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Thursday, 28 April 2016

Ten things that you should realize about tax avoidance and evasion after the publication of the Panama Papers Pt II

This is finally the follow-up on my last article, posted roughly two weeks ago. Labour-oriented obligations stopped me from finishing it earlier, but here it is.

6. Unless a global tax harmonization is established, the race for the best establishment climate for multinational companies is a tax race to the bottom, with only losers in the end.

Tax rulings – even though they are not destructive by default, as they offer clarity to multinational companies about their tax obligations – have turned into a weapon of fiscal mass destruction for many countries. 

Very often the countries that need the tax payments most – often poor countries in the Third World that either have supplied the raw materials and commodities to the multinationals involved or that are responsible for a substantial part of their realized profits – are deprived from receiving tax money by such rulings. The profit money, made during the commercial activities in these countries, flows towards ‘the path of least fiscal resistance’, aka the countries with the lowest tax rates.

While the original beneficiary – the country were the sales and profits were realized and where the tax money should have been paid – does not get the tax proceeds at all, the eventual beneficiary of the tax money – in most cases, the country having the most lucrative tax ruling for the multinational involved – does only get a token amount of tax money, that stands in no relation with a fair tax payment on realized sales and profits.

And so, often in three or four stages, the massive corporate profits disappear from the face of the earth: from f.i. Angola to Bermuda, with one or two layovers in The Netherlands, Ireland or Luxemburg.

Even though every tax-haven (including The Netherlands, the UK and Luxemburg) only gets a token amount from these corporate profits ‘on their way to the tropics’, no country wants to give such tax-rulings up for free. This is due to the fact that these fiscal rulings, and especially the fiscal and legal arrangements surrounding them, create substantial numbers of high-yield fiscal and legal jobs.

And the countries that still not have favourable, fiscal arrangements for such multinationals will do their utmost to also grab a slice of the pie, in order to make a few bucks on money that is not theirs in the first place. And so the perfect race to the bottom is established.

The only way to fight this phenomenon of corporate tax avoidance/ evasion is a global, fiscal harmonization. While this is perhaps a highly Utopian concept, it will prove the only way to fight this destructive behaviour by multinationals, but also by rich individuals, who use all kinds of (il)legal fiscal constructions, in order to dodge taxes. 

And even though multilateral agreements between all countries in the world will prove to be virtually impossible to achieve, the United States could perhaps force such a tax harmonization upon the rest of the world ‘at gunpoint’, by imposing draconian penalties on offenders of American tax laws.

7. The international battle against tax avoidance / evasion is a battle of ‘pots calling kettles black’.

Unfortunately, all countries are adamantly against tax avoidance and evasion... unless they do it themselves or profit (in)directly from it. Especially The Netherlands is a text book example of this schizophrenic behaviour.

In The Netherlands, it is allowed for the Internal Revenue Service to buy and use data sets, which are stolen or expropriated from banks and financial institutions in notorious tax havens (Switzerland, Liechenstein, Luxemburg and elsewhere), often by resentful (ex-)employees.

Where in the normal, economic circuits such behaviour would be called pilferage and should and would be considered inadmissible in court, it has become ‘a means to an end’ for the fiscal authorities, used to hit notorious tax evaders with stashes of money hidden in tax-havens after all.

And while I have not even the least sympathy for tax evaders (and even for avoiders), I consider this kind of pilferage nevertheless a crime, committed by an official government organization and therefore inadmissible in court, as far as I'm concerned.

Especially, as The Netherlands has spun a fiscal web with favourable tax rulings for multinationals, extremely low tax rates for certain kinds of taxes – for instance on foreign dividend yields and yields coming from related rights and patents-in-hand – and offers ample possibilities for the creation/establishment of letterbox firms, as ‘de jure’ headoffices for f.i. Russian oil companies or British / Irish rock bands, in order to avoid (or evade) taxes.

