Neil Collins’ Notebook – One world, one corporation tax is a terrible idea

If we can’t have world peace, then how about a world rate of corporation tax? Coming from anyone less distinguished than Janet Yellen, head of the US Treasury, such an idea would quickly go the same way as Esperanto or global disarmament, but it really does deserve to follow them into the realms of wishful thinking.

Getting global businesses to pay their “fair share” of tax has always been tricky, and never more so than in a world where companies can choose the country where their profits arise. A single world-wide rate would mean that the incentive to cheat would disappear, but this is where the problems start. If it’s the same everywhere, companies could decide which countries they should favour with payments – and which countries would favour them in turn.

Then there is the question of “fair share”. A rate of 25 per cent sounds fair, but in Yellen’s fantasy, the pressure from cash-strapped governments to raise it would be relentless. The most awkward question of all is: what is a taxable profit? Private equity groups have become world masters at financing with debt, which can be offset as a business expense, instead of equity, which must be rewarded out of post-tax earnings.

Small countries can struggle to attract investment, and a low rate of corporation tax is one of the few legitimate ways they can do so. Finally, the idea of the Chinese authorities agreeing to allow anyone else to tell them what to do is risible. Perhaps Yellen was just having a late April fool. It wasn’t funny, though.

End of the road for Stellantis?

Stellantis, the name for the mash-up that includes Fiat, Chrysler, Peugeot and Citroen, has a little problem with a rounding error. It’s the owner of the old Vauxhall plant at Ellesmere Port on The Wirral. The plant is tiny in the company’s scheme of things, but it supports about 1,000 attractive jobs, with an estimated five times that amount in the local supply chain, and not for the first time, its future hangs in the balance. In a world oversupplied with car plants, it is too small. In a business with too many second division brands, closure looks like an obvious, if painful, decision for the Stallantis board, far away in Amsterdam, at their meeting this week.

They have another reason to drive Ellesmere Port and its Astra off the road, unless Kwasi Kwarteng, the Business Secretary, comes up with a particularly juicy bung from the UK taxpayer to save it. Last autumn, after similar soul-searching, Stellantis boss Carlos Tavares committed to building a new petrol-powered model there, thus securing at least its medium-term future. Within weeks, the UK government slashed his tyres by announcing a ban on the sale of new petrol cars from 2030.

Building a car which cannot be sold in its home market would never make sense, while the cost of a complete retool of the plant to build electric in less than a decade destroys an investment case which was far from compelling in the first place. Besides, Stellantis plans to build electric elsewhere in its sprawling empire. Understandably, the company does not seem in a mood to help the government out of its hole. One source told the Daily Telegraph: “Stellantis wants long-term assurances. It won’t make a short-term decision that affects its long-term competitiveness.”

Kwarteng is desperately trying to persuade the company to persevere, but it is hard to see why Tavares should believe a word he says. Like so much else from this administration, the petrol ban came out of the blue, a political feel-good gesture with no thought for the consequences. Whatever Kwarteng says today about pledges for the long term, it would be rash to place any reliance on his promises. If this really is the end for Ellesmere Port, after sustained efforts from management and workforce, they will all know who to blame.

Just get that debt down, guys

Oil company accounts are largely impenetrable to outsiders, and most of us are reduced to asking two simple questions: how much debt, and how much dividend. It would be a comfort to think that those inside the empires know better, yet the evidence this week shows that they can produce thousands of numbers, and still leave us little the wiser.

Here is Bernard Looney at BP. He has done so well with disposals on the way to his green nirvana that he reckons he can use some of the cash to buy in its own shares. Never mind that such programmes have cost remaining shareholders dear in the past, or that replacing equity with debt makes BP more vulnerable to the sort of collapse in the oil price that we saw a year ago. His target of $35bn of debt is still quite a lot for a business valued at $60bn.

In contrast to BP, the Royal Dutch Shell dividend never went down – until a year ago. Then the board panicked at the lowest point in the oil price plunge, and slashed the payout by two-thirds. Since then, it seems that last March was not the end of the oil age after all, and Shell is now raising it again, albeit at a rate which will take 28 years to return to the previous level. Shell’s history of buy-backs shows even worse value destruction than BP’s, so we should be grateful that nothing is imminent.

To keep the market informed, Shell this week revealed that the Texas Big Freeze has cost it $200m. Is this a lot or a little? Who knows? The shares barely twitched. You can judge for yourself here, and after the analysts have finished their reading, Shell will obligingly publish their consensus for earnings later this month, followed by “enhanced voluntary disclosures” next. That promises more stats than you can shake a stick at, but still. The dividend? And the debt?