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The UK has finally rained on the parade of tech giants operating in its shores without paying taxes. Or at least, they will be starting in 2020. The government said that they will be introducing dramatic changes to how large tech companies are taxed to ensure that they pay their fair share.

UK chancellor Philip Hammond made the announcement on Monday that the UK would soon be taking action with a “digital services tax” enforced by 2020.

This measure will help the country raise some £400 million per year ($510 million) and was necessary to ensure fairness in the tax system. The chancellor said:

“It is only right that these global giants with profitable businesses in the UK pay their fair share.”

About time too considering that companies like Amazon and eBay have been operating in the country for years either without paying a dime in taxes or by making next-to-zero contributions.

The nature of internet businesses that undercut retailers with cheaper products has caused much anger from businesses in the UK both large and small for not paying corporate taxes and for creating an unfair competitive advantage.

How Will the Digital Services Tax Work?

The UK will impose an additional 2% tax on any revenue generated in the UK from search engines, online marketplaces, and social media platforms.

If Facebook was starting to feel unwelcome in Europe after being fined in a German court for data infringement and facing a GDPR fine of up to $1.63 billion, this latest announcement will serve as another blow to Zuckerberg & Co.

It should be noted that the tax will only apply to profitable companies with global annual revenues of at least £500m ($635 million).

The chancellor also said that the UK is open and committed to incorporating international reforms on digital services tax, however, until such time as an agreement had been reached, UK taxes would apply.

A lawyer working with Clifford Chance quoted in FT said that the new law directly targeted at the likes of Facebook, Google, Apple, and Amazon was:

“A clear attack on the large internet companies.”

With the exception of Spain, who introduced a draft last month to impose a digital services tax by next year, the UK’s new measures on digital tax are the among the strictest yet.

Possible Global Backlash

The UK proposal will be investigated by the European Commission, and we all know how swimmingly the UK gets on with them. If the measure is seen as protectionist, it could trigger considerable backlash from the EU since it is unlikely that any British company will be affected by the measure.

The US may also react negatively to the digital services tax, seeing it as a direct attack on its companies in one of its more successful industries.

While many retailers across Britain will welcome the news as leveling the playing field a little, some see the tax as a potentially dangerous move that could impact technology innovation in larger companies–and even spark a trade war at a time when the country is losing allies fast.

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Although HSBC’s earnings in Q3 slightly missed expectations, they were still up 28% on Q3 last year. Despite the growth, HSBC share prices are down 20% since the beginning of 2018.

HSBC hit pre-tax profits of $5.9 billion for Q3 from revenue of $13.79 billion. Revenue is up 6.32% illustrating cost savings within the bank have resulted in a greater profit share. Actual operating expenses were $7.96 billion down from $8.55 billion in Q3 2017.

In HSBC’s earnings statement CEO John Flint said:

“These are encouraging results that demonstrate the revenue potential of HSBC.”

HSBC’s shares are listed on both London and Hong Kong Stock Exchanges, its share price for both listings has declined by over 20% during 2018. The fall is mainly attributed to global economic uncertainty stemming from trade woes.

In Hong Kong, HSBC shares have risen today by 5% and in London by 5.63% so far.

Recent Profits from Asian Markets

HSBC is currently employing a “pivot to Asia” strategy which also seems to have yielded results. Three-quarters of Q3 profits originate from Asian markets.

CEO Flint and HSBC chairman Mark Tucker are still in their first year of leading the banking giant. Flint says although there are concerns over trade disputes between the US and China, an offshoot is likely to be more growth in trade within Asia itself.

HSBC’s Long-Standing Relationship with Saudi Arabia

HSBC is the largest overseas bank operating in Saudi Arabia and was a key sponsor of the country’s Future Investment Initiative “Davos in the desert.” Despite being a sponsor, CEO Flint made the decision not to attend saying:

“It was not an easy decision, but it was the right thing to do in the circumstances.”

Flint has defended HSBC’s operations in Saudi Arabia due to HSBC’s 1950’s onward, long history in the oil-rich economy. Flint said:

“We have 4,000 employees in Saudi Arabia and many customers, so we have a responsibility to them.”

Flint, aged 50, took over as CEO of HSBC in February 2018 after working at the bank for nearly 20 years. 14 of which were spent developing Asian markets.

In 2004, he was responsible for integrating HSBC’s investment activities under “HSBC Global Asset Management,” and went on to become the division’s CEO in 2010. Flint receives a salary of around $2.9 million.

HSBC is the largest bank in Europe and the seventh largest globally with assets under management of over $2 trillion. Its market value as a company is over $200 billion.

