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Prime housing market hit by tax changes

Tax rises on high-value properties, along with the prospect of a "mansion tax" and the uncertainty caused by a looming general election, have made homes that are worth more than £2m much harder to sell, according to research for the Financial Times. More than half of all properties in London’s most expensive central areas have been withdrawn unsold in the six months to the end of June, the research by the property data company Lonres and analysts Dataloft shows. Since March 2012, buyers of homes worth more than £2m have been charged 7 per cent stamp duty. Those buying houses worth less than £125,000 pay no stamp duty, while purchasers of properties worth between £125,000 and £2m pay a sliding scale of between 1 and 5 per cent. Before the top rate was introduced, between 20 and 30 per cent of £2m-plus homes on the market in London’s most expensive central areas were withdrawn unsold. That proportion rose after the new stamp duty band was brought in, with the trend intensifying this year. Anthony Payne, Lonres managing director, said: "The £2m stamp duty and mansion tax threshold remains a sticking point in the market." The figures are evidence that taxes do have an impact on the market for high-end homes, and are the latest example of the slowdown at the top end of London’s housing market. Both Labour and the Liberal Democrats have promised to add to the financial burden on the owners of high-value homes by introducing an annual mansion tax on residences worth more than £2m if they win next May’s election. Labour are currently leading in the polls. "There’s no doubt that the upper end of the prime central London housing market has started to slow and it comes as little surprise," said Mr Payne. "A raft of taxes aimed at the upper price thresholds, the strengthening of sterling, talk of a mansion tax, increased stability in the global economy and the upcoming general election have all combined to affect [buyer] sentiment." One in five properties available for sale in prime central London in the first six months of this year had its price reduced, Lonres and Dataloft found. Homes worth more than £5m received the biggest discounts, with sellers cutting prices by an average of 10 per cent in an attempt to attract buyers. Withdrawals were particularly concentrated in the £2m-£5m price bracket. Two-bedroom flats were the most common type of property to be withdrawn. London’s most luxurious areas – Knightsbridge and Mayfair – saw the highest proportions of withdrawals. Less well-known areas, such as Pimlico and West Brompton, which are on the fringes of London’s prime zone, saw fewer withdrawals. Roarie Scarisbrick, a partner at property-buying advisers PropertyVision, said the increase in taxes was making it harder for families in London to move up the housing ladder. "The trade-up gap grows ever wider and the associated transaction costs make moving less and less attractive, so less stock means higher prices," he said. "Incinerating £100,000 or more just in [transaction] costs makes people think twice about moving." Homeowners who sought to cash in but did not need to sell were likely to withdraw their properties from the market if they could not achieve their desired price, he said. "The high number of withdrawn properties is a reflection of overambitious and often discretionary sellers failing to find a buyer," he said. "Expect to see more withdrawals as the discretionary sellers give up and stay put when they can’t sell."

Big tax inverters ‘have $21bn offshore’

