ACTIVIDAD INDIVIDUAL

A. Leer el texto “A new architecture” y responder las preguntas 1 a 5. (Tiempo de actividad: 60

min)

1. What is Biden planning to do? What are his intentions behind this plan, according to the author?
2. What are some of the problems behind the current international tax system?
3. How is this new proposal different from previous attempts? Describe it.
4. Does the author believe this proposal will be passed? Explain
5. What does the graph show? How is it related to the text?

A new architecture
A less loophole-riddled system for taxing multinationals is within reach
When people come to look back on Joe Biden’s presidency, they may, depending on events in the coming
months, conclude that one of his most consequential economic achievements was to reverse a decades-long
global boom in corporate tax dodging. His administration’s call for an end to the “race to the bottom” has
reinvigorated multilateral talks on rewriting international rules that encourage multinationals to funnel vast profits
to tax havens. Two months after that call, America and other rich countries have agreed on a road map for
reform. The deal paves the way for the biggest corporate-tax overhaul in a century.
Mr. Biden’s motives are not pure: he is driven less by
principle than a desire to squeeze more out of American
firms to finance his post-pandemic spending priorities.
Nevertheless, the G7 countries’ proposals, which their
finance ministers approved on June 5th, are welcome.
The international tax system sits on foundations laid in
the 1920s. For much of the following century
policymakers’ concern was to avoid double taxation, not
curb abuse. The result has been a steady rise in
avoidance, further fuelled by the growth of tech firms and
intangible assets, to the point where 40% of
multinationals’ overseas profits are shifted to havens. The
OECD estimates this costs exchequers up to $240bn a
year—a tiny fraction of global economic output, but still a
lot of unbuilt hospitals and unfixed roads.
Past attempts to plug this hole have been piecemeal. The G7 wants a more comprehensive fix. It has backed a
global minimum corporate-tax rate of at least 15%, combined with a reallocation of taxing rights to give more to
countries where firms have sales.
In fact, it is only a first step. Reaching a global deal involves finding terms that 132 other countries, including
China and India, can accept. Poor countries fear a rich-country stitch-up: the g7 could reap over 60% of the
revenue gains from a minimum tax. Some havens will resist, including Ireland, which jealously guards its 12.5%
corporate-tax rate—and has a veto on tax matters in the EU.
If these obstacles can be overcome, the reforms will still need to be passed into law. Many in America’s
Congress worry that they may hurt its companies’ competitiveness. European countries want America to move
first. America wants France, Britain and other countries that have introduced “digital-services taxes”, targeting
the sales of Silicon Valley firms, to scrap them immediately. Agreeing to put them on hold would help move the
delicate diplomacy forward. Europe’s levies have provoked retaliatory tariffs from America, which are currently
suspended. The OECD reckons a tax-induced trade war would wipe more than 1% off global GDP.
Expectations also need tempering on how much of the revenue lost to a voidance will be clawed back. Most
would come from the minimum tax. But a floor of 15% would raise global corporate-tax revenues by as little as
2.7%. The $50bn-80bn that the combined reforms might raise is meagre beside multinationals’ $6trn of global
annual profits. The profit reallocation part of the proposals looks like a lot of work for not much gain. Countries
where an as-yet-undefined group of multinationals have sales would get to share taxing rights over at least 20%
of any global profits those firms made above a 10% margin. The net gain from this fiddly exercise may not
amount to much more than $10bn.
Actividad GRUPAL
Lea el texto “Banco Popular fails and is bought by Santander” y responda (en castellano)

1. What happened to Banco Popular? Explain briefly

2. How did the Spanish government, the European Commission and Santander perceive the transaction?
3. Do all the shareholders agree with the deal? What course of action will they probably take?
4. What does the graph show? How does it relate to the text?

The popular mandate Jun 10th 2017| MADRID

Banco Popular fails and is bought by Santander
As European bank crises go, this was an orderly one
EVEN a bank failure can be presented as a triumph. This week Banco Popular, a big Spanish lender, endured a
run. Depositors were said to be withdrawing €2bn ($2.2bn) a day. The bank lost half its stockmarket value in
four days, as a self-imposed deadline to find a saviour loomed. On June 6th, it was declared by the Single
Resolution Board (SRB), an independent agency set up by the European Commission in 2015 and charged with
winding down banks, to be “failing or likely to fail”. The next morning, Santander, Spain’s biggest bank,
announced its purchase for the symbolic sum of €1 ($1.10). It is to raise €7bn in capital to help absorb
Popular’s property-related losses.
Spain’s government, the European Commission and
Santander all cheered the outcome as a model European
response to a bank crisis. Shareholders and junior
bondholders in Popular have been wiped out. Spanish
ministers pointed out that taxpayers would not have to pay
for a rescue of the sort arranged for Bankia, a giant savings
bank nearing collapse, when Spain needed a banking bail-
out in 2012. Ana Botín, Santander’s boss, declared the deal
was good for Spain, for Europe, for Popular’s 4.4m
customers and for her shareholders. Santander’s market
leadership in Spain and Portugal will be strengthened.
The cheerleaders do have a point. Compared with previous
banking disasters, this one has been handled, in Ms Botín’s
words, with “agility and speed”. But Popular’s demise is also
a reminder of Europe’s residual banking woes.
In Spain these go back to uncontrolled lending that financed a construction bubble which burst in 2008.
Popular, a bank whose executives historically had close ties to the Opus Dei movement in the Catholic church,
tried to weather the crisis by turning to shareholders, not the government. In 2016 it completed its third
capital increase since 2012. The strategy didn’t work. Popular’s 300,000 or so shareholders have now had the
value of their investment reduced to zero. So have investors in some €2bn of bonds, including “contingent
convertible” instruments, introduced after the crisis, that are turned into equity when things go wrong.
The terms of the Santander deal are likely to be challenged in court. Some shareholders called it an
expropriation. Investors will also ask why supervisors with supposedly beefed-up powers failed to step in
earlier. Popular underwent various European banking stress tests and its successive capital increases were
deemed sufficient by regulators. As recently as April, Spain’s economy minister, Luis de Guindos, said it had
“no problems of liquidity”.
By then Popular had posted a record loss of €3.5bn for 2016. It was smaller than Bankia and never posed a
systemic risk. That helped the government shun a bail-out. But Spain’s opposition parties called on Mr de
Guindos to explain Popular’s demise in parliament. “What riles people”, said Miguel Ángel Revilla, head of the
regional government in Cantabria, is that successive capital increases were authorised and various bank heads
went home “weighed down by millions of euros” in pension and compensation packages.