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Snap Inc., developer of the infamous social media app Snapchat, lost 1% of its users in the third quarter of 2018. Its stock also declined by 17.5% on Friday, before clawing back up to negative 10%. Snapchat currently entertains 186 million users, with more than 200 billion Snaps (images) saved by users in their Memories.

Snapchat’s Decline After a Controversial Redesign

In the second quarter of 2018, 3 million users left Snapchat for various reasons. The majority of these people voiced their frustration with the redesign of the app in November 2017.

Prior to the update, Instagram had introduced Stories for its users as well. However, it wasn’t able to attract many people until Snapchat revamped their app.

While people were trying to familiarize themselves with the redesign, various celebrities took to social media to criticize the app. On February 2018, Kylie Jenner, reality TV star and owner of Kylie Cosmetics, asked her followers on Twitter whether she was the only one who wasn’t opening Snapchat anymore.

sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.

— Kylie Jenner (@KylieJenner) February 21, 2018

Due to her tweet, Snapchat’s stock went down by 7.2% and it lost over $1.3 billion in market value.

The nightmare didn’t end there. Snapchat came under scrutiny for allowing an ad which asked users whether they would “Slap Rihanna” or “Punch Chris Brown.”

Famous singer Rihanna took to Instagram to criticize Snapchat for making fun of domestic violence victims and urged her fans to delete the app altogether.

Snap Inc. Struggles to Remain Relevant

According to the third quarter report published by Snapchat, the company’s revenue has increased to $298 million. Snapchat has also partnered with media companies such as CNN to deliver news and added 21 different shows on Discover. Snap Inc. is also introducing a desktop app for Windows and MacOS.

Another interesting feature is a result of the partnership with Amazon, whereby users will be able to buy products by simply taking a picture of them from the Snap camera.

Hooked, an app that provides stories in the form of texts has also joined hands with Snapchat to release a science fiction and thriller series Dark Matter. The story was made available on Discover on October 26 and will be updated on October 30.

Last week, Snap Inc. announced that former Amazon and Huffington Post executives, Jeremi Gorman, and Jared Grusd, were welcomed to the roles of chief business officer and chief strategy officer.

The announcement came after the ex-chief strategy officer Imran Khan left his position in September 2018. Khan’s salary was recorded to be $441,923 in 2017. The company also gave him a ‘stock performance award‘ worth $100 million in the same year.

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Things are going from bad to worse for China this year. A survey released today by the American Chamber of Commerce (AmCham) South China revealed that over 70% of US companies with operations in the region are either delaying further investment or seriously considering relocation of their manufacturing facilities to other countries.

As the US-China trade war begins to eat into profits, American companies are particularly affected by the ongoing dispute.

The AmCham surveyed 219 companies in Southern China, of which one-third came from the manufacturing sector.

A massive 64% of companies were looking into relocation outside of China, although just 1% said that would mean reestablishing bases in North America.

On top of that, almost three-quarters of American businesses in Southern China are stalling investment in the country, while just half of their Chinese counterparts are taking a similar stance.

Although, that also means that some 50% of Chinese companies in Southern China are also looking for more affordable pastures, with Southeast Asia in view.

Rising Competition from Foreign Rivals

US companies surveyed reported facing rising competition from countries like Germany and Japan, as well as cheaper production in India and Vietnam. Harley Seyedin, President of AmCham South China, told Reuters:

“It could very well be that people are holding back on placing orders until times are more certain or it could very well be that they are shifting to other competitors who are willing to offer cheaper products, even sometimes at a loss, in order to get market share… One of the most difficult things about market share is once you lose it, it is very hard to get back.”

The companies that have been hardest hit by rising US tariffs are those in the retail and wholesale sectors, whereas companies suffering worse from the hiked Chinese tariffs hail mainly from the agriculture-related sphere.

The AmCham survey was held between September 21 and October 10, shortly after US tariffs became applicable on some $200 billion worth of Chinese goods and a Beijing response imposed tariffs of their own on $60 billion of US, leading to the trade war that’s damaging both economies.

No End in Sight for US Firms in Southern China

At the current time, there is no end in sight to the trade war, with the US set to impose further tariffs at the start of next year. While the signs are not looking good for US businesses in China or the export-reliant cities they operate in, President Trump is expected to meet with President Xi Jinping at the G20 summit next month. It is hoped that they will come to some kind of amicable agreement.

The biggest concern of the companies surveyed was that the rising cost of goods would result in reduced profits. One-third of companies already reported that the trade war had affected volumes ranging from $1 million to $50 million, with 10% of manufacturers reporting a higher volume loss in excess of $250 million.

Featured image Shenzhen from Shutterstock.