Tag Archives: Tax

Farmers worldwide struggle with rising fuel costs

By Stephanie Kelly and Tom Polansek

NEW YORK/CHICAGO (Reuters) – Farmers worldwide are feeling the pinch as fuel costs rise to near four-year highs just as they plant and harvest their fields, eroding agricultural income already hamstrung by depressed crop prices.

The agricultural sector from the United States to Russia, and Brazil to Europe, is seeing profits harmed by the rise in diesel prices. The global oil benchmark, Brent crude, touched $80 a barrel for the first time since late 2014 on Thursday.

Coupled with local economic issues, the increase is making it even harder for many farmers worldwide to turn a profit in the estimated $2.4 trillion agriculture industry, casting a cloud over future investments.

In the United States, fuel accounts for about five percent of farmers’ overall costs, and is hurting margins at a time when farm income is already half that of 2013. Massive harvests have depressed prices of staples such as corn, wheat and soybeans.

Diesel fuel is essential for planting, harvesting, and shipping crops to market. In the United States, farmers will spend an estimated $15.25 billion on fuel and oil in 2018, an 8 percent increase from 2017, U.S. Department of Agriculture data showed.

The price of ultra-low sulfur diesel used for farming equipment and transporting crops has not been this high in May since 2014. Heating oil futures, the proxy for ultra-low sulfur diesel, traded at $2.29 a gallon on Thursday.

Ron Heck, who grows soybeans in Perry, Iowa, said his fuel costs could go up $1,000 to $2,000 during the northern hemisphere’s spring.

“You feel the pain right away,” Heck said.

In Russia, fuel prices for farmers are up 50 percent compared with a year ago, Arkady Zlochevsky, the head of Russia’s Grain Union, a non-governmental farm lobby, told Reuters. Farmers will need to spend more ahead of harvesting, which starts in about a month in Russia, he said.

For a graphic on farmers’ cash expenses, click https://tmsnrt.rs/2rXHHQf

FINANCIAL STRESS

U.S. farms are also factoring in potential losses of income due to a 25 percent tax China announced on major American imports following the U.S. government’s decision to slap duties on steel and aluminum.

“We’re seeing financial stress occurring in agriculture that we probably haven’t seen for a decade or so,” said Scott Brown, director of strategic partnerships at the University of Missouri’s College of Agriculture, Food and Natural Resources. “If diesel prices continue to go higher, it continues to put more pressure on [farmers].”

Net farm income is forecast to fall to $59.5 billion in 2018, an 8.3 percent decline from 2017, according to the USDA. It has fallen by 55 percent since 2013.

In Holly Grove, Arkansas, Tim Gannon paid about $17,000 in February to fill a 7,500-gallon tank with diesel used to run equipment and irrigation. The price increase means it may cost up to 25 percent more, or an extra $4,000, to refill it in coming weeks, he said.

“That’s a fairly significant amount of income to lose,” he said. Gannon has been taking steps to cut his diesel costs over the past year by reducing the number of times he plows, or tills.

In Brazil, farmers are also taking steps to deal with higher costs, as diesel prices have climbed 43 percent in the country since July 2017. Eder Ferreira Bueno, a farmer in grain state Mato Grosso, said increased fuel costs meant he had “no other option but to spend less to treat the soil.” Other farmers might hire fewer workers or delay investment plans, he added.

In neighboring Argentina, the top shipper of soybean meal and oil worldwide, farmers are having to deal with a weakening currency at the same time fuel costs are rising.

“Where the impact is felt greatest is in trucking costs. We are already at a disadvantage when compared to our competitors on freight costs within Argentina,” said David Hughes, a farmer in Buenos Aires province and president of Argentine wheat industry chamber Argentrigo.

In Europe, French grain producers say rising oil costs may have a knock-on effect on fertilizers and crop protection products.

“It comes at a time when things are already difficult for farmers economically,” said Philippe Pinta, head of grain growers group AGPB in Paris.

Wamego, Kansas, farmer Glenn Brunkow said he may lock in diesel prices in advance for the first time ever next year, to avoid the pain of future increases.

“You just kind of all of a sudden realize, ‘Wow, it’s pretty high,'” he said.

