THE European Union is about to rule that Gibraltar has acted illegally over its offshore status, for...
THE European Union is about to rule that Gibraltar has acted illegally over its offshore status, forcing the last British territory in Europe to rewrite its tax code and threatening it with bankruptcy with liability running into billions of pounds, according to this morning's Times newspaper.
After an investigation by the EU Competition Commissioner, Brussels is expected to declare that Gibraltar acted unlawfully in not notifying the Commission of tax concessions it offered offshore finance companies.
Such a ruling could destroy the Rock's attempts to set itself up as an offshore financial centre and land Britain, ultimately responsible, with a vast fine in back payments. The move would threaten thousands of jobs in Gibraltar, which was encouraged by Britain to develop its offshore financial industry after the closure of the British naval base which once accounted for 60 per cent of the Rock's economy.
Preparing for the worst, Gibraltar is considering radical changes to taxation which would not discriminate between local residents and outsiders. About 20 per cent of Gibraltar's labour force would be affected by a ruling, and Britain says that it is taking the matter seriously.
Britain has recommended to Brussels that it does not seek repayment of all the tax concessions, should the ruling go against Gibraltar. In the worst case, these could amount to ten years' worth of taxation.
Merrill Lynch HSBC, the online wealth management joint venture, is scaling down its global expansion amid intense competition among retail brokers to serve affluent customers, continues the FT.
Merrill HSBC said on Thursday it would not be opening a service in Germany or Japan as planned, but would concentrate on the UK, Australia and Canada.
Merrill will eliminate the quarterly £18 ($26) portfolio fee charge, which was putting off some investors. It is also reducing the trading fee charged to investors who deal via telephone to £19.95 - the rate for online trades.
Prudential, the life insurer, is today expected to announce plans to cut 2,000 jobs, representing 20 per cent of its UK workforce, says the Times.
The job losses follow a strategic review by Mark Wood, the former chief executive of AXA Sun Life, who was recruited to run Prudential's UK and European operations.
This is the second redundancy programme announced by Prudential this year. In February the company closed the UK salesforce with the loss of 2,000 jobs.
The move is in response to the economic slowdown. M&G, Prudential's fund management operation, and egg, its majority owned Internet banking arm, are not thought to be affected.
At the same time as announcing job cuts, Prudential has struck an £810m ($1.2bn) deal with Winterthur, whereby the insurance arm of Credit Suisse would take over the general insurance division of the UK's second biggest insurer, and is also likely to phase out its Scottish Amicable life assurance brand, says the FT.
The whole of the Prudential general insurance division, including 1,200 staff, is being transferred to Winterthur. The deal is expected to add to Credit Suisse's earnings in the first year.
Winterthur is understood to have beat rival bids for the business from Direct Line, Royal & Sun Alliance and CGNU.
Prudential will continue to underwrite the policies and will form a joint venture with Winterthur through its UK brand, Churchill, for new business.
Skandia, the Swedish insurance and savings group, on Thursday blamed weak global equity markets and the September 11 terrorist attacks for larger-than-expected nine-month losses, adds the FT.
Its biggest problems were in the US, where sales of variable annuities plunged and the profit margin on new sales fell to a negative 0.8 per cent.
The group recorded a nine-month operating loss of SKr5.7bn ($538m), after sliding into a third-quarter loss of SKr4.4bn compared with a SKr1.7bn profit a year ago.
Skandia accounts on an embedded value basis, which means that profit rather than the balance sheet is hit by short-term market fluctuations.
Sales of single-premium products have been hardest hit by the stock market turbulence, with overall sales of unit-linked assurance falling 34 per cent to SKr72bn over the nine months. In the US - the group's most important market - unit-linked sales halved from SKr61bn to SKr31bn.
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