And not less hypocrite are for instance the United States, which hosts genuine tax havens, like the states Nevada, Wyoming and South Dakota or the United Kingdom, which is described by its own public broadcaster BBC as a tax haven for multinationals.

Summarized, all countries hate each other's guts, in case their own citizens and companies are offered possibilities to avoid / evade their own imposed taxes, but don’t feel bad about offering such possibilities to companies and citizens from other countries.

8. Don’t automatically expect your leaders to pay their fair share in taxes. The chance that they don’t, is substantial.

PM David Cameron and Russian president Vladimir Putin were amongst the most conspicuous ‘users’ of the Panamese law firm-used-for-tax-avoidance Mossack Fonseca, but probably many more global government leaders try to hide their own nest eggs cleanly out of sight, while urging their own citizens to pay their taxes or else...

It is like in the famous quote of George Orwell’s Animal Farm:“All animals are equal, but some animals are more equal than others.”

Of course, such government leaders understand the importance of paying taxes for the financial wellbeing of their state or country, as no-one else does. Nevertheless, they consider their own efforts and sacrifices for God, their country and ‘momma’s apple pie’ as having such magnitude, that ‘special arrangements’ apply to themselves and to their (political / personal) friends and beneficiaries.

The results of such destructive behaviour is that tax payments become more and more a common man’s party, while the elites – both represented by the large companies and rich and famous private persons – find both ways and justifications for not paying their fair share of taxes.

9. The battle against corporate tax avoidance / evasion is a battle fought with one’s feet and one’s wallet.

Even though the playing cards in the deck are not stacked in favour of the ordinary tax-payers, he or she still has a possibility to show his opinion about private and especially corporate tax avoidance / evasion: don’t use the products and services of such tax-avoiding companies! 
  • Abolish certain hamburgers, when the issuing chain of restaurants evades taxes at home or abroad;
  • Don’t drink coffee from that famous store chain, when this company ‘burns’ its profits, using opaque constructions regarding the delivery and payment of ‘their special and unique’ coffee bean blend;
  • Don’t shop at store chains that avoid / evade taxes;
  • Don't do your private or corporate, financial transactions at banks that help others to avoid / evade taxes. Don't save or lend money there and don't execute your stock transactions at such a bank;
  • Don’t buy clothes or shoes from certain famous brands, when not a fair share of the producer’s profits is paid in taxes. 
Just like with the alleged usage of children’s labour by western companies or the manufacturing of clothes and shoewear under extremely dangerous circumstances, the consumers have a voice that can be heard in the most remote places and in the boardrooms of the leading companies; the only thing that they have to do is not squandering their principles on cheap offers and impressive television advertising campaigns.

10. One day, tax avoidance / evasion among companies and wealthy citizens could spur the end of capitalism, one way or another. An uprise of the tax slaves could be nigh when the economy does not quickly recover from the current depression.

I am not a doomsday believer at all. As a matter of fact, I am always quite optimistic about things making a turn for good, in the end.

What I do believe, however, is that the corporate tax evaders and the rich elites should read books about the economic situation and the public anger in the prelude to the French Revolution, the Russian Revolution or the Second World War. And then they should ask themselves how much the current, financial and economic situation, and also the public anger in many empoverized countries, differs from the situation in those shaky times.

As far as I’m concerned, it was always the dire situation of the common people and small enterprises, in comparison with the inconceivable richness of the wealthy elites, that led to such massive and brutal political changes; not so much the emergence of new and different political ideas.

As I stated in the first part of this article: when rich people and large companies are not willing to pay their fair share of taxes, all income for the state must be supplied by the common people, whether they like it or not. This outrages the common people, who are already strapped for cash, when in difficult, economic situations.

So while the capitalism was the undisputed winner of the battle against Communism in the Nineties of last century, it runs the risk of losing its number one position due to the sheer, intrinsical arrogance that comes with it: "Why would I sympathize with empoverished people and families?! I am a winner and poor people are losers, who failed to grab their opportunities and must suffer for that through poverty"). 