(Reporting by Stephanie Kelly in New York and Tom Polansek in Chicago; additional reporting by Sybille de La Hamaide and Valerie Parent in Paris, Polina Devitt in Moscow, Ana Mano and Marcelo Teixeira in Sao Paulo, and Hugh Bronstein in Buenos Aires, Editing by Rosalba O’Brien)

Washington refocuses on tax; anti-tax activist sees bill in September

Grover Norquist, president of Americans for Tax Reform, speaks before the dedication of a statue of the late Senator Barry Goldwater (R-AZ) in Statuary Hall on Capitol Hill in Washington February 11, 2015. REUTERS/Joshua Roberts

By Ginger Gibson and David Morgan

WASHINGTON (Reuters) – Congressional Republicans are ramping up discussions on overhauling the U.S. tax code that a prominent Republican anti-tax advocate said on Wednesday will produce a bill by September with a hefty corporate tax cut.

Grover Norquist, head of the anti-tax Americans for Tax Reform and a lobbyist close to Republican leaders, said a “Big Six” group of Republican tax decision-makers was targeting the end of this month for producing a basic framework for a bill to be introduced in September.

“The House, the White House and the Senate have been meeting for a couple months. They’ll have a package in September,” said Norquist, a conservative tax and small-government activist who has met with Big Six members.

The group met on Wednesday evening and two members who emerged 45 minutes later said they were united on tax principles but offered no comment on whether they had agreed to a framework.

“We’re all on one page, on one unified page,” White House economic adviser Gary Cohn said.

House of Representatives Ways and Means Committee Chairman Kevin Brady also told reporters there was unity and to expect a statement in coming days.

Central to the discussion is the 35 percent corporate income tax rate, how much it can be cut and whether a cut can be made permanent. The White House wants to slash the rate to 15 percent for seven years, while congressional Republicans are trying to settle on a permanent rate that does not increase the deficit.

President Donald Trump and his representatives on the Big Six – Cohn and Treasury Secretary Steven Mnuchin – are “really excited about the 15 percent rate” for corporations, Norquist said.

The congressional Big Six members are Brady, Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan and Senate Finance Committee Chairman Orrin Hatch.

Norquist has played a key role in tax negotiations in Washington for years.

Trump is insisting on lowering the tax rate for pass-through businesses, now taxed at the top individual tax code rate, to 15 percent, Norquist said.

The Big Six agree that Trump’s 15 percent corporate rate cannot be achieved on a permanent basis without adding to the federal deficit, administration officials said.

Such a steep tax rate cut would mean a revenue loss of more than $2 trillion over a decade, independent analysts say.

To solve the deficit issue, the White House is open to making the 15 percent rate temporary, with an expiration in seven years, Norquist said. That would conflict with Republicans in Congress who want a permanent tax overhaul, but it would ensure rates would not have to be renewed during Trump’s presidency.

Mnuchin said on Wednesday morning that the administration would be “sensitive to increasing the debt.”

“We are very close to releasing a detailed plan and I can assure you that we believe that detailed plan will be responsible on the impact on the economy and the cost to the debt,” he said.

Under current law, companies adhere to complex depreciation schedules for how long it takes for equipment to wear out and lose value.

Business groups have called for “100 percent expensing,” a policy that would let companies write off the entire price of equipment in the year of purchase. Former President Barack Obama pushed for temporary 100 percent expensing as a economic stimulus to help reverse the recession when he took office.

The White House is considering a three-year window to allow 100 percent expensing, Norquist said. After the three years, the rate would return to 50 percent, which is the current law.

(Reporting by Ginger Gibson; Editing by Dan Grebler and Bill Trott)

Trump to meet U.S. business leaders on infrastructure, tax reform

U.S. President Donald Trump waves as he walks from Marine One upon his return to the White House in Washington, U.S., April 9, 2017. REUTERS/Joshua Roberts - RTX34UUD

By David Shepardson

WASHINGTON (Reuters) – U.S. President Donald Trump will meet with about 20 chief executives on Tuesday as he works to gain support for a $1 trillion infrastructure program, tax reform and other administration priorities, said White House spokesman Sean Spicer.

Trump will meet with the heads of General Motors Co <GM.N>, International Business Machines Corp <IBM.N> and Wal-Mart Stores Inc <WMT.N>, a government official briefed on the matter said.

Trump has pledged to unlock $1 trillion in private and public infrastructure investments to fix bridges, improve the electrical grid and broadband internet, modernize airports and potentially rebuild hospitals for veterans. Nearly three months after his inauguration, Trump will again seek the advice and funds of the private sector for his “national rebuilding” program.

