EU warns it will take unilateral action, if OECD doesn't agree on digital tax
20 January

EU warns it will take unilateral action, if OECD doesn't agree on digital tax


European industrial policy chief Thierry Breton warned that the European Union will take unilateral action, if discussions at the OECD level on taxation for digital companies such as Amazon or Google do not bear fruit. After less than two months on the job, Breton said that European countries, which have previously failed to agree on a union-wide digital tax, were now on the same line. French economy minister Bruno Le Maire said he hoped to resolve a row with the United States over a planned French-only digital tax by Wednesday evening. France decided in July to apply a 3% levy on revenue from digital services earned in France by firms with revenues of more than 25 million euros in France and 750 million euros worldwide, a move that has been supported - but not followed - by the UK and other EU countries. Washington has threatened to impose taxes on key French products in response. Last week, the French government said the United States risked a proliferation of national taxes on tech giants if President Donald Trump rejected new international rules for taxing digital companies at the World Economic Forum. Le Maire wants a U.S. commitment in Davos to the international tax reform and is also pressing Washington to lift a threat of tariffs on French champagne, cheese and luxury handbags made in retaliation for France’s own digital tax. Agreement was close on a universal tax proposal drawn up by the Organisation for Economic Cooperation and Development, Le Maire said, but Washington needed to take the "last step" to reach a compromise.

UK Prime Minister Boris Johnson will call for deeper investment ties between Britain and Africa at a summit for leaders of 21 African countries that comes days before his country will leave the European Union. After securing Britain’s departure from the EU on Jan. 31, Johnson is keen to develop business ties with countries outside the world’s largest trading bloc. The prime minister will also announce an end to British support for thermal coal mining or coal power plants overseas. UK’s exit from the union has generated new attempts for trade and overseas subsidies as data from Britain’s Financial Conduct Authority showed that around a thousand banks, asset managers, payments companies and insurers in the European Union plan to open offices in post-Brexit Britain so they can continue serving UK clients. As a first step, the companies, who until now have been able to serve UK customers directly from their home base, have applied for temporary permission to operate in Britain after Jan. 31 when the UK leaves the bloc. The extent of access to each other’s markets after December is subject to negotiations between the EU and Britain, but even the best-case scenario is unlikely to cover the full range of financial services. Vice-versa, Dublin is a popular location for UK-based insurers and asset managers that need an EU hub, reflecting the strong ties between the two countries. Firms from France, Cyprus and Germany have applied for 170, 165 and 149 temporary permissions respectively.

Oil prices rose to their highest in more than a week after two large crude production bases in Libya began shutting down amid a military blockade, setting the stage for crude flows from the OPEC member to be cut to a trickle. Brent was up by 70 cents, to $65.55 having earlier reached $66 a barrel, the highest since Jan. 9. The West Texas Intermediate was up by 26 cents, at $58.80 a barrel, after rising to $59.73, the highest since Jan. 10. In the latest development in a long-running conflict in Libya, where two rival factions have claimed the right to rule the country for more than five years, the National Oil Corporation (NOC) on Sunday said two big oil fields in the southwest had begun shutting down after forces loyal to the Libyan National Army closed a pipeline.

Central banks will be taking central stage this week anticipating a possible volatile market for currency trading. The Bank of Japan is meeting on Tuesday, Bank of Canada on Wednesday, while the Norges Bank and the European Central Bank (ECB) will announce monetary policy decisions on Thursday. No policy changes are expected but the ECB will launch its strategic review of its monetary policy tools for the first time since 2003 making the interpretation of the macro data crucial for future plans such providing clues on its strategy on trying to achieve its inflation target, currently near to but below 2%. The ECB could raise interest rates in the next couple of years, which would likely benefit the common currency but in the short term Euro traders are focusing more on the German ZEW survey due on Tuesday and flash PMIs from Germany and the Eurozone on Friday. In the UK, money markets price a 70% probability of a cut, a huge jump from 5% only two weeks ago, but given the lack of negative impact on the pound last week and the Brexit deadline in less than two weeks, many pound traders are preparing for a volatile news-driven market.


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