The week’s news included; UK National Insurance to increase by 1.25%, Apple loses first round in Epic Games app store legal dispute, UK haulage industry insolvencies reach 2 year high, Amazon offers to pay for workers’ college tuition amid US labour shortage.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram 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:
- The Fashion Law – Are Sound Trademarks the Next Frontier in Fashion Branding?
- Law Gazette – Financial results: Big law firms saw big gains despite pandemic – but why?
- City A.M. – Wise: Banks will face death by a thousand fintechs if they don’t collaborate with new innovations
1. UK NI INCREASE
The UK government has announced the largest tax rise in a generation in order to fund social care and the NHS. Employers, employees and self-employed people will pay an additional 1.25% for National Insurance from April 2022. This decision reneges on a 2019 campaign promise by Boris Johnson to increase funding for social care without raising any taxes. Despite this, Johnson argues the pressures of the pandemic have required him to change course. The National Insurance increase is expected to raise £12 billion per year. There will also be an overhaul of the social care system from 2023, introducing an £86,000 cap on social care costs for individuals over their lifetime. Those with assets under £20,000 will have their care covered by the state. Subsidies will be introduced for those with assets over £20,000 but under £100,000.
There has been staunch criticism of the choice to raise national insurance. The increase affects almost all people of working age bar those in receipt of their state pension. Many argue the bill for social care is being paid by those who can least afford it. Those on a gross salary of £20,000 will pay an extra £130 a year, while those on £30,000 will pay an additional £255 per year. Those earning under £9,564 a year do not have to pay National Insurance. Once a person earns over £50,000 National Insurance eats a smaller proportion of their total pay hence why National Insurance is considered a regressive tax. Critics have suggested increases in other taxes such as Capital Gains and Income tax should have been explored.
2. BIDEN’S TAX PLAN
President Joe Biden is looking to increase tax rates for America’s wealthiest people and largest corporations to fund his $3.5 trillion social spending plans. A corporate tax rate increase from 21% to between 25% and 28% has been proposed. These would likely accompany changes to prevent aggressive tax avoidance ensuring corporations actually pay taxes. 55 of the US’ s largest profitable companies paid no federal income tax in 2020 despite collectively generating over $40 billion in pre-tax income. These include Nike, HP and Fed-Ex. President Trump had slashed corporate tax from 35% to 21% in 2018, so this rise only goes halfway to pre-2018 levels. Unsurprisingly, corporations are lobbying to block these new tax changes. Businesses argue these increases are huge and would harm customers and employees alike.
Additionally, individuals earning over $452,700 or married couples earning over $509,300 will see an increase in income tax from 37% to 39.6%. Again, this rate was slashed under Trump and Biden seeks to restore it to pre-Trump levels. Those earning over $1 million will now see long-term capital gains and dividends treated as ordinary, taxable income.
While these tax plans are still on the drawing board, Biden’s vision is clear, tax those who can most afford it. Biden’s spending plans will see huge social reform in the US including universal childcare, tuition-free community college, and paid family leave.
3. APPLE SUFFERS LOSS IN EPIC GAMES LAWSUIT
Apple has lost the first round in a crucial case against Fortnite-maker Epic Games. A Californian court has ruled that Apple could not prevent app developers from offering alternative payment systems. Apple has historically obliged developers to use Apple’s App Store system to process in-app payments, incurring commission charges of up to 30%. This injunction could see swathes of developers seek to introduce their own payment systems to avoid the charges. Epic has also sued Google over the same issue.
The silver lining for Apple here is that the court could not conclude that Apple was a monopoly over this issue. The judge stated that Apple enjoyed a “considerable market share” but this did not “show antitrust conduct”. Apple even called this ruling a “resounding win”. Analysts say Epic’s attempt to prove an antitrust breach was “speculative” at best, but the ruling still provides an important step forward in US antitrust law.
4. BUY NOW PAY LATER BATTLE
FinTech and payment firms are ramping up their battle for supremacy in the buy now pay later (BNPL) market. In its attempt to get ahead, Revolut is devising an innovative way to introduce BNPL at checkouts both in person and online. Using Revolut’s bank card, customers will be able to switch on the service and use their card as a BNPL product. Revolut boasts 16 million customers, and this new feature could bring in many more.
Revolut is facing stiff competition from the likes of PayPal and Klarna. Klarna was the pioneer of BNPL as we know it after launching its service in 2005 and it is reaping the benefits. Its latest funding round saw Klarna crowned as Europe’s most valuable fintech at $46 billion. PayPal has recently doubled down on BNPL. Last week, it bought Japanese BNPL firm Paidy for $2.7 billion and has been offering its own service for some time.
