UK’s Labour moots new company tax plan
Britain's opposition Labour party, tapping into widening public anger over corporate tax avoidance, wants the government to push for new international rules to force companies to report profit and tax payments country-by-country.
Campaigners say the move, which is receiving increased support internationally despite strong opposition from business, will deter companies from shifting profit into tax havens where they have no staff or sales.
Prime Minister David Cameron has said corporate tax avoidance would be discussed at the annual summit of the Group of Eight leading industrial economies, which Britain is hosting in Northern Ireland next month.
He has urged companies to be more transparent but has only proposed voluntary measures.
Companies say country-by-country reporting will impose unreasonable administrative burdens.
But campaigners say firms fear being embarrassed by highlighting how they frequently pay low or no taxes in countries where they have big sales and how they report big profits in tax havens.
The standard could also lead to companies revealing that they earned no money in countries where they told investors they operated profitably.
Tax reform
Coffee chain Starbucks received broad political, media and public criticism in Britain last year after an investigation showed it assured investors the United Kingdom was a profitable market after telling tax authorities its operations lost money.
The European Union agreed earlier this year to force European banks to report profit on a country-by-country basis as part of measures to ensure they hold enough capital.
The US and EU have also agreed measures to force companies in the extractive industries to publish tax and other payments to resource-rich nations, to reduce corruption.
Labour on Sunday issued a new policy document on corporate tax reform which backed forcing companies to publish figures on revenues, profit and taxes in each country that they operate.
Ernst & Young, one of the 'big four' accounting firms which audit most of the big multinational companies, has warned clients that country-by-country reporting may become a global standard unless they come up with an alternative.
Britain's CBI business lobby group has urged businesses to publish "narrative" reports explaining their tax affairs to the public.
A committee of UK lawmakers has accused Google of "unethical behaviour" for avoiding tax by shifting profit from UK sales to an untaxed unit in Bermuda.
Google says it complies with tax rules in every country where it operates.
Cyber experts fear escalation of attacks
Cyber security professionals know a myriad of ways hackers can try to wreak havoc on critical infrastructure or infiltrate corporations to steal or spy, but it is the fear of the unknown that some say keeps them up at night.
US security officials and private sector experts wonder what kinds of time-bombs can be - or have been - embedded by malware into computer networks, just waiting to explode.
Cyber espionage is already "the greatest transfer of wealth in history", National Security Agency Director Keith Alexander, the top US general in charge of cybersecurity, told the Reuters Cybersecurity Summit in Washington this week.
"Disruptive and destructive attacks on our country will get worse," he said. "Mark my words, it will get worse."
Stealing software or money like the $45m lifted from two Middle Eastern banks in a daring global plot revealed this month might pale next to an attack that could, for example, switch off the lights in a major US city.
That was the fear in New Orleans in February when a power outage struck the Super Bowl, the National Football League's championship game, witnessed by tens of millions of viewers. The outage was blamed on an electrical relay device and not a cyber attack.
"The known unknown is what I worry about," US Secretary of Homeland Security Janet Napolitano told the Summit.
"For example, we don't have the identity of all the adversaries who are trying to either commit crimes or acts over the cyber networks. The things we know about, we can deal with. It's the known unknown," she added.
The military is a big target, something that Rear Admiral William Leigher, who is in charge of "information dominance" with the US Navy, takes on board.
"Our networks see thousands of intrusion attempts every day...staying up with the threat, making sure that our defensive systems are up to par is probably one of the things that gets most of my attention," Leigher said.
To be sure, the United States has not suffered the kind of destructive cyber attack that damaged some 30 000 computers at Saudi Arabia's oil company, Saudi Aramco, last year. But experts said they were worried about the increasingly sophisticated cyber capabilities of countries such as China, Russia and Iran.
"This new growing trend of nation states engaged in cyber attacks that are designed to be destructive to parts of the US economy is very, very concerning," said Mike Rogers, chairperson of the US House Intelligence Committee.