Three US companies seeking to use controversial takeovers to cut their US tax bills hold at least $21bn in "trapped" offshore cash that the deals could unlock. According to data compiled by Moody’s for the Financial Times, the biggest offshore cash piles held by companies pursuing so-called "tax inversions" belong to Medtronic, a medical devices group; AbbVie, a drugmaker; and Applied Materials, a technology group. The deals enable US companies to shift their tax domicile to a country with lower tax rates by acquiring a foreign rival. The tax benefits include lower-cost access to existing offshore cash and to future non-US earnings. Thirteen inversion deals worth $178bn have been announced since the start of 2013, according to Dealogic. Nine other companies doing inversions do not disclose their offshore cash while Mylan holds just $174m outside the US. The deals have sparked political outrage, with President Barack Obama describing the companies as "deserters" that are "renouncing their US citizenship". Medtronic has predicted that its inversion would cut its effective tax rate by 1 to 2 percentage points from the 18 per cent it paid last year. Applied Materials said its deal would cut its tax rate from 22 per cent to 17 per cent. AbbVie said the inversion would reduce its tax rate from about 22 per cent to 13 per cent. However, the three companies have said that tax benefits are not the primary motivations for their deals. Attacks on inversions will ramp up again this week as lawmakers return to Washington and the Democrats seek to make them a campaign issue ahead of midterm elections on November 4. Chuck Schumer, a senior Democratic senator who will this week introduce legislation to curb the deals, told the FT: "We need to move quickly and aggressively to curtail inversions and prevent companies from using shady accounting practices to avoid their US tax obligation." According to Richard Lane at the rating agency Moody’s, who compiled the figures, US non-financial companies hold a total of about $950bn in overseas cash and liquid investments. The obstacles to accessing it are not insurmountable, but companies are reluctant to do so while domiciled in the US because repatriating it would trigger a US tax liability. Inversions allow companies to move cash more freely between overseas subsidiaries and their new foreign parents while bypassing US tax collectors. They will also be able to lend future earnings from the foreign parent to their US businesses and deduct interest payments on the debt from US tax liabilities, a practice known as "earnings stripping" that Senator Schumer is seeking to stop. However, Bret Wells, a law professor at the University of Houston, said companies could not simply remit existing cash to their new foreign parents free of US tax, because their old foreign subsidiaries would remain owned by a US company, which would in turn be owned by the foreign parent. "The bigger tax benefits will come from creating new foreign subsidiaries and channelling their future overseas earnings into them. They will have never been under a US ownership structure and will be beyond the reach of the US taxman," he said. Medtronic, which has struck a $42.9bn deal to buy Ireland-based Covidien, has $13bn of cash outside the US. It has said it wants to use cash generated outside the US to "invest much more aggressively in the US". Applied Materials has agreed a $9.3bn merger with Japan’s Tokyo Electron and will be domiciled in the Netherlands. The US group has $2.4bn in offshore cash and has said the inversion will create "a very free flow of cash" that could be used to pay dividends and buy back stock. AbbVie has a cash pile of $10.2bn and says a "significant portion" is overseas. Moody’s estimates conservatively that at least half is outside the US. AbbVie, which has agreed to buy Ireland-domiciled Shire for £32bn, has said US taxes on repatriated cash put it at a disadvantage to non-US rivals in making investments. The US Treasury is exploring ways to use executive action to curb the deals in the absence of legislation from Congress.

Telecoms groups reject sharing networks

A government demand to improve mobile phone coverage in Britain’s rural areas by asking operators to share networks has been rejected by telecoms executives, forcing ministers to consider other options. Sajid Javid, the culture secretary, has made "national roaming" an important part of attempts to improve the UK’s much-criticised mobile services before next year’s general election. Mobile coverage in rural areas has been particularly criticised by customers, as well as by David Cameron after he struggled with reception on journeys around Britain. National roaming would allow customers to use the network of any operator for voice calls in "not spots" – areas where their carrier has no coverage. Overseas roaming is similar in concept, by allowing travelling mobile customers to use the network provided by a local operator, although national roaming has not been adopted elsewhere in the world. Ed Vaizey, the digital economy minister, wrote to mobile operators to seek agreement on national roaming plans by the start of next year. He has taken oversight of the project, although Mr Javid is still responsible for the delivery of the government’s broadband plans. However, mobile executives replied, rejecting the idea as unworkable in the time suggested, as well as undesirable in principle, according to two people with knowledge of the discussions. "It was rejected. There are reasons why it wouldn’t work from a technical and legal perspective," said one person close to the issue. "The letters outlined the complexity of it and pushed for alternatives." Mr Vaizey has since responded with requests for the companies to offer different ideas to meet a similar objective in extending voice services across the UK, the sources said. The Department for Culture, Media and Sport is also engaging in its own cost and benefit analysis of national roaming, which remains a key objective of Mr Javid’s. Industry executives insist they are ready to work with the government to reduce the number of mobile not-spots. One idea put forward would be to share the basic mast infrastructure used to transmit mobile signals across the big operators. Companies such as EE and Vodafone have already made improvements to rural mobile services. One executive pointed out that national roaming had not been adopted elsewhere which, he said, reflected the problems of ringfencing voice communications and individual parts of the network. The industry also argues that there would be less incentive to invest in networks to try to beat rivals on quality of service. Mr Vaizey said: "We are investing up to £150m to improve mobile coverage in areas where there is currently no coverage from any of the mobile network operators through the Mobile Infrastructure Project. "There are also areas of the UK that have coverage from some MNOs but not all of them. We’re looking closely at ways to improve mobile coverage in these areas, including national roaming."