And also for its misunderstanding for the needs of the needy, common people, who all want to have THEIR share of wealth, job-certainty and general well-being, instead of being treated as guinea pigs in a laboratory.

Sunday, 10 April 2016

Ten things that you should realize about tax avoidance and evasion after the publication of the Panama Papers.. Pt 1

1. Paying taxes is a zero sum game: the more high net-worth people and multinational companies avoid/evade taxes, the higher the amount of taxes is that the rest of the population (i.e. the common workers) has to pay.

Say, you live in a country with 17 million people and some 250,000 companies, strangely resembling to The Netherlands. And say that the central and all local governments of this country need to reel in €350 billion annually, in direct and indirect taxes from people and companies, in order ‘to keep the shop open’ and maintain the normal standards of living, safety, progress and dilligence within the country.

In  this country in an ideal world companies pay €100 billion – of which €60 billion is paid by 3000 large, multinational companies and the rest by smaller companies – and the citizens pay €250 billion in taxes.

In the following chart you can see the devastating impact of tax avoidance and evasion on the financial situation for the remainder of the population.

The shifting effects of tax avoidance / evasion by
multinational corporations and high net-worth citizens
Data and chart by: Ernst's Economy for You
Click to enlarge
The math behind it is simple: when a central government needs a total of €350 billion in annual tax income, it will get its hand on this money, one way or the other. The result is that exactly those people and companies that cannot dodge taxes, keep footing the bill... always!

And to make things worse, there is hardly any central or local government in the world that puts a means to an end, when the tax yields promise to be disappointing as a consequence of economic crises or other drawbacks. 

When the tax yields promise to be too low indeed, these governments just raise the indirect and/or direct taxes. Governments simply need the money and mostly avoid cutting in their own flesh, in spite of some obligatory displays of austerity within their departments and offices.

The bitter result is that an ever smaller group of citizens and small companies must foot an ever larger amount of taxes, in order to keep the government happy.

2. The only people and companies that pay taxes, are the people and companies that really don’t have the means to avoid or evade them.

Even though I am a passionate believer in the goodness of most people and the relative benevolence of most companies, I get more and more convinced that every person and institution than can dodge taxes... will dodge taxes!

And I’m not talking about simply using all legal deduction possibilities, surcharges and subsidies that one has in modern countries, like The Netherlands, Germany, the United Kingdom or the United States.

No, I am talking about the usage of Dutch and Luxemburg letterbox firms, in order to flush profits and yields from dividends, overseas trade and usufruct away from the hungry eyes of the local, fiscal authorities to a warm and nice place where nobody can’t find them anymore.

Or about the creation and usage of “legal-ish” and fuzzy fiscal constructs, such as the ones that Mossack Fonseca and their likes in the industry create and endorse.

A genuine eye-opener was that in The Netherlands and abroad not only ‘the usual suspects’ (i.e. multinationals, extremely wealthy inhabitants, celebrities, government leaders and other insiders) belonged to the customers of the aforementioned lawfirm Mossack Fonseca, but even small SME companies, like ‘Good Meat’ butchery, furniture plant ‘The Splinter’ or flower shop ‘La Tulipa Negra’ [all fake names, of course – EL].

When even the owners of such small companies turn to tax avoidance / evasion through such fuzzy, fiscal constructs, there is really something wrong with the mentality in a country. And undoubtedly, the behaviour of such small business owners is spurred by the high-brow tax dodgers and multinational companies about whom they read in the papers and magazines: "When these guys don't pay taxes, why should I?!"

3. Multinational companies really don’t pay taxes... ever.

This logical-wisdom-in-hindsight was uttered by the financial sage and avid twitter jockey Robin Fransman (@RF_HFC, definitely one of my favourite Dutch twitter users), on the Dutch financial website “Follow the Money”. Here are the pertinent snippets of his statement:

Welcome in the miracle world of international profit taxes. In fact companies don’t pay taxes. They never did, nowhere in the world... Companies can’t pay taxes..., only people can! That sounds crazy, but is logical. Taxes are only paid by entities that cannot avert it on parties furthermore in the supply chain.