"The ferociousness of these attacks is increasing and it's something that we better get a handle on," Rogers added.
Dmitri Alperovitch, co-founder of Crowdstrike, a security technology specialist firm that works with governments and private companies, said he is most concerned about Iran, particularly if there is a spike in tensions in the Middle East.
He is watching the attacks that have taken down the websites of more than a dozen US banks in the past nine months. There are no signs that hackers have managed to destroy or modify crucial financial data, but that is the fear.
"Attacks that focus on modifying data in the stealth way, sabotage, integrity attacks - those are the ones that are most insidious and those are the ones we really should worry about," Alperovitch said.
The migration of ever more elements of the economy to the digital world opens the door to malfeasance.
"We keep hooking more and more stuff up to the internet, so the attack surface keeps growing," said Michael Daniel, cyber security policy coordinator at the White House.
"Pretty soon your coffee maker and your refrigerator is going to be an attack vector because it's going to be hooked up to the internet."
More Than 1,000 Unaccompanied Diplomats Face Threats, PTSD As Obama Calls For Increased Embassy Security
U.S. Ambassador Gerald Feierstein was thousands of miles (km) away at the U.S. Embassy in Sanaa, without his wife and family on what is called an "unaccompanied" posting.
He is one of more than a thousand U.S. diplomats on such tours of duty in danger spots around the world, part of a trend that is changing the definition of being a diplomat.
Over time, his wife has learned to stay calm when the phone rings unexpectedly at her home outside Washington. For nearly five years, she has not lived in the same country as her husband, a career diplomat who specializes in the Middle East and South Asia.
After militants stormed the U.S. Embassy in Yemen last September, breaking through to the inner building and ripping plaques and lettering from the walls, Feierstein called his wife to tell her he was OK.
He had also called her a few years earlier when he was based in Islamabad, Pakistan, and a bomb went off near his residence. He was unhurt in that attack.
But when Al Qaeda in the Arabian Peninsula considered by U.S. officials to be al Qaeda's most dangerous affiliate offered 3 kg of gold last December for the killing of Feierstein, it was Mary's turn to call her husband. He played down the danger.
"He said it was old news. They are constantly under threat, you know," Mary Feierstein said in her first media interview since the threat.
After a police officer came to her home to give her his card and tell her to call him if she needed any help, "that's when I got scared," Feierstein said.
The new perils for foreign service officers were spotlighted last Sept. 11, when militants overran the temporary U.S. mission in Benghazi, Libya, killing four Americans, including Ambassador to Libya Chris Stevens. Two other U.S. diplomats were killed in Afghanistan in the past year.
President Barack Obama, still grappling with controversy over the Benghazi attack, called on Congress on Friday to fully fund his $4 billion embassy security budget request.
In a memorial ceremony earlier this month at the State Department, Vice President Joe Biden said that diplomats "take risks that sometimes exceed those of the women and men in uniform."
Honored along with Stevens were Sean Patrick Smith, Tyrone Woods and Glen Doherty, who died in Benghazi; and foreign service officers Anne Smedinghoff and Ragaei Said Abdelfattah, killed in Afghanistan in 2013 and 2012.
FIVE-FOLD INCREASE IN UNACCOMPANIED DIPLOMATS
The State Department says there are about 1,100 U.S. foreign service officers now at posts abroad where they are unaccompanied or there are limits on who can accompany them - usually meaning no children.
That is a five-fold increase in unaccompanied American diplomats over the past decade, and represents about 14 percent of U.S. foreign service officers serving overseas.
The change began with "civilian surges" into the war zones of Iraq and Afghanistan to help with stabilization and reconstruction. Over 400 unaccompanied diplomats are in those countries.
Then, the Arab Spring uprisings starting in 2011 added many unstable countries to the list where the State Department did not want to send families.
The fluctuating list now includes Afghanistan, Iraq, Pakistan, Yemen, Libya and Tunisia, as well as the new African state of South Sudan, the State Department said.
