PRESS DIGEST – Financial Times – March 22

Financial Times

MULTINATIONALS PAYING ‘MUCH MORE TAX’ TO SETTLE DISPUTES

Revenue & Customs has said that multinationals are paying
“much more tax” to resolve cross-border disputes about transfer
pricing – the way companies divide taxable profits between
countries. Senior Revenue official Melissa Tatton said that
although multinationals now paid more attention to getting
transfer pricing right, the amount of tax raised by the Revenue
through transfer pricing work had risen to 500 million pounds
three years ago and was likely to be much higher this year. The
risks surrounding transfer pricing were highlighted last month
by a 505 million pound settlement between the Treasury and
pharmaceutical group AstraZeneca (AZN.L: ).

DIVIDENDS SET FOR SHARP JUMP

Data provider Markit expects dividend pay-outs by UK
companies to rise by 18 per cent this year as the economy
recovers. In recent weeks, many companies have announced
higher-than-expected dividend payments for last year, raising
hopes over 2010’s pay-outs. According to Dutch bank ING
(ING.AS: ), 47 per cent of the 161 FTSE 350 companies to report
dividends so far this quarter have exceeded analysts’
expectations, with 27 per cent underperforming. Chris Grigg, the
chief executive of property company British Land (BLND.L: ), said
the increased payments were “a signal that profits will
recover”.

RECESSION FAILS TO CURB STAFF EXPENSES

According to research by GlobalExpense, which handles
expenses management for private and public sector organisations,
companies have not been able to significantly cut employee
expenses despite the recession. David Vine, chief executive of
GlobalExpense, said: “Businesses have either made little effort
to tighten expenses polices since the recession, or
spectacularly failed to implement them.” Figures show the
average expense claim last year was for 55.50 pounds, compared
with 57.14 pounds in 2008 and 55.34 pounds in 2007

THINK-TANK ATTACKS LOGIC OF VAT RISE

Centre-right think-tank Policy Exchange said a rise in value
added tax would stem growth and employment, contrary to widely
held views that VAT rises would be the least damaging method of
increasing taxes. Research by the think-thank, favoured by
Conservative party leader David Cameron, found a VAT rise could
distort prices and redirect economic activity inefficiently
because not all goods attract the same level of VAT. The report
concluded that “increasing VAT would be more damaging to
economic growth than increases to the basic rate of income tax.”

OCADO SALES FILLIP BOOSTS FLOAT PLAN

Online retailer Ocado will announce on Monday that it has
increased gross sales by a quarter in the year to Nov. 29, to
427.3 million pounds. Excluding new space and new delivery
areas, underlying sales rose 22 per cent. Ocado, which has
raised more than 350 million pounds from investors since its
inception, plans a one billion pound initial public offering
later this year. The float is expected to be backed by several
blue chip institutional investors. Retailer John Lewis, which
holds a stake of about 30 per cent in Ocado, has already
indicated its support.

BABCOCK SET TO FIRM UP OFFER FOR VT

The board of support services company Babcock International
(BAB.L: ) is said to be firming up the value of a possible bid
approach for rival VT Group (VTG.L: ). The
shipbuilder-turned-outsourcer finally gave in to investor
pressure to agree to discussions with Babcock and a series of
meetings have been held over the last fortnight. The talks were
aimed at establishing how much Babcock could afford to pay and,
according to sources close to the situation, Babcock is now
going over data provided by VT, with a bid expected as early as
next week.

RBS SAYS WORRIES ABOUT ECONOMY REDUCED LOAN DEMAND

Royal Bank of Scotland (RBS.L: ) has defended the 12 billion
pound decline in business lending it reported for 2009, saying
the figure was a result of lessened demand rather than its
unwillingness to lend. RBS Business Banking chairman Peter
Ibbetson cited business’ nervousness, in light of the uncertain
economic outlook, and suggested that lending volumes were
unlikely to recover for some time. The 12 billion pound decline
is in stark contrast to the 18 billion pound increase in lending
ordered by the government, but RBS’ views tally with recent
research by the Forum of Private Business which found that only
four per cent of businesses saw accessing finance as a concern.

BSKYB WARY OF FREEVIEW OFFER

BSkyB (BSY.L: ) will be offered the opportunity to put premium
content, such as football, on Freeview, when broadcasting
regulator Ofcom publishes its pay-TV market review later this
month. The satellite broadcaster is known to be vehemently
opposed to the review’s main thrust, which is expected to compel
it to sell premium content to rivals at prices set by the
regulator, and has described the latest concession as a “sop”.
Sky has said that it is likely to take legal action against
measures contained within the review.

OUTSOURCER CAPITA SEES JOBS SWITCH FROM UK

In an interview with the Financial Times, Capita’s (CPI.L: )
chief operating officer Simon Pillings has predicted a new wave
of UK job losses to offshoring. The interview comes as the
outsourcing group is stepping up its Indian operation and is
likely to be politically sensitive, as Capita has already cut UK
jobs in its own operation and plans further losses. Pillings,
who expects the firm’s Indian headcount to increase by almost a
third over the next 18 months, said Capita has lobbied all the
major political parties and that he expects government
outsourcing to rise regardless of the results of the election.

AIRLINE FLIES EMPTY JETS AS ACTION BITES

The union Unite said that on Sunday, 37 flights by airline
British Airways (BAY.L: ), including some jumbo jets, flew without
any passengers on them. BA said that it did not recognize the
union’s figures but it did admit that a number of flights
including some 747 jumbo jets did not have any passengers
aboard. A BA spokesman said the empty planes “were operating as
cargo flights, which bring us lots of money. And they will come
back with hundreds of passengers on board.” Tony Woodley,
Unite’s joint general secretary, said he was trying to contact
the BA chairman to reach an agreement before the second four-day
stoppage scheduled for next Saturday. Meanwhile, BA said 52 per
cent of staff due to work had turned up at Heathrow while
Gatwick airport saw a 97 per cent turn-out.

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PRESS DIGEST – Financial Times – March 22