Superb opportunity for travel!

subsidy*

stability

privatisation

inflation

recovery

corporation

budget

deficit

sterling

conciliation

minister

treasury

redistribution

nationalisation

depression

census

bullion

legislation*

recession

boom

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

US Airways May Ask For OK to Cut Wages

By Barbara De Lollis, USA TODAY

September 16, 2004

Labor leaders at US Airways expect management to soon seek bankruptcy court permission to cut wages for members of some of its five unions. Pilot union leader Bill Pollock said Wednesday that he's been warned by senior management that pilots must act on concessions within about a week. Otherwise, Pollock said, the company will likely turn to bankruptcy court for help. Faced this week with a deadline for $110 million in pension fund contributions and stalled talks with unions, the No. 7 airline filed Sunday for bankruptcy protection.

Since spring, management has been seeking a third round of concessions from unions totalling $800 million annually. Following earlier concessions, most US Airways captains make between $120,000 and $150,000 annually; first officers, somewhat less. US Airways has been burning through about $1 million a day, with no real prospect of finding outside financing for operations. Virtually all the airline's assets are pledged to the government to secure a loan guarantee that helped it escape its first bankruptcy. The government has granted the airline use of part of the loan proceeds as interim financing through Oct. 14.

US Airways' daily losses could double or triple as travel slows because of the normal autumn downturn and hurricane disruption at key Florida locations, says airline consultant Robert Mann. He expects, at most, unions to have two or three weeks to reach agreements before the company asks the court to rescind contracts. US Airways spokesman David Castelveter declined to specify when the company might address labor costs. "We will move quickly to reach our cost-cutting objectives," he said.

Using a provision of the bankruptcy code, US Airways could ask the judge to void a labor contract, seek emergency pay cuts or both. United Airlines, in its bankruptcy, sought similar permission. It gained concessions without using it. Before the latest US Airways filing, talks with pilots seemed the most promising. They fizzled last week amid union divisions. Pilot union spokesman Jack Stephan says progress appears unlikely as long as members of union leadership remain divided. Pilots next meet on Monday.

US Airways isn't guaranteed victory in using the court to cut labor costs, says bankruptcy lawyer Howard Seife at Chadbourne & Parke in New York. Management must show it negotiated in good faith and gave unions sufficient information to evaluate pay-cut proposals. "US Airways will have to make its case that in order to survive, it has to be able to reject" its union contracts, Seife said.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

Britain among World’s Leading Low-Tax Havens

By David Smith

THE SUNDAY TIMES

Britain has one of the most business-friendly tax regimes in the industrialised world, a survey shows. Britain, along with Ireland, has the lowest personal and corporation tax rates in Europe. Only America has lower taxes.

The survey, to be published this week by Forbes Global and carried out by Jack Anderson, a senior tax consultant with Ernst & Young in Paris, constructs a tax “misery index” for each country by adding up its top tax rates on personal and corporate income, plus Vat, wealth taxes and social-security taxes.

America’s misery index is the lowest at 90%. Ireland’s is 109,5% and Britain’s 109,7%. Japan is on 123,6% and Switzerland 125%.

The survey suggests that despite the “stealth” taxes introduced by this government and its predecessor, Britain remains by international standards a low-tax location. It also shows that lower tax rates, for both individuals and companies, are part of an international trend. Japan has cut the top corporation tax rate from 48% to 41% and the top rate of income tax from 65% to 50%.

France is at the top of the list as the most taxed industrialised country, with a misery index of 193%. Belgium is on 171%, Italy 154%, Sweden 151%, Austria 147% and Germany 143%.

Anderson said: “European statesmen profess to be baffled as to why their economies are failing to create the new jobs needed to keep their populations off the dole. If you want less of something, tax it. That explains why unemployment correlates almost perfectly with the tax misery index”.

High taxes, according to his analysis, explain the “brain drain” from continental Europe to Britain and America – 60,000 French engineers work in Silicon Valley and 50,000 French professionals in London – as well as an annual net direct investment outflow of more than £100 billion a year. Employing a middle manager on a salary of £30,000 a year costs a French company £43,000 a year because of statutory employment costs.

Changes could force lower taxes throughout Europe. Germany’s tax-reform plan, which has just been published, involves a cut next year in corporation tax on retained and distributed earnings to 25%, a cut in the top rate of income tax from 51% to 48,5% and a cut in the standard rate of income tax from 22.9% to 19.9%. Capital-gains tax on corporate shareholdings will be reduced to zero under the deal by which the banks agreed to help rescue Philip Holzmann, the failing German construction giant.

“These are hugely significant changes”, said Steven Bell, Deutsche Bank’s chief London economist. “At the very least they will stem the flow of investment and people out of Germany”.

Although the tax-reform plans have yet to receive parliamentary approval, which will take several

months, they could also result in an outbreak of “tax competition” in Europe as other countries seek to match the German changes.

Anderson calculates that the German reforms will cut the country’s misery index from 143% to below 124%.

He predicated the reforms would go through parliament largely untouched. “They will be emulated to varying degrees by France and the Continent’s other high-tax countries”, he said. “This will propel Europe’s economies for years to come, just as the US and UK economies continue to benefit from the Reagan and Thatcher tax cuts of the 1980s”.