The U.S. embassies in Algeria, Sudan and Lebanon are in the "limited accompanied" category as is the U.S. Consulate in Mexico's third-largest city, Monterrey, a focal point for drug-related violence.
The risks to diplomats are not all external. A 2007 State Department survey said 17 percent of employees who had served in dangerous posts indicated some symptoms similar to those of post-traumatic stress disorder. The department, following the military's lead, has set up a program to help diagnose and treat PTSD in its employees.
Mary Feierstein realized she was one of an expanding group of left-behind relatives when she started attending the year-end holiday parties the State Department throws for them, and noticed the crowd getting bigger every year.
She also noticed a lot of small children at those parties, and admitted to thinking, "At least my kids are grown." Her children, two daughters and a son, are all in their 20s. Her son has served two tours of duty with the Marines in Iraq.
Then-Secretary of State Hillary Clinton attended the holiday parties, at which some of the unaccompanied diplomats were Skyped in from abroad. Feierstein said she thought Obama should attend too.
The president did call Gerald Feierstein to thank him for his service after the Yemen embassy was attacked last Sept. 13, two days after the Benghazi assaults.
'NEW NORM'
The United States used to be quicker to evacuate its embassies and consulates when dangers arose, said Susan Johnson, president of the American Foreign Service Association, the official union representing the Foreign Service.
These days, Washington tries to manage risks by building up the physical security of posts and increasing diplomatic security personnel, she said.
"In the process, we seem to have built a new level of tolerance for the amount of risk our diplomats face," Johnson said, adding that unaccompanied tours were increasingly becoming "a new norm."
There is pressure on diplomats to do the dangerous tours in order to advance. It is perceived to be "almost mandatory" to serve at an unaccompanied post and "punch that ticket" during a Foreign Service career, she said.
The State Department said 20 percent of its current employees had served in Iraq, Afghanistan or Pakistan.
The department offers incentives such as danger pay and shorter tours. Unaccompanied posts can be just 12 months, with several breaks, and families can often be left behind at a previous post to minimize disruption.
The State Department has made considerable progress in supporting employees in unaccompanied posts, its inspector general said in a 2010 report. Still, it said, "many returnees experience problems adjusting to their follow-on assignments," and more counseling services may be needed.
Mary Feierstein was born in Pakistan and met her husband on his first tour there in the 1970s. She said he was one of some "really tough people" that the State Department keeps cycling through stressful, dangerous posts.
Gerald Feierstein served in Lebanon unaccompanied in 2003 and 2004, then returned to Washington for a few years and was a senior official in the State Department's counterterrorism office.
He was sent to Pakistan for the third time in his career in 2008, as deputy chief of mission in Islamabad. His family stayed in the United States. In September 2010, Feierstein went to Yemen, again without his family.
"We were planning to go later. ... After the Arab Spring, we haven't been able to go there at all," Mary Feierstein said.
At home, she volunteers for the local Democratic Party and supports causes like gun control. She last saw her husband in March.
While tired of the separation, she said she felt sorrier for her children, even though they are grown. "They miss him so much. They are so happy when he comes home."
New Energy Policies in the Middle East Must Go Hand in Hand With Subsidy Reform
There are three major consequences of the Middle East's high energy intensity and reliance on oil: first, it carries a large implicit economic cost as a result of the value of oil and gas exports foregone and additional gas imports required in some cases; second, such a high degree of energy dependence increases the economy's volatility through its greater exposure to energy supply disruptions or price shifts; and third, it has increased the region's greenhouse gas emissions.
Given the intentions of the region to boost economic growth, reduce economic dependence on volatile energy markets and curtail greenhouse gas emissions growth, the region's high energy intensity is a natural target for reform.