Every cent that companies pay in taxes, cannot be used for investments, to raise their wages, reduce the prices of their products or pay dividends to their shareholders. Taxes for companies hit you as a consumer, as well as they hit you as a worker or a shareholder (either directly or via your pension). “There is no such thing as a free lunch”.

Therefore for companies to survive, they must put energy in tax optimization (i.e. paying the least amount of taxes possible).When they refuse to do so, they are less competitive on the labour market, the consumer market or the capital market (mostly in all three simultaneously) and will fall down eventually.

Eventually, all taxes come from common citizens’ wallets. The question is of course: when companies don’t pay taxes, why are these charged to them in the first place?! Cynics point at the fact that corporate taxes are attractive for politicians, as it seems that normal citizens don’t have to pay them. However, there is another reason why governments want to charge taxes on corporate profits and that is that it offers the possibility to redirect taxes to tax-payers abroad.

Say, we charge taxes on a chocolate factory, which both exports a substantial amount of chocolate abroad and has foreign shareholders. Via the sales price of chocolate in foreign countries, as well as through the foreign shareholders, a substantial amount of taxes has been averted abroad.

This whole article of a few years ago is still a must-read for everybody who masters Dutch or is willing to accept the poor quality of automatic translation tools. While you don’t have to agree with Robin, you will nevertheless be impressed with the unavoidable logic behind his thesis.

And one even starts to understand the reluctance of multinational companies to pay their tax dues, albeit without defending their (sometimes immoral) actions to dodge taxes.

4. People of substantial private wealth, who generate their annual income through the usage of this wealth, will hardly pay taxes either.

Simply stated: while there are only a few ways for workers to legally avoid or (illegally) evade taxes, the ways for owners of substantial private wealth to dodge taxes are numerous and still growing in numbers.

Especially in The Netherlands and other modern countries, the fishing net of the internal revenue service for common workers is ubiquitous and omnipotent.
Simply stated, payment of taxes in The Netherlands is a question of: 
  1. Visiting the website of the Dutch revenue service;
  2. Looking up one’s tax data;
  3. Checking the numbers of earnt income, mortgage and interest deductions and at last the various surcharges there;
  4. Change everything that needs to be changed...; 
  5. And then hit the Send-button! 

Wham, bam, thank you, Sir and Ma’am!!! Your tax charge will be collected from your bank account with no. 48.99.28.293 at two week's notice! 

There is simply no way to escape from an institution that sees everything and knows all there is to know about one's employer, one’s income, one’s expenses, one’s mortgage, one’s family situation and everything else. The only thing that you can do against it... is just paying your dues!

However, when private wealth comes in the equasion, the internal revenue service suddenly plays a whole different tune. Suddenly a host of possibilities opens up to move money around the globe until nobody knows where it is anymore, hide it in a opaque trust on Jersey or invest it in non-existing firms on a sunny and warm island in the Atlantic or Pacific Ocean.

Where the grip of the Dutch Internal Revenue Service on workers’ taxes is almost 100% complete, its grip on owners of private wealth is much more loosely. 

And the more money people have, the more it pays out to hire fancy sollicitors, legal wizards or the best tax specialists in the business. It is a simple question of spending one million to save ten millions or more... You can do the math yourself!

The people involved in such tax avoidance (evasion) businesses don’t look at things of morality and fairness towards the rest of the population. They simple look at their own interests and act accordingly. “Too bad for you, but it is my money and I already paid my share in taxes when I made this money in the first place. And I don't want to be taxed twice for it!”

And so the bill is eventually footed by the workers and other people that don’t have access to the tips, tricks and legal possibilities of the rich and shameless...

5. The morality of people endorsing tax avoidance / evasion in the financial or the legal industry is stupefied with every all-nighter and every paycheck, under extreme pressure of their piranha-like superiors and peers.