Trump also wants to streamline the income tax system, cut federal regulations, reduce corporate income tax and add new taxes to prod companies to keep or move production to the United States. He has held numerous sessions with CEOs since taking office.

The chief executives are part of Trump’s “Strategy and Policy Forum” that was created in December and last met with the president on Feb. 3.

The business leaders from a variety of sectors will also meet in small groups with Transportation Secretary Elaine Chao, Environmental Protection Agency chief Scott Pruitt, Commerce Secretary Wilbur Ross, Education Secretary Betsy DeVos and White House budget director Mick Mulvaney, Spicer said.

Participants in Ross’ meeting include Wal-Mart CEO Doug McMillon and Indra Nooyi, chief executive officer of PepsiCo Inc <PEP.N>. Pruitt’s meeting will include GM CEO Mary Barra and Paul Atkins, CEO of Patomak Global Partners LLC and a Republican former SEC commissioner. Chao’s meeting will include Tesla Inc <TSLA.O> CEO Elon Musk.

BlackRock CEO Larry Fink, who heads the world’s largest investment management firm, in a letter to shareholders Monday backed calls for private investment to rebuild U.S. infrastructure. The Trump administration plans to unveil as soon as May the $1 trillion infrastructure plan over 10 years.

“Fixing crumbling roads and bridges is not enough. We need to be focused on reshaping our world, not just repairing it,” Fink wrote.

Last week, Trump pitched infrastructure projects to about 50 New York area CEOs. National Economic Council Director Gary Cohn told executives that privatizing air traffic control, which the administration proposed in its budget outline in March, could be a big boost.

Other chief executives taking part Tuesday include consultant EY, Boston Consulting Group, the Cleveland Clinic and Global Infrastructure Partners, an infrastructure investment fund.

(Reporting by David Shepardson; Editing by Andrew Hay and Lisa Shumaker)

Exclusive: Trump says Republican border tax could boost U.S. jobs

The U.S. border with Mexico is seen in Nogales, Arizona, U.S., January 31, 2017. REUTERS/Lucy Nicholson

By Steve Holland

WASHINGTON (Reuters) – U.S. President Donald Trump on Thursday spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports, but he did not specifically endorse the proposal.

Trump, who has lashed out at U.S. companies for moving operations and jobs to countries such as Mexico, had previously sent mixed signals on the proposal at the heart of a sweeping Republican plan to overhaul the tax code.

“It could lead to a lot more jobs in the United States,” Trump told Reuters in an interview, using his most approving language to date on the proposal.

Trump sent conflicting signals about his position on the border adjustment tax in separate media interviews in January, saying in one interview that it was “too complicated” and in another that it was still on the table.

The proposal has divided American businesses. Critics say the planned 20 percent tax on imports could be passed along in higher prices to consumers, including manufacturers that rely on imported goods to make their products.

Some critics have warned of a potential global trade war which would sharply curtail U.S. and world economic growth.

Advocates say U.S. exporters will gain as their revenues will be excluded from federal taxes. They say the tax on imports will encourage domestic production and cause the already strong dollar to rise, offsetting upward pressure on import prices.

COMPANIES ‘TO COME BACK’

Trump has also called for a 35-percent border tax on U.S. companies that move jobs abroad and import products back into the U.S. market. It has been unclear in the past if those references referred to the border adjustment proposal.

“I certainly support a form of tax on the border,” he told Reuters on Thursday. “What is going to happen is companies are going to come back here, they’re going to build their factories and they’re going to create a lot of jobs and there’s no tax.”

White House spokesman Sean Spicer also came to the defense of border adjustment on Thursday, disputing the claim that it could lead to higher consumer prices. “That benefits our economy, it helps American workers, it grows the manufacturing base,” Spicer told reporters at a White House briefing.

The Mexican peso <MXN=> weakened slightly against the U.S. dollar immediately after Trump’s comments and was last trading at 19.68 per dollar. Earlier on Thursday, the Mexican currency hit its strongest level since Trump’s Nov. 8 election victory.

