December 6, 2017 nº 1,928 - Vol. 14

"A song without music is a lot like H2 without the O."

Ira Gershwin

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  • Top News

Tax plan crowns a big winner: Trump's industry

After a frenzy of congressional action to rewrite the tax code, salesclerks and chief executives are calculating their gains. Business was treated with the everyone's-a-winner approach that ensures no summer camper goes home without a trophy. Some got special prizes. Cruise lines, craft beer and wine producers (even foreign ones), car dealers, private equity, and oil and gas pipeline managers did particularly well. And perhaps the biggest winner is the industry where President Trump and his son-in-law, Jared Kushner, made their millions: commercial real estate. House and Senate Republicans, in their divergent bills, both offered steeply reduced rates to corporate giants, partnerships and family-owned firms across the board. But when it came time to eliminate special breaks or impose tighter standards, real estate was generally excused from the room. Most businesses were hit with new limits on deductions for interest payments, but not real estate. Most industries lost the ability to defer taxes on the exchange of similar kinds of property, but not real estate. Domestic manufacturers and pharmaceutical companies lost some industry-specific breaks, like the tax credit for so-called orphan drugs, in exchange for lower rates. The real estate industry ended up with an even more generous depreciation timetable, allowing owners to shelter more income. And in a break from previous practice, rental and mortgage-interest income qualifies for a lower tax rate, the kind of special treatment traditionally reserved for long-term capital gains and certain qualified dividends. Writers of the congressional bills promised that their overhaul would simplify the tax code, but the intricacies of the changes create countless opportunities for gamesmanship. Suddenly, there are a dozen different tax rates that apply to different businesses, in different industries, and to different investments. That means opportunities to come out ahead by making deals between these different groups or structuring businesses to take advantage of various provisions. That could lead to a flurry of restructuring and asset shifting that has no purpose other than lowering the tax rate. One business might borrow money to invest in another, or buy equipment and treat it as an expense and then lease it to another company. Ideally, the tax code is meant to encourage businesses to make sound economic decisions, and forgo activities whose sole purpose is to avoid taxes. But the proliferation of different business rates rewards loophole hunting and earnings shifting. The speed with which they're doing this creates a level of ambiguity that will keep tax lawyers and tax professionals busy for 20 years. For some industries, such accounting acrobatics may not be necessary. A Senate provision that is being marketed as an aid to small craft breweries would save money even for the largest beer, wine and liquor producers, whether they are in the United States or abroad. Foreign cruise lines that operate in the United States got a last-minute reprieve from a new tax that was in an earlier version of the Senate bill. Whistle-blowers and their attorneys are happy about a provision specifying that they can collect rewards based on criminal fines. Car dealers escaped the cap on interest deductions that apply to most other businesses. Private equity firms were not able to sidestep that cap, but they held on to most of the carried-interest benefit that allows private equity managers, hedge fund managers and real estate investors to pay a lower rate on much of their income. Firms will have to hold an asset for three years instead of one, but the average hold time is already more than five years. The energy industry also did well. Coal and natural gas would potentially benefit from provisions that undercut their renewable-energy competitors. In a reversal of more than four decades of national policy, the Senate bill would open a pristine 1.5-million-acre expanse of the Arctic National Wildlife Refuge to oil and gas exploration. And at the last minute, the Senate bill gave master limited partnerships, which mainly finance pipelines, the same special tax treatment that REITs have: a lower rate on the income they generate. (Click here)

Supreme Court allows enforcement of revised travel ban

The US Supreme Court on Monday allowed enforcement of the Trump administration's revised travel ban pending further court proceedings. (Click here)

The 1995 law behind president Trump's plan to move the US embassy in Israel to Jerusalem