Fortunately, the very fact that the region's energy use is anomalously high and possibly inefficient is a sign that relatively easy gains are possible to bring it under control. There are clear signs that there is significant scope for efficiency improvements. Energy use per unit of GDP is even more dramatically out of step with other regions than per capita statistics, with energy use per unit GDP double the G7 average for example, suggesting that with the right reforms energy demand growth can be slowed or even cut without harming economic growth. Indeed cutting energy demand by increasing energy efficiency would actually boost economic output as for the region's oil producers more crude would be available for export, while for the region's net gas consumers less gas would be need to be imported, improving the balance of trade in both cases.
So the theoretical potential for improvements is clear, but what are the practical steps to achieve it? Governments are currently focused on developing alternative energy options as their primary solution, nuclear and solar power especially. These energy sources will deliver two of the key energy policy aims of the regions' authorities: reducing their economic dependence on oil and cutting greenhouse gas emissions growth. However, to focus solely on these fuels would not fix the Middle East's energy problems.
First of all, the high cost and slow delivery of these new energy sources mean that they cannot deliver all of the energy supply changes needed in a timely manner. That is why policymakers must also put the promotion of natural gas front and center alongside nuclear and solar. Natural gas is the clear choice to complement these alternative energy supplies because the region has reserves in abundance which can be developed quickly, while gas-fired power plants are fast to build, reliable, responsive to demand and emit the least greenhouse gases of any hydrocarbon, at least 50 percent less than coal and 30 percent less than oil in power generation.
Second, and more fundamentally, promoting nuclear and solar, or even natural gas, do not address the problem of energy consumption as previously mentioned. Without addressing this, economic growth will still be affected by demand constantly surpassing supply.
The underlying source of the region's high energy intensity must be addressed and reformed if the region is to deliver a sustainable energy policy with maximum economic benefits: subsidies. Subsidies to oil, gas, water, electricity mean that consumers pay far less than the market rate for these products while producers cannot achieve full value for their output. The United Arab Emirates, for example, has amongst the highest subsidy rates per person in the world, with energy subsidies worth nearly $4,200 per capita per annum in 2011 according to the IEA. While such costs may be internalized by the state and judged to provide worthwhile social benefits, subsidies also always distort market incentives and result in a less efficient energy and economic outcome in the long-term.
Middle East energy use is so high because consumers have little incentive to reduce their energy consumption or make their energy use more efficient since the financial savings from doing so are negligible. Conversely, producers have less incentive to develop new supplies if they cannot sell for above the cost of production. Moreover, as the economy and energy market fundamentals shift, the lack of any market-based price signals means that supply and demand does not respond quickly enough to changing circumstance, slowing the economy down further.
A classic example of the effects of subsidies to constrain the region's economic potential is the role of oil in Saudi Arabia's power sector. In the summer months over a million barrels per day of oil is burnt in power plants to meet peak power demand because there is insufficient non-associated gas production to meet demand. Subsidies exacerbate the problem at every turn: subsidized power prices boost demand; subsidized oil prices make it feasible to burn for power even though it comes at a huge opportunity cost compared to the revenues it would have achieved if exported; at current prices Saudi Arabia there is an opportunity cost of USD 85-95 on every barrel burnt in its power generation sector, and so with oil demand in the power sector in excess of 230 million barrels a year that is $20 billion of lost export revenues. Finally subsidized gas prices create the supply shortfall in the first place because they make it uneconomic to explore for and develop the non-associated gas resources that Saudi Arabia is believed to have in abundance in recent years LUKoil, Eni, Repsol, Shell and Sinopec have all committed to look for natural gas in the country and subsequently exited without success while leading to unconstrained industry demand growth. Moving towards a market based system would address all of these imbalances and make the Saudi or any other Middle East economy healthier and more robust.
The eventual removal of subsidies will create both winners and losers, so a transfer from the current system to a new one must be carefully designed to smooth any disruption and compensate the vulnerable but if a plan is prepared and carried out over a number of years this should not be an insurmountable problem. Ultimately, supply side reforms, to boost alternative energy sources can only ever be half a solution. Demand side reform, via a path to ending energy subsidies in the region, is equally essential to deliver the best economic future for the Middle East and its wider effect on the global economy.
