Charlotte Street Partners

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Higgs boson blues

Written by Maria Julia Pieraccioni, associate 
Edited by David Gaffney, partner
9 April 2021

Good morning,

A decade after the discovery of the Higgs boson, a particle that permeates other particles with mass, physics are enjoying another moment célèbre. This week, scientists at the Fermi National Accelerator Laboratory celebrated an extraordinary achievement. Chris Polly, a physicist at the Fermilab, and his team were able to prove that the muon, a particle first discovered 20 years ago, is set to break the laws that govern physics and describe the known universe.

The novelty and excitement of such a muonic revelation were overshadowed mid-week by President Biden’s proposal to coordinate global corporate taxation. The Financial Times reported on Thursday that Biden’s administration is proposing a new global corporate tax system in which multinational corporations would be required to pay a national tax on sales in each country in which they make a profit. This plan was detailed in a series of documents sent to 135 countries at the OECD-led international taxation negotiation.

In a case of double jeopardy, the American president’s proposal misses that many European states—from France to Italy to Spain—have their own independent “digital” taxes, aimed predominantly at US tech giants. Several countries have called for a European-wide legislation to curb tech giants’ tax avoidance and profit-shifting habits, but as we well know, fiscal or legislative unity is not quite Europe’s forte.

The desire to curb the worst excesses of tech giants is hardly a novelty. Early noise in Europe started in the midst of the 2008 recession, when the Republic of Ireland enticed tech giants such as Facebook with low corporate taxes to relocate headquarters. President Macron continues to champion the role of the state in limiting tech companies’ market power but there is a sense in which Joe Biden;s intervention has legitimised and given succour to an effort that has sometimes been perceived as  anti-capitalist-style, Chinese intimidation politics, or whining about the world being injuste.

Biden’s plan has been described as “seismic”, with the potential to dramatically shift the concept of tax sovereignty. If successful it could recuperate more than $300 billion each year. Perhaps equally interestingly, it is an uncharacteristic move for an American president. The US is historically, politically and culturally tax-averse, and even hosts some homegrown corporate tax havens, from Dakota to Wyoming, to its most infamous in Delaware.

The saying goes, “if you can’t beat ’em, join ’em”. This may very well be a case set to break the laws that govern politics. 

News

The Treasury has released two text messages sent by chancellor Rishi Sunak to former prime minister David Cameron in a bid to demonstrate there was no special treatment given to Greensill Capital as it attempted to access the Bank of England’s Covid loan scheme. Opposition politicians have questioned whether the chancellor may have broken the ministerial code. (£)

The Department for Transport has said a watchlist will be drawn up to monitor the countries in the government’s plan to allow foreign holidays from 17 May. The new proposal includes a traffic light system for foreign destinations, which will require travellers to comply with different rules based on the country they visit.

According to a Holyrood election poll conducted by Savanta ComRes for The Scotsman newspaper, the SNP is set to miss out on a majority in the Scottish parliament by a single seat. It also found that 49% of Scots would vote for the SNP, but that Alex Salmond’s Alba party would take vital votes from the party. (£)

Business and economy

Liberty Steel’s founder Sanjeev Gupta penned an emotional appeal to creditors,suggesting their “cavalier behaviour” may threaten thousands of British jobs. Gupta is billions of pounds in debt, after the collapse of his main lender, Greensill Capital. (£)

The European Scrutiny Committee has concluded that there are “persistent and fundamental” differences between the UK and the EU over the Northern Ireland Brexit deal. The biggest concern for the committee was the lack of clarity on the extent to which EU subsidy rules will apply to UK businesses, which might impact their willingness to accept UK subsidies.

Columns of note

Alibaba CEO and co-founder Jack Ma’s disappearance from the public eye has fuelled more speculation on the Chinese government’s increasing grip on big tech. Alibaba, Pinduoduo and Tencent, the three largest Chinese tech companies, have added $1.2trn to their combined market capitalisation since 2016. Yet, in recent weeks their stock prices have experienced a steady fall. Why? This piece in The Economist posits that China’s central government is essentially operating a hostile takeover, by rewriting the tech industry’s regulation to allow for more overt state control on data and the firms’ assets.

We are often too prone to look for similarities in recurrent events rather than their differences, according to Larry Elliott in The Guardian, who writes that the Covid-19 pandemic sets itself starkly apart from the 2008 housing crisis-led recession. Governments worldwide seem to have shifted, embracing deficits and promising higher spending. This is a noticeable departure from states’ modus operandi in the past decade, influenced by “small states, low taxes, and balanced budgets”. The increasing size of the state, and its potential for a successful economic recovery, leads to doubts on the effectiveness of the draconian economic policies implemented more than a decade ago.

Cartoon source: The New Yorker

Markets

What happened yesterday?

Trading was unaffected by news of President Biden’s proposals for an international corporate tax. The UK’s FTSE 100 closed in positive territory yesterday, ending the day up 0.8%, while its mid-size counterpart, the FTSE 250 index closed up 0.4%. The Europe’s Stoxx 600 index closed the day up 0.6%.

Across the Atlantic, investors had an eye on the Federal Reserve’s role in curbing or unleashing inflation. The Fed maintained a steady 1.62% yield on the 10-year Treasury bond, lower for the first time in 14 months. In response, the S&P 500 closed the day 0.4% up, while the Nasdaq Composite closed at one per cent higher than the day before.

What’s happening today?

AGMs

Rio Tinto

EGMs

Kcell Regs

GMs

On-line Block

Orient Telecom.

Final dividend payment date

Idox Group

Scot.amer.inv.

Interim dividend payment date

BMO Managed Portfolio Income Trust

Dunelm

Galliford Try

Gore Street En.

Grit Real Est.

Ind.inv.tst.

Morses Club

Nb Global

Palace Capital

Redrow

Ricardo

Stand Life Uk

Quarterly payment date

Apha Real

Regional Real

Special dividend payment date

Sylvania Pl

UK economic announcements

(08:30) Halifax House Price Index

Int. economic announcements

(07:00) Industrial Production (GER)

(07:00) Current Account (GER)

(07:00) Industrial Production (US)

(08:00) Balance of Trade (GER)

(13:30) Producer Price Index (US)

(15:00) Wholesales Inventories (US)

Source: Financial Times

did you know

In 1997, astronaut John Grunsfeld called a car maintenance talk radio show from the Mir Space Station to complain about problems he was having with the engine. [Source: QI Twitter]

Parliamentary highlights

House of Commons

The House of Commons is in recess and will next sit on 13 April

House of Lords 

The House of Lords is in recess and will next sit on 12 April

Scottish Parliament 

The Scottish parliament is in recess ahead of the election on 6 May

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