Every six months for more than two decades, US presidents have had to decide all over again whether to move the US embassy in Israel from Tel Aviv to Jerusalem. Since the Clinton administration, they decided each time to keep the embassy where it is, seeking not to throw a wrench into delicate Middle East peace talks. On Tuesday, however, after signing a waiver putting off the move in June, President Donald Trump informed the Palestinian Authority's President Mahmoud Abbas that he's going to recognize the contested holy city as Israel's capital and begin the process of moving the embassy there. That decision, which experts fear will spark unrest throughout the Arab world, represents the conclusion of a process that began in 1995, with the passage of that year's Jerusalem Embassy Act. The law required the US to move the embassy from Tel Aviv to Jerusalem by a set deadline, but conceded that the move could be put off for six months at a time as long as the President "determines and reports to Congress in advance that such suspension is necessary to protect the national security interests of the United States." The reasons why such a waiver might be needed are not much different today than they were in 1995. In 2017, the potential consequences of recognizing Jerusalem as the capital remain the same: the risk of sparking protests in the Arab world and jeopardizing the standing of the US as a broker in coming peace talks. One thing that's different about 2017's political climate, however, is that there's "a window of opportunity that didn’t exist before," as Israel's ambassador to the US Ron Dermer explained, for the two sides share security concerns about Iran. Whether that view holds true remains to be seen, but peace talks are planned for early 2018.

  • Crumb

1 - Brazil's PagSeguro considers IPO in New York. (Click here)


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  • MiMIC Journal

Will tech firms challenge China's 'open' internet?

China has been smart and ruthless in its control of the internet within its borders. It blocks some foreign sites all together and it censors - heavily - what Chinese are allowed to see. Nonetheless the big idea at China's annual global internet get-together in Wuzhen is openness. There wasn't much openness about the "great firewall" that keeps out Twitter, Facebook, Google and the New York Times to name a few.


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  • Brief News

US to recognize Jerusalem as Israel's capital

Trump will recognize Jerusalem as Israel's capital, senior administration officials have said. But the officials said Trump would not immediately move the US embassy from Tel Aviv to Jerusalem. The news comes ahead of an expected speech by Trump on Wednesday. Arab leaders earlier warned against moving the US embassy in Israel to Jerusalem, with one saying this would be "a flagrant provocation to Muslims". The status of Jerusalem - a holy site for Israelis and Palestinians - is extremely contentious. Israel has always regarded Jerusalem as its capital city, while the Palestinians claim East Jerusalem as the capital of a future Palestinian state. In recognizing Jerusalem as Israel's capital, the US becomes the first country to do so since the foundation of the state in 1948. The issue goes to the heart of Israel's conflict with the Palestinians, who are backed by the rest of the Arab and wider Islamic world. The city is home to key religious sites sacred to Judaism, Islam and Christianity, especially in East Jerusalem. (Click here)

First tax havens blacklist published by EU

The European Union has published its first blacklist of tax havens, naming 17 territories including Saint Lucia, Barbados and South Korea. A "watch list" of 47 countries promising to change their tax rules to meet EU standards has also been issued. The "grey list" includes Hong Kong, Jersey, Bermuda and the Cayman Islands, as well as Switzerland and Turkey. Both lists have been criticized as omitting the most notorious tax havens. EU tax commissioner Pierre Moscovici said the blacklist represented "substantial progress", adding: "Its very existence is an important step forward. But because it is the first EU list, it remains an insufficient response to the scale of tax evasion worldwide." The EU is encouraging member states to take what it calls "defensive actions" against those countries that do not reform their tax systems.

Ireland forced to collect Apple's disputed 13bn euros tax bill

Ireland is to comply with a European Commission order to collect a disputed 13bn euros tax bill from the US firm Apple. The money is now being paid into a blocked separate account, while Ireland appeals the Commission's decision. The Commission ruled last year that Ireland had given Apple illegal state aid by allowing it to pay an effective 1% corporation tax. Ireland was referred to the European Court of Justice after it failed to implement an order to collect the tax. The Irish government says it profoundly disagrees with the Commission's analysis of the case.

Austrian Supreme Court rules in favour of same-sex marriage

Same-sex couples in Austria will be able to legally marry from 2019 after a ruling by the country's top court. Its constitutional court said the current marriage law violated non-discrimination rules. The ruling also allows heterosexual couples to enter a civil partnership. The move will bring the country in line with 15 other European countries. (Click here)

US B-1B bomber in attack drill show of force to North Korea

The US military has flown a B-1B bomber over South Korea as part of a massive joint aerial drill, in a move seen as a warning to the North. The B-1B Lancer plane simulated bombing a military field. The drill is taking place a week after Pyongyang fired what it claimed was a new intercontinental ballistic missile which could hit mainland US. The US has previously deployed bombers as a show of force after North Korean missile or nuclear tests.More than 200 planes and thousands of troops are involved in the Vigilant Ace aerial exercise, which ends on Friday and had been planned before North Korea's latest missile launch.

