Big companies’ tax affairs in Europe are to be opened up to greater public scrutiny with the EU rushing out a law compelling them to reveal corporate profits and taxes on a country-by-country basis, the Financial Times reported. Amid a political furore over allegations of tax avoidance by corporate-giants such as Apple, Starbucks and Google, the EU is extending transparency reforms for banks and resources groups to all large public and private companies. At a summit on Wednesday, EU leaders ditched longstanding reservations about more intrusive reporting rules and broadly backed a shake-up that could see a law passed as soon as this summer. The overhaul will have far-reaching implications for big multinationals in Europe, as most do not break down tax, profits, revenues and staff numbers by country. It would also pile public pressure on groups using low-tax bases such as Ireland or Luxembourg as a revenue hub for their European operations. Michel Barnier, EU commissioner for the single market, is working on legislative options for the disclosure rules, including by amending an existing proposal from April on corporate reporting of social and environmental issues. An alternative fast-track approach is for EU lawmakers to table amendments to new rules on accounting issues, which are almost agreed and is expected to be voted through by the European Parliament next month. Read more. (Subscription required.)
Daily Insolvency News Headlines
Fri., May 24, 2013
Slovenian lawmakers approved changes to the country’s insolvency legislation designed to accelerate corporate restructuring and aid the ailing banking industry, Bloomberg reported. Lawmakers voted for changes the government said will lower the debt burden at companies and spur an economic recovery, according to a live broadcast on public broadcaster TV Slovenija in the capital Ljubljana. The overhaul is supported by the central bank, which said in February previous legislation allowed owners to drag out the insolvency process, causing an “unnecessary” wave of bankruptcies that in turn affected banks’ business. Slovenian banks, including Nova Ljubljanska Banka d.d., the nation’s largest, are struggling with bad loans that represent almost a fifth of the nation’s total output as the government pushes forward an economic overhaul meant to reassure investors and the European Union the country can make it without outside assistance. Banks in the Adriatic nation will transfer bad loans to the bank asset-management company starting next month to help clean up their balance sheets. Slovenia’s export-dependent economy, in its second recession since 2009, will shrink this year and next before recovering in 2015, according to the forecast by the European Commission. Read more.
Ireland's new insolvency laws will help distressed home-loan borrowers, but also help Irish taxpayers regain some of the huge sums the country has pumped into its banks during the country's deep financial crisis, Irish central bank head Patrick Honohan said Thursday, Dow Jones Newswires reported. Dublin last month detailed a new so-called Insolvency Service of Ireland agency, the centerpiece of new debt-solution laws that the government says will help distressed borrowers strike deals with their banks. Ireland faces one of the deepest home-loan and household debt crises in the world, a legacy of the country's severe banking and property market ills that eventually forced it to seek a 67.5 billion euro ($87 billion) bailout deal from the European Union and International Monetary Fund in late 2010. Unemployment, which has soared to 14% from about 4% before the crisis in 2007, has squeezed household incomes and increased credit defaults, leaving many home loans in arrears. However, Mr. Honohan told a conference on banking resolutions that with "the vast majority of Irish borrowers" continuing to repay their loans, banks can construct imaginative solutions such as offering so-called "split mortgages" to deal with the crisis. "I have outlined how the split mortgage idea could be fleshed out in a way that would increase the number of insolvent borrowers enabled to stay in their home while both removing the worst of the debt overhang on the borrower, and ensuring that the 'taxpayer' (through bank ownership) can share some of the upside coming from economic recovery," he said. More than five years after the onset of the banking crisis, lawmakers have criticized Irish banks, which were rescued at huge cost to Irish taxpayers, for taking so long to strike deals with distressed home-loan borrowers. The Irish central bank imposed quarterly targets on lenders to review all files of distressed home-loan borrowers. Read more. (Subscription required.)
A Spanish High Court judge has charged the former chairman of fishing firm Pescanova, Manuel Fernandez de Sousa, with falsifying information and insider trading, according to a court document published on Thursday, Reuters reported. Pescanova, one of the world's largest fishing firms, filed for insolvency in April and the dealings of Sousa, who sold a large stake in the firm in the months before the insolvency petition, have come under scrutiny. The company filed for insolvency on 1.5 billion euros ($1.9 billion) of debt but financial sources believe total debt is more than double that amount. Sousa was removed in April from the helm of the firm he had run for more than three decades and the High Court has now called him to testify on July 1. In a radio interview earlier on Thursday, he denied any wrongdoing. "I sacrificed everything for Pescanova. If I had not believed in this company, I wouldn't have kept my shares and I wouldn't have provided 10 million euros in liquidity," he said on Cadena Ser radio. Read more.
Ireland’s 850 hotels have aggregate debts of €6.7 billion and about 300 of them are in financial difficulty. These are the key points of a report on the health of the sector jointly commissioned by AIB and the Irish Hotels Federation, the Irish Times reported. The report also found that 54 per cent of hotels increased their turnover in 2012, while two-thirds of the 111 respondents expect tourism to improve here within the next three years. In his commentary to the report, commissioned from consultants Amárach, IHF chief executive Tim Fenn said overhanging debt was a “key challenge” facing the sector, along with labour costs, which account for about 40 per cent of hotel turnover on average, and local authority rates, which he argues have not been lowered in the downturn. Read more.
The International Monetary Fund may have been too optimistic in assessing the debt sustainability of some borrowing countries and could toughen loan conditions in an effort to make debt restructuring more successful, according to the fund’s staff, Bloomberg reported. Sovereign debt restructuring cases in recent years have often come “too little and too late,” IMF economists and legal experts wrote in a report published today. The Washington-based fund came under pressure at times from other public-sector creditors to accept delays in restructuring and should consider changes to its assessment rules, they wrote. “In hindsight, the fund’s assessments of debt sustainability and market access may sometimes have been too sanguine,” according to the report, which the IMF board reviewed on May 20. The board, in a separate statement, asked staff to continue its analysis. Delays in restructuring “were also sometimes facilitated by parallel incentives on the part of official creditors, who accordingly may have an interest in accepting, and pressuring the fund to accept, sanguine assessments of debt sustainability and market reaccess.” Greece, which last year pushed through the largest sovereign restructuring in history and has received two bailouts from the IMF and European nations, is among the cases that motivated the fund to review its policy on the matter. Staff will continue exploring potential changes to its own guidelines, with a potential decision in a year, according to the IMF. Read more.