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Merkel Ally Seehofer Criticizes ECB’s ABS Plan, Bild Says 2014-09-07 18:10:03.547 GMT

By Claudia Rach Sept. 7 (Bloomberg) -- CSU head and Bavaria PM Horst Seehofer says CSU and Angela Merkel’s CDU shouldn’t leave certain topics to anti-euro Alternative for Germany, or AfD, Bild Zeitung reports in preview of tomorrow’s edition. * Seehofer cites as example ECB’s plans to start buying assets, saying it’s frightening many people that ECB may open bank’s money tap and buy junk paper at same time * NOTE: Sept. 4, Merkel lawmakers lash out at ECB urging long- term exit strategy * NOTE: Earlier, ECB stimulus steps announced Sept. 4 may total EU800b: Spiegel Link to Bild Zeitung story (in German): http://tinyurl.com/pernlsx

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To contact the reporter on this story: Claudia Rach in Berlin at +49-30-70010-6219 or crach1@bloomberg.net To contact the editors responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net

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BN 09/07 16:06 Schumer Draft Tax Plan Against Inversions Could Reach to 1994

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Schumer Draft Tax Plan Against Inversions Could Reach to 1994 2014-09-07 16:50:00.43 GMT

By Richard Rubin Sept. 7 (Bloomberg) -- The legislative proposal, which faces high hurdles in a deadlocked Congress, may be part of Democrats’ attempts to penalize cos. that cut their tax bills w/cross-border mergers known as inversions and get added to political strategy to blame Republicans. * Proposal isn’t final and subject to change, aide to Senator Charles Schumer says * Schumer hasn’t decided when he will introduce legislation * NOTE: Sept. 4, Treasury Secretary Lew Urges Closing of ‘Wasteful’ Corporate Tax Loopholes

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To contact the reporter on this story: Richard Rubin in Washington at +1-202-654-7307 or rrubin12@bloomberg.net To contact the editors responsible for this story: Joe Sabo at +1-609-279-3119 or jsabo@bloomberg.net Dan Hart

Fed’s Plosser: Fed Should Raise Rates ‘Sooner Rather Than Later’

NEW YORK–Federal Reserve Bank of Philadelphia leader Charles Plosser said Saturday the U.S. central bank will likely need to raise rates "sooner rather than later" to keep the economy running smoothly.

"I am not suggesting that rates should necessarily be increased now," Mr. Plosser said in the text of a speech to be given in Amelia Island, Fla.

That said, preparing to raise interest rates sooner than many now expect "may allow us to increase rates more gradually as the data improve, rather than face the prospect of a more abrupt increase in rates to catch up with market forces, which could be the outcome of a prolonged delay in our willingness to act," the official said.

Mr. Plosser is a voting member of the monetary policy setting Federal Open Market Committee. The official dissented at the central bank’s last gathering in late July, believing the institution needed to stop committing to keep rates very low for well into the future. He wanted the central bank to make the outlook for policy more contingent on incoming data. Mr. Plosser reiterated his case for this change in his speech.

"We have moved much closer to our goals since last December, and, as we do so, the stance of monetary policy should reflect such progress and begin to gradually adjust. That is the essence of being data dependent," Mr. Plosser said. "Our first task is to change the language in a way that allows for liftoff sooner than many now anticipate and sooner than suggested by our current guidance," Mr. Plosser said.