US Supreme Court questions bias in 'gay wedding cake' case

The US Supreme Court appeared divided after hearing heated arguments in the case of a Colorado baker who refused to make a wedding cake for a gay couple. Baker Jack Phillips turned away David Mullins and Charlie Craig in making such a cake in 2012, saying it was against his Christian belief. A legal battle ensued, with Colorado's court finding that the baker's actions represented unlawful discrimination. The baker says this violates his rights to religious freedom and free speech. Justice Anthony Kennedy, a conservative who sided with liberal judges in the landmark 2015 decision legalizing same-sex marriage, questioned whether the state's civil rights commission ruling against the baker was biased against religion. Justice Kennedy, a strong advocate for free speech rights, added that the ruling had "neither been tolerant nor respectful of Phillips's religious beliefs". But he also raised concerns about whether ruling in favour of the baker would lead to more discrimination against the gay community during the extended 80-minute hearing.

US border arrests at lowest since 1971 - Trump administration

The number of arrests made at the US border has dropped to a 46-year low, according to figures released by the Trump administration. Despite the decline in Border Patrol arrests, officials at Immigration and Customs (ICE) report a significant increase in arrests within the US.

Additional lawsuits filed against opioid manufacturers

Two more lawsuits have been filed against opioid manufacturers and distributors by the state of Montana and a county in Kentucky alleging that the opioid epidemic was part of a business plan, alleging statutory negligence, civil conspiracy, fraud and other complaints.

Obama's shared more tweets than Trump

Twitter has released its most retweeted and "liked" tweets of 2017. Trump, whose posts on the site have become a key part of his communication strategy, hasn't even made the top 10 most retweeted or liked tweets this year. Obama beat his successor with three of the most shared tweets of 2017. The most-liked tweet of the year was from Obama. On the day of clashes at a white supremacist protest in Virginia, Mr Obama posted a photo of himself talking to multi-racial children through a window. Not only was this the most-liked tweet of the year, it was also the second most retweeted post worldwide. In contrast, on the same day - 12 August - President Trump said that "many sides" were at fault for the "hatred, bigotry and violence" that occurred in Charlottesville. The social media platform's most shared tweet of the year was from a 17-year-old Nevada resident who asked US fast food chain Wendy's how many retweets he would need to get a year's worth of free chicken nuggets. Wendy's told Carter Wilkerson he would need to get 18 million. To date, his tweet has been shared over three million times.

UN urges Iraq to reconsider proposed marriage bill that does not set minimum age

Special Representatives of theUN Secretary-General on Sexual Violence in Conflict Pramila Patten and for Children and Armed Conflict Virginia Gamba on Monday urged the Iraqi government to reconsider proposed amendments in the Personal Status Law that do not set a minimum age for legal matrimony.

Spain Supreme Court withdraws arrest warrant for ousted Catalan leaders

Spain's Supreme Court on Tuesday withdrew a European arrest warrant seeking the deportation of Carles Puigdemont, the former President of Catalonia, and four former Catalan officials. The deposed officials fled to Belgium after Spanish courts found the October Catalan independence referendum was unconstitutional and constituted acts of sedition by Catalan officials. Puigdemont has stated he would return to Spain if guaranteed a fair trial. (Click here)

Mueller 'demands Deutsche Bank data'

US special counsel Robert Mueller has ordered Germany's Deutsche Bank to provide records of accounts held by Donald Trump. Mueller issued a subpoena to the bank several weeks ago demanding the transaction data. He is investigating alleged collusion between the Trump presidential campaign and Russia. However, a lawyer for the US president denied the reports. US investigators are said to be demanding information on dealings linked to Trump as part of an investigation into alleged Russian influence in the US presidential election. Deutsche Bank, one of the Trump Organization's major lenders on its real estate projects, said it would not comment on any of its individual clients. (Click here)


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