SOLUTION: THE GLOBAL MINIMUM TAXThe talks seek to put a floor under corporate tax rates by having countries legislate a minimum that they would levy on untaxed foreign income. In other words, if Company X headquartered in Country Y paid no or little tax on profits in Country Z, Country Y would tax those profits at home up to the minimum rate.That would remove the reason for using a tax haven, or for setting one up. Biden has proposed a 15% floor for the global talks, though it could be higher.ANOTHER PROBLEM: TAXING ‘DIGITAL’ COMPANIESAnother focus is what to do about companies that make profits in countries where they have no physical presence. That could be through digital advertising or online retail. Countries led by France have started imposing unilateral “digital” taxes that hit the biggest U.S. tech companies such as Google, Amazon and Facebook. The U.S. calls those unfair trade practices, and has threatened retaliation through import taxes.THE SOLUTION: ALLOCATING TAXING RIGHTSBiden’s proposal focuses on the 100 biggest and most profitable multinationals no matter what kind of business they are in, digital or not. Countries could claim the right to tax part of their profits — under a proposal backed by the Group of Seven wealthy democracies, up to 20% of the profits of companies above a profit margin of 10%. Governments would have to roll back their unilateral taxes, defusing the trade disputes with the U.S.BIDEN’S PLANSThe agreement, reached last week in talks convened by the Organization for Economic Cooperation and Development, plays a role in Biden’s push for changes that would, in his view, make the tax system fairer and raise revenue for investments in infrastructure and clean energy. The U.S. already passed a tax on foreign earnings under the Trump administration. But Biden wants to roughly double the Trump era rate to 21%, and also to charge that rate on a country-by-country basis so tax havens can be targeted. The president also seeks to make it more difficult for U.S. companies to merge with foreign firms and avoid U.S. taxes, a process known as inversion.All those changes must be approved by the U.S. Congress, where the Democratic president has only a thin majority. Biden wanted a diplomatic win at the OECD talks so that other countries impose a form of a minimum tax to prevent companies from avoiding their potential tax obligations.WHAT’S NEXT?The agreement reached at the OECD is likely to be endorsed at the finance ministers’ meeting since 20 G-20 countries joined in signing the OECD deal. More technical work would then be needed at the OECD before the G-20 would give its final blessing at a summit of heads of state and government Oct. 30-31 in Rome. Then comes implementation at the national level.The global minimum tax would be voluntary. So countries would have to enact it into their own national tax codes on their own initiative. According to Gabriel Zucman, an economics professor at the University of California at Berkeley who has written extensively on tax havens, the minimum tax will still work even if some countries don’t sign up. He said in a tweet that “the fact remains: If some countries refuse to apply a minimum tax, then other countries will collect the taxes they refuse to collect.”The proposal to tax companies on earnings where they have no physical presence, such as through online businesses, would require countries to sign up to a written international agreement.A key hurdle will be approval in the U.S. Congress. Biden’s tax proposals, which would be needed to comply with the global minimum, face opposition from Republicans, and the Democratic president has only a narrow majority. Rejection by the U.S., the world’s largest economy and home to many of the biggest multinationals, could seriously undermine the global deal. Any parts that are enshrined in a tax treaty would require a two-thirds vote in the U.S. Senate. Still, Biden could argue that passage would relieve U.S. tech companies of burdensome national digital taxes that would have to be withdrawn in favor of the global arrangement — a prospect that may have some bipartisan appeal.———AP Business Writer Josh Boak contributed from Washington, D.C.

Europe's central bank intensifies focus on climate change

Europe's central bank intensifies focus on climate change

The European Central Bank has a new approach to monetary policyBy DAVID McHUGH AP Business WriterJuly 8, 2021, 2:40 PM• 3 min readShare to FacebookShare to TwitterEmail this articleFRANKFURT, Germany — The European Central Bank has adopted a new approach to managing the economy that would tolerate transitory periods of consumer inflation moderately above its 2% goal — and take greater account of climate change in its forecasting and stimulus programs.The central bank for the 19 countries that use the euro said it was replacing its previous inflation goal of “below but close to” 2% annual inflation. The new target is described as a “symmetric” 2%.That means it would allow a “transitory period” of above-target inflation. In theory, that would give the bank space to maintain low interest rates and stimulus programs such as bond purchases with newly created money for a longer period of time.ECB President Christine Lagarde said that the new goal would give the bank more room to take “especially forceful and persistent action” in the event of an unexpected economic crisis. Such room to maneuver is especially important when market rates are close to zero, as they are now in many instances. That means the economy could more easily slip into deflation, a crippling downward spiral of prices and falling investment, without decisive central bank intervention.The decision moves the ECB in the same direction as the U.S. Federal Reserve, which shifted to average inflation targeting last year that could allow inflation moderately above 2% for some time. The ECB goal is not as aggressive as the Fed’s, since it would “not actively aim to run inflation above target to make up for previous shortfall,” said Andrew Kenningham, chief Europe economist at Capital Economics.“It would have no immediate implications for monetary policy, but in the longer run may imply policy would be looser for longer,” Kenningham said in an emailed research note.In another change, Lagarde said public dialog with citizens had convinced the bank to start counting the rise in house prices in its inflation measures to better represent consumer prices as they are relevant to households. Including owner-occupied housing in the EU’s inflation index would take years, however; therefore the bank said it plans to use initial estimates of housing costs to supplement its inflation measures.The bank said it would do more to take the impact of climate change into its monetary policy, saying that global warming could have “profound implications” for price stability. It said it would expand its economic models and statistics to better assess the effect that climate change could have on the economy.When purchasing bonds, the bank said it could take into consideration whether the companies issuing those bonds were compliant with EU legislation implementing the 2015 Paris climate change accords. Buying corporate and government bonds is a tool the bank uses to drive down borrowing costs for businesses, households and government budgets. Buying such “green bonds” in effect makes it cheaper to finance projects deemed to lower carbon dioxide emissions, the main greenhouse gas blamed by scientists for global warming climate change.The bank’s mandate established in the basic European Union treaty is to pursue price stability. Once that is achieved, it can pursue other goals consistent with the EU’s economic policies.The new strategy will be applied starting with the next ECB policy meeting meeting on July 22.

