The week’s news included; France imposes tech tax, Boohoo appoints Leveson to review practices after supplier scandal, Elon Musk becomes 2nd richest person as wealth grows $7.2bn in a week
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- Legal Cheek – How tech is transforming the legal sector.
- Yahoo Finance – GDPR enforcement must level up to catch big tech, report warns.
- FT – Big Four primed for new audit rules to speed legal push
- BBC News – How green and profitable are e-scooters?
1. FRANCE TECH TAX
France has ordered big tech companies to pay its controversial new digital service tax, despite pressure from the US. The French government had initially delayed the measures while the Organisation for Economic Cooperation and Development (OECD) was negotiating a new international tax framework. Furthermore, the US issued tariffs against the French due to the tax. The tech tax imposes a 3% levy on all revenue earned from digital services in France. The tax will only apply where firms generate over €25 million revenue in France and have global revenue exceeding €750 million. The impetus behind this levy is to ensure big tech companies pay they “fair share” of tax. Although this almost exclusively affects US based tech firms. Many firms channel their profits through low-tax jurisdictions such as Ireland, irrespective of where they generate revenue.
France stated earlier this year that if a new OECD framework was not in place by the end of 2020, it would collect its ‘ tech tax’ in December. OECD members agreed to continue negotiations into mid-2021. France will, however, remove the levy once an OECD agreement is in place.
The OECD is comprised of 140 nations who collaborate to set internationally agreed tax standards. The aim of the group is to tackle socioeconomic issues such as tax evasion, on a global scale. Like many international organisations, its success is based solely on the good will of members and cannot directly enforce its decisions on members without unanimous approval.
2. US STOCK MARKETS HIT NEW HIGHS
US stock markets soared to record highs last week as hopes of a coronavirus vaccine and a fast-economic recovery grow. The Dow Jones stock index surpassed a record 30,000 points, while the S&P 500 also hit a record high. The biggest gainers on the markets included Boeing, Chevron and Disney, all companies who took massive financial hits due to the coronavirus pandemic. Oil prices also rose around 5%.
The rally was also driven by Donald Trump agreeing to allow the formal transfer of power to Joe Biden. Markets across the world saw healthy gains, including in Europe and Asia. Investors and businesses are feeling more confident that life could return to normality in 2021.
3. ARCADIA GROUP ON BRINK OF COLLAPSE
Arcadia Group is to fall into administration putting 13,000 jobs at risk. Sir Philips Green’s retail empire, Arcadia Group, includes Topshop, Burton and Dorothy Perkins. Like the entire high street, Arcadia Group’s brands have been battered by lockdown measures during the pandemic. They have not experienced the boost in sales enjoyed by online competitors such as Asos and Boohoo.
Mike Ashley offered a £50 million loan, but this was nowhere near enough to plug the gap in Arcadia’s finances. There is a £350 million hole in Arcadia’s pension fund alone. The collapse of Arcadia will see liquidation and a subsequent rush to buy Arcadia’s assets & companies. There remains a glimmer of hope that some jobs could be saved. Given the dire state of the high street however, there will undoubtedly be waves of job losses.
4. UK TO INTRODUCE NEW COMPETITION RULES
The UK government will introduce a new regime to prevent big tech firms abusing their market dominance. Google and Facebook are the primary target of the new regime. It will set new requirements and standards covering data usage and competition. Users will have greater choice over the type of advertising they receive, and firms may need to be more transparent about their use of data. A new unit dedicated to big tech will be created within the Competition and Markets Authority (CMA).
The new regime will also provide additional support for media publishers. Online platforms such as Google and Facebook will have more stringent restrictions to prevent unfair terms. Google and Facebook account for 80% of all online advertising in the UK, hence why they are in the CMA’s crosshairs.
5. LIBRA LAUNCH
Facebook’s long-awaited cryptocurrency may launch as soon as January 2021 despite setbacks. Libra will launch a ‘ stable coin’, a cryptocurrency backed by traditional currencies such as the dollar. This will be accompanied by a token that will be pegged to the price of the stable coin. The Libra Association initially planned to launch multiple coins but after a significant backlash from regulators it will move forward more cautiously. Libra is now seeking approval to launch from the Swiss financial regulator, FINMA. This approval could come as early as January 2021, but this is not yet confirmed.
