Bershidsky on Europe: Facebook's 'Double Irish'

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website
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Here's today's look at some of the top stories on markets and politics in Europe:

Facebook cuts tax rate to near zero

Facebook International Limited, the social network's Irish profit center employing 382 people in Dublin, generated a gross profit of $2.38 billion in the year to December, 2012, and will pay just $2.6 million in corporate tax. The company achieved this by using the scheme known as Double Irish: It paid $2.38 billion to its parent company Facebook Holdings Limited, also Irish-based but not tax-resident in the country, as fees for the use of intellectual property. Both companies are controlled by a Caymans firm. Google and Apple use similar tax structures. There are reasons why Ireland tolerates the scheme: Even if it gets almost no tax payments, it now has a vibrant tech scene. The nation should close the loophole, though: a tax avoidance structure everybody knows about is a bad one. Keeping the "Double Irish" is not worth the unavoidable trouble with other EU member states which would like to tax the internet companies where they make their revenues.

GM to shelve Chevrolet brand in Europe

General Motors intends to stop selling most Chevrolet models in Eastern and Western Europe by the end of 2015, making Opel (Vauxhall in the U.K.) its major European brand. Only "iconic" cars like the Corvette will represent the Chevrolet line in Europe. This is a major break with the previous strategy of branding cheap Korean-produced cars Chevrolet to compete in the lower price segment. It did not work: Chevrolet's EU market share was 1.2 percent in the first 10 months of 2013. Opel is the company's stronger European brand with a 6.8 percent share. GM will imminently take a charge of up to $1 billion because of the strategy change, reflecting past marketing expenses. The move must have taken courage, but it is sometimes necessary to admit mistakes. Daewoo cars bearing the Chevrolet shield were sheep in wolves' clothes, and consumers did not take to them because the attempt to fool them was so clumsy.

German energy prices fallbecause of hurricane

Hurricane Xaver, now battering Northern Europe, has caused German energy prices to drop. Wind energy production increased to record levels, according to the consultancy Energy Brainpool, and the price of electricity with tomorrow delivery dropped 10 percent on the German energy exchange. For certain time slots, the drop is even deeper, up to 53 percent. Germany's painful transition to a "greener" energy sector does have some unexpected rewards. If the power supply is not disrupted, Germany will be partly compensated for any damage caused by Xaver by a few days of extra cheap power.

Deutsche Bank shuts down commodity operations

Deutsche Bank, said to be one of the five biggest players in global commodity trading, said it would cease almost all operations in this sector and only remain involved in precious metals. About 200 people at Deutsche traded in energy, agricultural commodities, industrial metals and dry goods. Some of them will be reassigned and others laid off. The bank's exit from the commodities market follows similar moves by smaller players such as UBS. It is a direct result of heavier regulation: Banks are now required to set aside too much money to cover trading positions for business to remain profitable. The heavy-handed regulation is not likely to do any good long-term: The more big players there are in a market, the more efficient it is.

French producers launch skinless kiwi

A group of agricultural producers in France called Prim'land has launched a revolutionary product: a kiwi that does not have to be peeled. It is a small fruit similar in size to the cherry tomato, and it is smooth-skinned like one, so it can be eaten skin and all. It took Prim'land three years to grow enough of the new variety, developed in New Zealand, to market the fruit as Nergi. The producers plan to make $40 million selling the new kiwi this year. It is hard to believe innovations are still possible in the fruit market, but then the kiwifruit itself is a relatively recent marketing case: The name only dates back to 1959. Previously, the fruit was known as the Chinese gooseberry and the melonette. It only really took off globally after it got the current name.

(Leonid Bershidsky can be reached at

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