EXPLAINER: Deterring tax avoidance by global companies

EXPLAINER: Deterring tax avoidance by global companies

Negotiators from 130 countries have agreed on a major overhaul of how the world’s biggest companies are taxed in an effort to deter international avoidance schemes that have cost governments billions in revenue.It’s an attempt to better cope with a world where globalization and an increasingly digital economy mean that profits can move easily from one jurisdiction to another. The agreement was sealed Thursday in talks overseen by the Paris-based Organization for Economic Cooperation and Development, though there are still details to work out and hurdles to clear before it can take effect in 2023.The key feature is a global minimum corporate tax of at least 15%, endorsing the broad outlines of a proposal from U.S. President Joe Biden.While the tax deal is complex in its details, the idea behind the minimum tax is simple: if a multinational company escapes taxation abroad, it would have to pay the minimum at home.Here’s why it was proposed and how it would work.THE PROBLEM: TAX HAVENS AND THE ‘RACE TO THE BOTTOM’Most countries only tax domestic business income of their multinational companies, on the assumption that the profits of their foreign subsidiaries will be taxed where they are earned.But in today’s economy, profits can easily slide across borders. Earnings often come from intangibles, such as brands, copyrights and patents. Those are easy to move to where taxes are lowest — and some jurisdictions have been only too willing to offer reduced or zero taxation to attract foreign investment and revenue, even if companies do no real business there.As a result, corporate tax rates have fallen in recent years, a phenomenon dubbed a “race to the bottom” by U.S. Treasury Secretary Janet Yellen.From 1985 to 2018, the worldwide average corporate statutory tax rate fell from 49% to 24%. From 2000-2018, U.S. companies booked half of all foreign profits in just seven low-tax jurisdictions: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland. The OECD estimates tax avoidance costs anywhere from $100 billion to $240 billion, or from 4% to 10% of global corporate income tax revenues.That’s money governments could use as they see deficits rise from spending on pandemic relief.THE SOLUTION: THE GLOBAL MINIMUM TAXThe talks seek to put a floor under corporate tax rates by having countries legislate a minimum that they would levy on untaxed foreign income. In other words, if Company X headquartered in Country Y paid no or little tax on profits in Country Z, Country Y would tax those profits at home up to the minimum rate.That would remove the reason for using a tax haven, or for setting one up. Biden has proposed a 15% floor for the global talks, though it could be higher.ANOTHER PROBLEM: TAXING ‘DIGITAL’ COMPANIESAnother focus is what to do about companies that make profits in countries where they have no physical presence. That could be through digital advertising or online retail. Countries led by France have started imposing unilateral “digital” taxes that hit the biggest U.S. tech companies such as Google, Amazon and Facebook. The U.S. calls those unfair trade practices, and has threatened retaliation through import taxes.THE SOLUTION: ALLOCATING TAXING RIGHTSBiden’s proposal focuses on the 100 biggest and most profitable multinationals no matter what kind of business they are in, digital or not. Countries could claim the right to tax part of their profits — under a proposal backed by the Group of Seven wealthy democracies, up to 20% of the profits of companies above a profit margin of 10%. Governments would have to roll back their unilateral taxes, defusing the trade disputes with the U.S.BIDEN’S PLANSThe OECD talks play a role in Biden’s push for changes that would, in his view, make the tax system fairer and raise revenue for investments in infrastructure and clean energy. The U.S. already passed a tax on foreign earnings under the Trump administration. But Biden wants to roughly double the Trump era rate to 21%, and also to charge that rate on a country-by-country basis so that tax havens can be targeted. The president also seeks to make it more difficult for U.S. companies to merge with foreign firms and avoid U.S. taxes, a process known as inversion.All those changes must be approved by the U.S. Congress, where the Democratic president has only a thin majority. Biden wanted a diplomatic win at the OECD talks so that other countries impose a form of a minimum tax to prevent companies from avoiding their potential tax obligations.WHAT’S NEXT?The agreement reached at the OECD will be taken up by the Group of 20 countries representing 80 percent of the global economy. However, all 20 G-20 countries joined in signing the OECD deal, indicating broad agreement, at least with the outlines. The G-20 could give its final blessing at a summit Oct. 30-31 in Rome.The global minimum tax would be voluntary. So countries would have to enact it into their own national tax codes on their own initiative. The proposal to tax companies on earnings where they have no physical presence, such as through online businesses, would require countries to sign up to a written international agreement.Some countries that took part in the OECD talks did not sign the agreement. They include Ireland and Hungary, both of which have corporate tax rates below the 15% minimum. Ireland’s finance minister, Paschal Donohoe, has said Ireland’s 12.5% rate is “a fair rate.” Donohoe said Thursday after the deal was announced that despite reservations about the rate, he remains “committed to the process” and aims “to find an outcome that Ireland can yet support.”According to Gabriel Zucman, an economics professor at the University of California at Berkeley who has written extensively on tax havens, the minimum tax will still work even if some countries don’t sign up. He said in a tweet that “the fact remains: If some countries refuse to apply a minimum tax, then other countries will collect the taxes they refuse to collect.”———AP Business Writer Josh Boak contributed from Washington, DC.

Page 1 of 212