This week’s news stories include: The government sells £1.1bn NatWest stake, Ryanair reports record loss, Tesla will no longer accept bitcoin, Amazon wins legal battle over tax bill, Delta Air Lines requires new hires to be vaccinated, and more.
Legally Possible’s top news story of the week: Amazon Wins Appeal Over Tax Bill
1. TESLA NO LONGER TO ACCEPT BITCOIN
Elon Musk announced in March that Tesla would accept Bitcoin as payment for its vehicles, which saw Bitcoin rise by 5%. However, Musk announced on Wednesday on Twitter that Tesla has “suspended vehicle purchases using bitcoin,” out of concern over “rapidly increasing use of fossil fuels for bitcoin mining.” The price of bitcoin dropped about 5% in the first few minutes after Musk’s announcement.
Tesla bought £1 billion worth of Bitcoin in February, driving a roughly 20% surge in the world’s most widely held cryptocurrency.
THOUGHTS AND IMPLICATIONS
Chris Weston, head of research at broker Pepperstone in Melbourne, said Musk’s reaction was a ‘blow’ to bitcoin but an acknowledgement of the currency’s carbon footprint.
Some crypto experts believed that this was always an unstable choice for Tesla, and could deter other companies from following suit. Some of the reasons included: Hourly price fluctuations make it extremely volatile, customers are charged a network fee to use or withdraw the currency, which made it unsustainable as a form of payment, and digital wallet regulation has always remained a ‘grey area’.
Musk has been a fan of other cryptocurrencies, making tweets this year that have made the digital currency dogecoin well known. Musk said on Sunday that his commercial rocket company SpaceX will be accepting the meme-inspired cryptocurrency as payment to launch a lunar mission next year.
You can read more about this news story in a previous weekly news roundup here.
Image: Artur Widak | NurPhoto | Getty Images
⭐ 2. AMAZON WINS APPEAL OVER TAX BILL ⭐
My top news story of the week!
Amazon has won a legal battle against the EU over allegations that the US technology company received €250m in “illegal state aid” tax benefits from Luxembourg.
This overturns the decision in 2017 from the European Commission that had ordered Amazon to pay €250m (£215m) in back taxes to Luxembourg. At the time of this decision, it was believed that Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules, which is illegal under EU state aid rules.
The general court has said that there was not enough evidence to prove that Amazon had been awarded a special tax deal by Luxembourg in 2006. You can find the complete ruling here. It is the second time that the general court has overturned a multinational tax avoidance ruling by Vestager.
Amazon said on Wednesday that it welcomed the decision, and said it had a “longstanding position that we followed all applicable laws and that Amazon received no special treatment”.
THOUGHTS AND IMPLICATIONS
This ruling can be seen as a blow to the EU’s fight against “sweetheart deals” which essentially allow big multinational tech companies to avoid hundreds of millions of euros in tax in other member states. In July last year, Europe’s second-top court rejected an EU order that Apple had to pay 13 billion euros ($11.8bn) in Irish back taxes. The Commission however is appealing that ruling – strongly suggesting that it will follow the same process with the Amazon ruling.
The European Commission are thinking of ways on how to better combat what is described as ‘unfair market competition’, and are debating two legislative proposals that could bring about vast changes. The aim is to enforce remedies that will lead to genuine practical changes, rather than seeking to constantly fine those that breach the rules.
Just this month it was revealed that Amazon paid no corporation tax in Luxembourg last year, despite collecting record sales income of €44bn in its holding company in the Grand Duchy. The tech giant insists, however, it pays all the tax it is required to pay. They also argue that they have invested over €75 billion across Europe over the past 10 years and have created thousands of jobs.
Photograph: Bloomberg/Getty Images
3. MALAYSIA’S 1MDB SUES BANKS
The now-defunct 1MDB and a former unit filed a combined 22 civil suits against entities and individuals for various alleged wrongdoings, including fraud and conspiracy to defraud the fund. 1MDB alleges all parties unlawfully enriched themselves during the scandal.