While Mr. Plosser hasn’t found many on the Fed to embrace his view that a rate increase from what are currently near-zero levels are getting closer, a number of central bankers are increasingly willing to consider changes in the guidance about future monetary policy.

On Friday, Boston Fed leader Eric Rosengren, who thinks monetary policy needs to stay very easy, agreed that it is time to change how the Fed describes the monetary policy outlook. In his speech, Mr. Plosser was upbeat about the state of the economy, and he brushed off the soft turn in August hiring, reported Friday.

"I believe consumer and business spending will help real GDP to grow at about 3% for the remainder of this year and next before reverting to trend, which I see as about 2.4%," he said. On hiring, the official said "despite the slowdown in August, job creation has improved markedly this year."

Mr. Plosser also said that price pressures are "drifting" up to the Fed’s 2% target.

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BN 09/07 12:20 *FIAT CEO SAYS CAN'T ACCEPT FERRARI CURRENT F1 RESULTS BN 09/07 12:19 *FIAT CEO SAYS FERRARI SHOULD IMPROVE FORMULA 1 RESULTS BN 09/07 12:17 *FIAT CEO REITERATES PLAN FOR OCT. 13 NEW YORK LISTING BN 09/07 12:16 *FIAT CEO ON MONTEZEMOLO: EVERYBODY NEEDED, NO ONE INDISPENSABLE BN 09/07 12:13 *MARCHIONNE: DECISION ON TREASURY WITHDRAWAL SHRS SALE END OCT BN 09/07 12:10 *MARCHIONNE SAYS FCA BOARD TO REVIEW CAPITAL NEEDS END OF OCT BN 09/07 12:09 *MARCHIONNE: 'NOTHING ON THE TABLE' ON MONTEZEMOLO BN 09/07 12:09 *MARCHIONNE SAYS HE WOULDN'T HAVE MADE MONTEZEMOLO'S COMMENTS BN 09/07 12:07 *MONTEZEMOLO LEAVING FERRARI NOT ON AGENDA: MARCHIONNE BFW 09/07 12:01 *FIAT CEO MARCHIONNE SPEAKS TO REPORTERS IN CERNOBBIO, ITALY BN 09/07 12:00 *MARCHIONNE: DISCUSSION ON CAP NEEDS END OF OCTOBER

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Fiat CEO Says Can’t Accept Ferrari Formula One Performance 2014-09-07 12:56:43.556 GMT

By Tommaso Ebhardt Sept. 7 (Bloomberg) -- Fiat CEO Marchionne says change of Ferrari chairman “not on the agenda, nothing on the table.” * Marchionne says “everybody is needed, nobody is indispensable” on Ferrari Chairman Montezemolo * Marchionne says he wouldn’t have Montezemolo’s remarks yesterday * NOTE: Fiat controls Ferrari * NOTE: Montezemolo Says He Committed to Ferrari Job For Further 3 Yrs {NSN NBHAZ76JTSE8 <go>}

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To contact the reporter on this story: Tommaso Ebhardt in Milan at +39-02-8064-4231 or tebhardt@bloomberg.net

To contact the editor responsible for this story: Chiara Vasarri at +39-06-4520-6325 or cvasarri@bloomberg.net

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BN 09/07 13:42 *VODAFONE TO BEGIN MOBILE PAYMENT SERVICE IN U.K. NEXT MONTH: FT

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Vodafone to Begin Mobile Payment Service in U.K. Next Month: FT 2014-09-07 13:50:18.264 GMT

By Joe Sabo Sept. 7 (Bloomberg) --Co. has developed service with Visa that will work with special SIM card embedded with NFC (near field communication) technology to swipe for payments at contactless sites, FT says. * Similar services already in Italy, Germany, Spain, Netherlands * Application to be available only on Android smartphones Link to story: http://on.ft.com/1rUIknS

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To contact the editor responsible for this story: Joe Sabo at +1-609-279-3119 or jsabo@bloomberg.net