These BNPL firms allow customers to spread costs of purchases typically over a few weeks or months without interest. They make money by charging vendors who offer it as a payment method. The BNPL market has quadrupled to £2.7 billion. Payment firm Square also threw its hat into the ring with a $29 billion acquisition of Australian BNPL firm Afterpay.
5. CMA EXTENDS FACEBOOK – GIPHY INVESTIGATION
The UK’s competition regulator has announced that it has extended the deadline of its investigation into Facebook’s purchase of Giphy. The Competition and Markets Authority (CMA) will now have until 1 December 2021 to complete its investigation, after which it has threatened to unwind the £400 million merger. Facebook has lashed out at the regulator, questioning whether they can enforce the action, particularly given their inability to issue an order against Giphy. The regulator provisionally found that the merger harms competition between social media platforms and could limit the quality and choice of GIF images on other social media platforms.
6. 888 BUYS WILLIAM HILL’S EUROPEAN BUSINESS
Gambling company 888 Holdings is to buy William Hill’s European arm in a £2.2 billion deal. 888 is purchasing the business from US casino giant Caesars Entertainment. Caesars had only purchased William Hill’s entire business in April for £2.9 billion but was only interested in the US business so was keen to sell its European arm swiftly. The deal includes all of William Hill’s 1400 UK betting shops and creates a combined giant with over 12,000 employees. It will significantly increase 888’s exposure to online and sports betting, two growing areas. The deal still requires shareholder and regulatory approval.
7. AMAZON PAYS £492M IN UK TAX
Amazon UK paid £492 million in direct tax last year as revenue reached a record £20.63 billion. The pandemic provided a huge boost to sales as more people than ever relied on online shopping. Amazon’s sales soared by over 50% in 2020. As corporation tax is paid on profits, not revenue, Amazon’s tax bills have been notoriously low. Amazon generated £1.8bn more in revenue than 2019 but is only paying £3.8 million more in tax.
The tech giant says it is proud of its contribution to the UK economy. It notes that it has invested £32 billion in the UK since 2010. Furthermore, Amazon employs 55,000 people in the UK. Union leaders however argue working conditions for large proportions of Amazon staff are inadequate, if not unsafe. They argue Amazon’s low tax bill simply adds insult to injury and are calling on ministers to effectively tax big tech.
8. HAULAGE INSOLVENCIES REACH 2 YEAR HIGH
The haulage industry has been battered by both the pandemic and Brexit, causing rising numbers of insolvencies in the industry. In June 2021 alone, 31 haulage firms collapsed, the highest number since January 2019. The driver shortage means the firms are simply unable to make enough deliveries and therefore, income. Multiple lockdowns meant prospective HGV drivers were unable to take their tests meaning there is a huge shortfall of qualified drivers. The job itself is gruelling so many have sought to leave the industry but there simply aren’t enough drivers to replace them.
Brexit has also been a significant factor in the crisis. The additional costs and paperwork involved in doing business with the EU have caused huge logistical problems in the industry. These logistical problems with transporting goods from the UK to the EU or vice versa are adding unsustainable costs for many firms. Additionally, swathes of drivers left for their home countries and recruiting new ones is difficult as HGV drivers are not considered skilled workers under post-Brexit immigration rules.
9. THREE INTRODUCES ROAMING CHARGES
From 23 May 2022, Three Mobile will introduce roaming charges for UK customers to use their allowances in the EU. Customers who take out new or upgraded contracts after 1 October 2021 will face a £2 per day charge to use their allowance of minutes, texts, and data in the EU. Roaming outside the EU will incur a charge of £5 per day. Three had a “Go Roam” feature allowing customers to freely use their packages in 71 countries but this will now end.
Before Brexit, mobile network operators had promised not to reintroduce roaming charges after Brexit. EE, Vodafone and now Three have broken those promises due to increased wholesale costs for UK network providers post -Brexit. UK law caps roaming charges at £45 per month.
10. AMAZON TO PAY FOR COLLEGE TUITION AMID US LABOUR SHORTAGE
Amazon has announced that it will offer to cover the college tuition of all 750,000 of its US frontline workers. A total of $1.2 billion will be invested in the scheme, providing annual funding for workers while they remain at Amazon. The offer also extends to high school diplomas, English language courses and career training. Walmart and Target have also introduced similar schemes.
A labour shortage in the US is driving companies to increase pay and incentives. Even McDonald’s in some states have started hiring 14- and 15-year-olds to fill gaps. In July 2021, job openings in the US hit a record 10.1 million. Although unemployment is still relatively high, US companies are struggling to find workers willing and able to fill their jobs.