The Libra cryptocurrency will eventually form part of a Facebook payments ecosystem. Users will be able send money to other users via a digital wallet app. Libra will be available on exchanges for conversion to conventional currency. The currency will, however, be tied to bank deposits and government securities so users will not see price volatility as is common with many cryptocurrencies. The idea is to revolutionise access to banking. There is concern that Facebook already wields too much power of user data and additional control of users’ financial transactions through unregulated cryptocurrency poses too much of a risk to users. The Libra Association is based in Switzerland and is led by Facebook and is comprised of 27 members including Uber, Spotify, and Shopify.
6. BOOHOO APPOINTS LEVESON TO REVIEW PRACTICES
Fashion retailer Boohoo has appointed former High Court judge Sir Brian Leveson to review its business practices. This follows Boohoo’s recent scandal where workers at one of its supplier factories were paying workers as little as £3.50 an hour. The scandal tanked Boohoo’s share price and saw its auditor, PwC, step down. Furthermore, Next, Asos and Zalando all removed Boohoo products from their website in response to the news.
Sir Brian Leveson will lead an independent investigation into Boohoo’s supply chain and business practices. The aim is to highlight and address any shortcomings within its business model. Ultimately Boohoo needs to regain the trust of consumers and business partners alike and this inquiry is the first step forward.
Sir Leveson is most famous for leading the ‘ Leveson Inquiry’ into ethics in the British press following the phone hacking scandal.
7. CINEWORLD SECURES LIFELINE
Cineworld secured a $750 million lifeline last week, allowing it to stay afloat. The huge deal will see the chain receive a $450 million debt facility and its $111m revolving credit facility extended until 2024. Its $200m tax rebate will be brought forward and all bank covenants regarding its debt will be waived until 2022.
Cineworld’s package works on the assumption full service can resume by May 2021. A number of blockbuster films have delayed their releases due to the pandemic and this has significantly affected cinemas. All of Cineworld’s sites in the US and UK have been closed since last month due to the restrictions and consequent lack of footfall. Some UK sites will tentatively open from 2 December. Cineworld is the second largest cinema chain in the world after AMC and turned over $4.3 billion last year.
8. SCOTLAND MAKES PERIOD PRODUCTS FREE
Scotland became the first country in the world to make period products free. This is the most significant move anywhere to tackle period poverty. Tampons and sanitary pads are now legally required to be provided by Scottish local authorities to ‘ anyone who needs them.’ Period poverty has been moving to the forefront of the agenda. In the UK, 10% of girls have been unable to afford period products. This has led to numerous girls missing school as a result. The Period Products (Free Provision) (Scotland) Bill legally requires Scottish local authorities to anyone in need, but they have discretion as to how to provide these.
Period products are taxed at 5% in the UK but under EU rules this cannot be lowered. Instead, the government uses tax raised from period products sales to support women’s charities and initiatives. As the UK is leaving the EU it will be free to remove VAT on period products and the government has hinted at doing this.
9. ELON MUSK BECOMES SECOND RICHEST PERSON
Tesla founder Elon Musk has leapfrogged Bill Gates to become the second richest person in the world. Musk’s wealth has grown exponentially this year in a ground-breaking period for Tesla. In 2020 alone, Musk has seen his net wealth soar by $100.3 billion to a huge $128 billion. Only two weeks Musk made his way to the top 3 by overtaking Facebook founder Mark Zuckerberg. Since then his wealth has grown by a further $7.2 billion.
Bill Gates could have been nearer the top spot but has given billions to philanthropic causes. He has given more than $27 billion since 2006 to the Bill and Melinda Gates Foundation. The foundation aims to help fight diseases and lift people in the developing world out of extreme poverty.
10. MOSS BROS LAUNCHES CVA
Moss Bros has launched a Company Voluntary Arrangement (CVA) in an attempt to keep the brand afloat. The CVA will see Moss Bros seek rent reductions on or simply close some of its 125 UK stores. This will also allow it to restructure its finances and settle some debts owed to creditors.
Moss Bros has been acutely affected by the Covid-19 outbreak, more significantly than many high street stores. It primarily sells men’s formal wear and apparel. Coronavirus restrictions have seen strict limitations on formal events such as weddings and introduced remote working en masse. This has decimated Moss Bros’ sales and recovery appears slow. Moss Bros is mulling cutting some of its 1000 workers and sees a CVA as the only way to survive the crisis. Competitor TM Lewin has already closed all of its 66 UK stores with the loss of 600 jobs.