Stocks of retailers, which could be hurt by border adjustment, weakened on Wall Street after Trump’s remarks. The S&P 500 retailing index <.SPXRT> ended down 1 percent. Shares of Wal-Mart Stores <WMT.N> slipped and closed down 0.6 percent. Trump said his administration will tackle tax reform legislation after dealing with Obamacare, the health insurance system that his fellow Republicans have bashed since it was put in place in 2010 by his predecessor, President Barack Obama.

Earlier on Thursday, Treasury Secretary Steven Mnuchin told CNBC the Trump administration aimed to formulate a tax plan with support from the Republican-controlled House of Representatives and Senate and pass it before August.

BUSINESS DIVIDED

Lawmakers and corporate lobbyists say the border adjustment tax could die in Congress, potentially jeopardizing the prospects for tax reform, mainly because of opposition from a handful of Senate Republicans.

But experts say Trump’s endorsement could change the political climate. “If Trump supports it, that makes it considerably more likely,” Harvard Business School professor Mihir Desai told Reuters.

Trump’s comments were followed by dueling statements from lobbying groups.

A statement from the pro-border adjustment American Made Coalition said the White House was “sending its strongest signals yet that it’s leaning toward supporting the House blueprint with border adjustability.”

The Americans for Affordable Products coalition that opposes the border adjustment tax issued a statement saying Trump’s remarks were “consistent with what he’s already said” and that it was “impossible” to know if they were specific to any individual legislative policy.

Trump spoke to Reuters after meeting with more than 20 chief executives of major U.S. companies to discuss ways to return manufacturing jobs to the United States, one of the linchpins of his 2016 presidential campaign.

Many CEOs of large multinationals back the border adjustment tax. The chiefs of 16 companies, including Boeing Co <BA.N>, Caterpillar Inc <CAT.N> and General Electric Co <GE.N>, sent a letter to Congress on Tuesday urging support for it.

A border adjustment has emerged as the most controversial segment of the House Republican tax reform blueprint. Under the House plan, it would raise more than $1 trillion in revenues to help pay for a corporate tax cut.

(Reporting by Steve Holland; Additional reporting by David Morgan, David Shepardson and Ginger Gibson in Washington and by Lewis Krauskopf in New York; Editing by Kevin Drawbaugh, Paul Simao and Howard Goller)

Mastercard sued for $19 billion in Britain’s biggest damages claim

Shoppers carrying bags

By Andrew MacAskill

LONDON (Reuters) – Some 46 million people in Britain could potentially benefit from a legal case brought against Mastercard <MA.N> demanding 14 billion pounds ($19 billion) in damages for allegedly charging excessive fees, according to court documents filed in London.

The case brought by a former chief financial services ombudsman alleges the payments company charged unlawfully high fees to stores when shoppers swiped their debit or credit cards and these were passed on to consumers in higher prices.

Mastercard is alleged to have done this for 16 years between 1992 and 2008, in more than 600 pages of documents filed at the Competition Appeal Tribunal on Thursday.”This was almost an invisible tax,” Walter Merricks, who is bringing the case, told the BBC. “Mastercard has behaved disgracefully in this. They have not had the reasonableness to accept that what this was doing was damaging UK consumers.”

Mastercard said in a statement it denied any wrongdoing.”We continue to firmly disagree with the basis of this claim and we intend to oppose it vigorously,” the world’s second-largest payments network said.

The lawsuit comes after the European Union’s antitrust regulator found in 2014 Mastercard’s fees to store owners to process international payments within the EU were excessive.Law firm Quinn Emanuel said the lawsuit was the largest damages claim in British history and would be brought under a law meaning consumers would automatically be claimants unless they opt out. Any person living in Britain who used a credit card, cash or cheques and was over 16 years old in the period covered by the lawsuit will automatically be part of the claim.If the 14 billion pound claim was shared equally between the number of eligible claimants, each person could receive more than 300 pounds each, according to a Reuters’ calculation.A lawyer working on the case said Mastercard charged shops fees in excess of 1 percent for card use on international transactions between 1992 and 2008.Although the EU’s anti-trust regulator only ruled Mastercard’s international fees were illegal, this impacted British consumers as it was the default fee used in Britain.

