US hedge fund seized an Argentine naval ship

[Edward Campbell]

Notice the change of language and tone coming from her.  We are now talking about challenges and having to work hard to balance the budget.  Right.

It does not matter what she promised.  She has to act.  Because she really has no choice.  All she has done is make her job that much harder with all her goodies this budget offered and now the eventual downgrade that will result.

As per the original story in this thread, there's a new wind coming from the creditors and it is cold and unforgiving.

                                                                                                                            :goodpost:

 

[Fishbone Jones]

Notice the change of language and tone coming from her.  We are now talking about challenges and having to work hard to balance the budget.  Right.

It does not matter what she promised.  She has to act.  Because she really has no choice.  All she has done is make her job that much harder with all her goodies this budget offered and now the eventual downgrade that will result.

As per the original story in this thread, there's a new wind coming from the creditors and it is cold and unforgiving.

You mean when she was yelling at Horvath, stating that the voters of Ontario wanted her and her budget. She already seems somewhat drunk with power.

However, yes, we should get the thread back on track.

 

[Brad Sallows]

So, what does ON have in lieu of a navy?

 

[PuckChaser]

Solar and wind farms. That stuff is probably worth a pretty penny. After all, we're paying billions in subsidies for it.

 

[Edward Campbell]

According to this article, which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, the US is trying, again, to extend the reach of its tax collectors:

http://www.ft.com/intl/cms/s/0/9288ffc6-0c9a-11e4-9080-00144feabdc0.html?siteedition=intl#axzz37crPcU1r

Jack Lew pushes US Congress to crack down on tax ‘inversions’

By James Politi in Washington

July 16, 2014

Jack Lew, US Treasury secretary, has urged Congress to crack down on merger deals in which companies seek to redomicile overseas to reduce their US taxes, invoking the need for “economic patriotism” in reversing a practice that has flourished in recent months.

In a letter to Dave Camp , the Republican chairman of the tax-writing House Ways and Means Committee, Mr Lew said US lawmakers should pass measures to stamp out “inversions”, which were contained in the Obama administration’s most recent budget proposal and later embraced by senior Democrats on Capitol Hill.

Mr Lew said the tax change should take effect retroactively from May 2014 – the time when Pfizer , the US drugs company, was considering a relocation to the UK in conjunction with its $106bn bid for AstraZeneca , a British rival, that ultimately collapsed.

“Congress should enact legislation immediately . . . to shut down this abuse of our tax system,” Mr Lew wrote in the letter to Mr Camp, which was obtained by the Financial Times on Tuesday. “What we need as a nation is a new sense of economic patriotism, where we all rise and fall together,” Mr Lew wrote.

The Obama administration proposal, which was backed by powerful liberal Democrats such as Carl and Sandy Levin, as well as Ron Wyden, chairman of the Senate finance committee, would clamp down on tax inversions by raising the threshold of foreign share ownership required for such a deal to be structured from 20 per cent to 50 per cent.

By having it take effect starting in May 2014, the US Treasury and congressional Democrats hope to avoid a further increase in companies structuring such agreements over the next few months. However, retroactive application of tax changes is relatively unusual, and its use to reduce the number of inversion transactions has received criticism from business groups, conservative tax economists, and Republican lawmakers.

Mr Lew’s letter on Tuesday was first reported by the Wall Street Journal. It follows plans revealed this week by Mylan , the US generic drugmaker, to move to the Netherlands through its purchase of Abbott Laboratories ’s European generics drugs unit.

The decision by Heather Bresch, Mylan’s chief executive and the daughter of Joe Manchin, the Democratic senator from West Virginia, came just before it emerged that Walgreen s, the US drugstore chain, is also considering an inversion to Switzerland as it weighs the purchase of the rest of Alliance Boots.

The most high-profile tax inversion planned by a US company, which ultimately failed, was Pfizer’s effort to buy AstraZeneca  this year, which increased scrutiny of such transactions in Congress and stoked debate among many US corporate tax executives, economists and lobbyists.

Driving US companies away from US shores is the corporate tax rate of 35 per cent, one of the highest in the developed world, and the treatment of foreign earnings, which are subject to US taxes when they are repatriated to America.

Both the Obama administration and congressional Republicans have plans to overhaul the US corporate tax system entirely to make it more globally competitive, but they have been unable to agree on many of the details, leaving the door wide open for inversions to keep occurring.

With little legislative action expected before the November midterm elections, any hopes for tax reform have been pushed until next year at the earliest. Congressional Democrats had proposed to clamp down on inversions with a two-year moratorium to allow more time for a tax reform deal to be negotiated, but Republicans have been sceptical and it is unlikely that even Mr Lew’s intervention will change that dynamic.

All countries want to attract and retain global head offices and their associated R&D facilities. America has, traditionally, been better at this than anyone since Edwardian Britain. But it's not, now. Successive US governments have tried to steal the corporate golden egg by applying silly corporate taxes. (Corporate taxes are very, very popular amongst a HUGE majority of people, including Canadians, but the HUGE majority of Canadians is terminally bloody stupid.) Now companies, which are always way smarter than the HUGE majority of voters, are "voting with their feet." The Obama administration's answer is to "outlaw" rational business decisions. US courts have shown a propensity to read laws as written, even dumb laws. Maybe activist courts, which would slap the administration and the congress upside the head for making stupid, illiberal decisions, would be a good thing.

 

[a_majoor]

Since US business taxes are among the highest in the OECD, setting up shop somewhere else makes perfect sense. Apple has a dragon's horde of about $35 billion USD in offshore accounts that won't ever be repatriated to the US for that very reason. Of course this is OK so long as you are one of the "crony's"; GE has payed npo or minimal taxes following the same rules but without comment by the Admnistration or the press...

Asking the courts to take an activist stand may be a mixed blessing; there is a good chance that instead of throwing out poorly conceived laws and regulations, the court will enthusiastically embrace and expand upon it instead.

The only cure is to let the hard realities of the market take their course. Outlawing something that the market demands only stokes the black or grey markets; US companies prevented from sensible relocation to low tax, low regulation regimes may simply close shop altogether and sell their patents and intellectual property to a (notionally) foreign company instead. Consumers will go for cheaper imports in order to maximize their own standard of living and make their dollar stretch. Investors fed up with lower rates of return may demand action to remove the impediments to economic activity and growth within the US, and of course this is also in line with some domestic political movements.

 

[Edward Campbell]

According to a report in Business Insider the New York Judge Thomas Griesa said that he "will not grant Argentina a stay on payment to bondholders as it attempts to negotiate the payment of over $1.3 billion worth of bonds owed to a group of hedge fund creditors referred to collectively as NML ... Now The Republic has until July 30th to either pay all its bondholders including NML, negotiate with NML to the creditors' satisfaction, or default on its debt."

Sovereign default is nothing new, and it's certainly not new to Argentina, but it tends to drive out "good money" from entire regions. In fact the same article says that, "In 2015 — whether Argentina pays or not — President Cristina Fernandez de Kirchner and her administration will be gone. All the alternatives are more market friendly. It's one of the reasons why hedge fund managers like Mike Novogratz of Fortress Investments and Dan Loeb of Third Point Partners have said they're ready to invest once Argentina hits bottom."  So the vulture funds will be there but, I suspect most of the bond market will look elsewhere, outside of Latin America, to the detriment of Brazil and Chile, too.