THOUGHTS AND IMPLICATIONS
The latest effort comes as a Malaysian court is hearing an appeal by ex-Prime Minister Najib Razak to overturn his conviction and 12-year jail sentence linked to the 1MDB scandal that brought down his government in 2018.
Najib, and the fugitive financier Jho Low and his family are among individuals named in the civil suit. Jho Low, whom is believed to have orchestrated the fraud, has previously professed his innocence.
Photograph: Olivia Harris/Reuters
4. GOVERNMENT SELLS £1.1BN NATWEST STAKE
The UK government will cut its stake in NatWest by £1.1bn, edging it closer to a full return to private ownership. This is the second time it has cut its stake in two months, and the fourth since 2015.
This will bring the government’s stake in NatWest, previously known as Royal Bank of Scotland (RBS), to around 54.8%, down 5% from 59.8%.
It has been 13 years since the government bailed out RBS at the height of the 2008 financial crisis which brought it under state control, injecting £45bn to keep the bank afloat in order to prevent an even worse meltdown in the banking system.
Alison Rose, chief executive of the bank, said: “HM Treasury’s share sale represents another important step in returning NatWest to private ownership. It also reaffirms the strength of our investment case – a bank that champions the potential of people, families and businesses to build long-term value and drive sustainable returns for our shareholders.”
2020 saw the UK face a record £303 billion deficit driven by the coronavirus response, which explains the push to sell down the government stake.
Photograph: Phil Noble/Reuters
5. RYANAIR REPORTS RECORD LOSS
Ryanair has reported a record loss of £701 million, the biggest loss in the company’s 35-year history, as a result of the travel restrictions caused by the Covid-19 pandemic.
The £701m loss follows a €1bn profit a year earlier, after passenger numbers plunged 81% in what it said was its “most challenging” year to date. However, the company remains hopeful and may even break even this year, in the absence of further disruptions and restrictions. The vaccine rollout is expected to help airlines recover.
Ryanair expects traffic to recover as governments begin to lift international travel restrictions, with forecasts for around 80 million to 120 million passengers during the current financial year. Bookings trebled since it was announced that travel restrictions in the UK were set to be eased on 17th May.
Read more about the new traffic light system of rules that the government have put into place regarding travel in a previous weekly news roundup here.
Photo: Getty Images
6. DELTA AIR LINES REQUIRES VACCINE
Delta Air Lines, one of the major US airlines, will require new employees to be vaccinated against covid-19 to protect other employees and passengers as travel recovers from last year’s lows during the worst of the pandemic.
However, they will not impose the same requirement on current employees, 60% whom are already vaccinated, but will be “encouraged” to get vaccinated instead, according to Delta CEO Ed Bastian. Although, employees who choose not to be vaccinated may be banned from working on international flights.
This contrasts with other US airlines who do not require their employees to be vaccinated. American Airlines said it gives vaccinated employees an extra vacation day and a $50 gift card, which act as an encouragement and an incentive to receive the vaccine, rather than it being a requirement. A spokesman for Southwest Airlines said the carrier is encouraging employees to get vaccinated but also has not made it a requirement.
THOUGHTS AND IMPLICATIONS
This decision by Delta has created many concerns, such as whether such a policy could create stigma against those unwilling to get the vaccine, and whether this could constitute discrimination.
However, employers requiring their staff to be vaccinated is perfectly legal, and can bar them from the office if they refuse to get jabbed, according to the Equal Employment Opportunity Commission (EEOC), a US employment federal agency. But there are two exemptions companies must allow for, according to the EEOC: a disability or religious reasons.
It is likely that many more companies will require their new, and even existing, employees to be vaccinated, as more data comes to light that widespread vaccination is the best way to protect against cross border infection, and could thus prevent future travel and lockdown restrictions as a result of any more waves.
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