9.29.14: Tax Evaders Pay, Consumers Spend
Today and Tomorrow in Business
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The European Union's antitrust arm is set to reveal tomorrow why it suspects Ireland gave Apple Inc. a cozy deal -- not to mention an unfair advantage -- on corporate taxes that could violate the EU's state-aid prohibitions. Apple may have to pay back taxes. The EU this week also plans to release preliminary findings on whether Fiat Finance & Trade got a sweet deal from Luxembourg. Italian prosecutors are investigating past tax filings of Prada SpA's top executives, we learned today. Next up: Starbucks Corp.’s tax deals with the Netherlands. Note to chief financial officers: In case you hadn't noticed, a global crackdown on corporate tax-avoidance strategies, especially transfer pricing, is underway.
Where the Stores Are
Some financial-industry experts wondered why Wal-Mart Stores Inc. would want to offer low-fee checking accounts with no minimum balance and no overdraft fees. Turns out the move is a natural for the retail giant, FiveThirtyEight reports, once you consider that its stores are located where much of the U.S.'s unbanked population lives. Bank fees for out-of-network ATM withdrawals and overdrafts, meanwhile, are at record highs, Bankrate.com reports.
Jeffrey Katzenberg is again weighing a sale of DreamWorks Animation SKG Inc., after an attempt to build the film studio into a mini-Walt Disney Co. was rocked by uneven box-office results. One possible buyer is Masayoshi Son, who heads up Japan's SoftBank Corp. and is one of the more intriguing corporate leaders of our day. The acquisitive Son’s SoftBank already controls Sprint Corp., the third-largest U.S. mobile operator, and is looking for more deals. SoftBank can afford it: Its 30 percent stake in Alibaba Group Holding Ltd. is now worth more than $70 billion.
Over a working life, the typical college grad will earn $1.19 million, more than twice that of a typical high school grad, a new Brookings Institution study shows. Not all college degrees are the same, and what you study matters far more than where you study it. The report's interactive graphic could help kids decide on a major, persuade you to get that master's degree, or convince us that our national priorities are misplaced: The earnings of an early-childhood educator are about the same as a high-schooler with no college. Worse, median salaries of late-career math and science teachers are less than those of high-school grads their age.
Wondering why real yields on short-term Treasury bills have dipped below zero, meaning that investors are willing to pay the U.S. to hold their cash? The Federal Reserve is testing demand among some 100 money-market funds for its reverse-repo program, the tool the Fed will use to drain the banking system of excess cash and tighten policy, the FT reports. Because the Fed is capping its facility at $300 billion (the market had expected a higher cap), and regulators are discouraging banks from over-leveraging by borrowing in the repo market, money-market funds have had to scramble to buy Treasury bills to place their cash somewhere.
All Cylinders But One
Consumer spending in the U.S. accelerated in August as further job gains encouraged households to loosen their purse strings. Purchases increased 0.5 percent last month, beating forecasts. The U.S. economy appears to be firing on all cylinders, with the exception of the housing sector. Americans signed fewer contracts in August to purchase previously owned homes. Most investors are betting the Federal Reserve will raise interest rates next year to keep inflation in check, although Monday's data gave little sign of growing price pressures.
And Don't Forget
- Tuesday's reams of economic data include U.S. consumer confidence; the S&P/Case-Shiller home price index; Chicago purchasing managers index; euro-area unemployment and consumer prices; German unemployment; Chinese purchasing managers index; U.K. gross domestic product and housing prices; and Japanese household spending.
- Argentina faces a payment deadline on its government bonds Tuesday.
- Microsoft Corp. Chief Executive Officer Satya Nadella is in India to make a "strategic announcement."
- Walgreen Co. announces earnings.
- The U.S. is set to release details of payments to doctors by pharmaceutical and medical device manufacturers.
Pro-democracy rallies spread spontaneously and mostly peacefully across Hong Kong after office hours Monday. Tens of thousands of people joined the "Umbrella Revolution" (for the umbrellas they carry to deflect pepper spray and the hot sun), which stretched across the island's main shopping and business districts. Supporters inundated protesters with food, water and gear. There appeared to be no central organizing authority, and no serious damage was reported. The protesters are also civic-minded: They bagged their garbage from the night before, even sorting plastic bottles for recycling. The effect on emerging-market stocks hasn't been so benign.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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