Two years ago, the European Union capped the fees retailers pay at 0.2 percent for debit cards and 0.3 percent for credit cards. Merricks in a statement said the case is a watershed moment for consumer compensation in Britain.Merricks was head of Britain’s financial services ombudsmen for ten years until 2009, helping to settle disputes between consumers and financial services companies. Britain’s banks have been caught in a range of misspelling cases in the last five years. They have paid 24 billion pounds in compensation for mis-selling loan payment insurance, making it Britain’s costliest scandal in financial services.Consumers no longer living in Britain, but who lived in the country between 1992 and 2008, can opt in to the collective claim against Mastercard.Any hearing on the case is not expected until early 2018, unless MasterCard settle it out of court.

($1 = 0.7523 pounds)

(Editing by Mark Potter and Alexander Smith)

Philadelphia passes soda tax after mayor rewrites playbook

Soda in Walmart

By Luc Cohen

NEW YORK (Reuters) – Philadelphia Mayor Jim Kenney scored a victory that eluded more than 40 U.S. public officials who took on the powerful U.S. soda industry when the city council voted on Thursday to slap a tax on sweetened drinks.

After a bitter, months-long battle, the city council voted 13-4 to approve a 1.5 cent-per-ounce tax on sugary and diet drinks. The council already approved the plan in a preliminary vote last week, and the outcome had not been expected to change.

The City of Brotherly Love became the biggest U.S. city to have such a tax. Much smaller Berkeley, California, was the first.

Similar efforts, including several spearheaded by former New York City Mayor Michael Bloomberg, were defeated after intense lobbying from organizations like the American Beverage Association, which opposes the Philadelphia move and represents Coca-Cola Co and PepsiCo Inc.

The Philadelphia tax marked a major victory for health advocates who say sugary drinks cause obesity and diabetes. But experts noted those concerns were not the focus for Kenney and other backers of the tax as they took on critics complaining that “nanny state” public health measures intrude on residents’ personal lives.

Instead, Kenney rewrote the soda-tax advocate’s playbook. He played up the benefits of the cash injection from the tax for the city’s depleted coffers. In the first year, the tax is projected to raise $91 million, and he pledged to spend funds on public programs such as universal pre-kindergarten.

The strategic shift could lend momentum to movements in San Francisco, neighboring Oakland, California, and Boulder, Colorado. Residents of those cities will vote in November on similar taxes, which could deal further blows to a U.S. soft drink industry already hit by declining soda consumption.

U.S. soda consumption fell for the 11th straight year in 2015, according to Euromonitor data.

AVOIDING THE BLOOMBERG TRAP

Bloomberg made public health a centerpiece of his tenure as New York City mayor between 2002 and 2013. He moved to limit smoking in parks and restaurants, ban transfats and require calorie counts posted in some restaurants.

On soda, he pushed for a tax, then a ban on soda purchases with food stamps, and finally a much-lampooned limit on the size of sugary drinks. His efforts were ultimately rejected, with critics decrying the moves toward a “nanny state.”

The strategy worked in Britain, where a new soft drinks levy was announced in March after officials emphasized the country’s obesity crisis, saying it cost the economy billions of pounds annually and was a huge burden on the state-funded health system.

That approach never worked in Philadelphia. Michael Nutter, the previous mayor, twice tried to pass a soda tax as a health initiative and as a way to plug a budget shortfall. He was unable to push it through the city council.

Kenney, who became Philadelphia’s mayor in January, had made a campaign pledge to provide universal pre-kindergarten, and he kept that issue as his focus. A spokeswoman said complex state laws on taxation made enacting a citywide soda tax the best option to raise revenue for that signature proposal.

Bloomberg personally contributed funding to support Philadelphia’s pro-tax campaigners.

FIZZING WESTWARD

Opponents of Philadelphia’s soda tax argued that the measure will disproportionately hurt the poor and prompt Philadelphians to travel to nearby suburbs to buy soda.

In Colorado, Boulder hopes to use soda tax revenue on health programs, and San Francisco and Oakland officials would recommend but not require funds raised to go toward obesity and diabetes prevention.

When Berkeley passed its soda tax in 2014, industry groups dismissed the measure as a fluke given the city’s largely white population and reputation as a hotbed for liberal measures.

But Philadelphia is the fifth-largest U.S. city, with 1.6 million people. “No one can trivialize it as they can trivialize Berkeley,” said Larry Tramutola, a California political strategist who worked on the Berkeley campaign and is currently leading the San Francisco and Oakland efforts.

(Additional reporting by Melissa Fares in New York; Editing by David Gregorio and Dan Grebler)