This morning, I read a revealing article of Dutch anthropologist and journalist Joris Luyendijk, about the people working at banks and law firms in the London City and elsewhere. These are the people who carry out all the legal paper work and establish the fuzzy fiscal constructs, necessary for large scale tax-avoidance (evasion) by companies and wealthy citizens.

Here are a few snippets of this disturbing article, translated by me:

As stated earlier, bankers are no monsters so you can just ask them, face to face: “How can you live with yourself, when you do things like that?!”

Often, their first answer was: “We just don’t think about that”. As a female worker at the legal department of a large bank expressed, while looking back at the years in which she established “shell companies” on the Virgin and Cayman Islands: “When you are in the middle of it, and you work until very, very late on a daily basis, you just don’t ponder about such things. Only later I realized: ’Hey those products are probably used for tax avoidance’. When you are a rapidly moving part of the machine, you are exclusively focused on the next stockpile of documents, coming your way.”

Everybody who has a good job at a bank, a lawyer’s office or a consultancy firm works long, long hours: especially in the London City, but to a lesser degree – also in Amsterdam. 

Many of those employees either suffer from insomnia or live like a ‘Spartan’. Especially in London, the ‘bosses’ expect from the ‘juniors’ that they make regular all-nighters: one works all night, returns home with a cab at six o’clock in the morning and takes a shower and a clothes change, while the taxi waits. And then it’s back to the office, for yet another long, long working day. 

Such pressure undermines all ethical awareness, according to interviewees. One is exclusively focused on ‘corporate survival’: getting the job done!

All these workers are probably the best of the best and the brightest of the brightest, with all the possibilities in place to really make a difference for everybody else in the world. 

Yet, their superiors ask them to act like brainless, corporate piranhas, who neglect or even mislead their customers and harm their countrymen, their families, their friends and especially their own conscience in their hunt for money, status and luxury in a city that has turned into a ghetto for the wealthy.

Their “training on the job” is not so very different from the training that Marines, SAS troops or Navy Seals receive to extend their physical and mental limits, stultify their own emotions and turn into killing machines who can kill enemies in a split second, without blinking an eye. 

Also these all-nighter workers learn to push their emotions and conscience aside and extend their mental and physical limits, in order to fight the exhaustion and despair that undoubtedly accompany the difficult moments in their jobs. Failure is not an option!

Consequently, it is no wonder, that these workers don’t ponder about the ethics or the impact of their activities with regards to the rest of the world. 

They have learned to look at customers as muppets and common citizens without a big checkbook are not even worth mentioning. Emotions are a luxury that they simple can’t afford to have in their struggle to stay on top of the food chain.

So, when an extremely wealthy customer walks in, who wants to evade taxes via the Cayman Islands, so be it! "His wealth is my commission and I need that commission in order to survive!"


To be continued!

Wednesday, 30 March 2016

Is Tata Steel already anticipating towards a Brexit by abandoning its British subsidiaries, formerly known as Corus Steel United Kingdom?

Yesterday, the British Financial Times printed an article that probably shocked many workers in the British steel industry.  

In this article the FT stated that the Indian steel giant Tata Steel officially confirmed rumours in the market, that it is planning to sell its British subsidiary, formerly known as Corus Steel. This will without a doubt mean trouble for the more than 15,000 workers in the British steel industry, as the British branch of Tata Steel has been loss-bearing for years and will be extremely hard to sell without serious job-losses.

The following snippets were printed by the Financial Times:


Tata Steel has confirmed today that it plans to cut 1,050 jobs in the UK, including 750 at Port Talbot which is the UK's biggest steelworks.

The British steel industry suffered a severe blow as Tata, the Indian steel giant, confirmed fears that it was about to put its UK business up for sale. Late on Tuesday the Indian group said it was “looking at strategic alternatives” to the current ownership “to explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts”.

Earlier, union sources had revealed that the company was poised to announce the sale of its British steel operations, plunging several plants — at Port Talbot, Rotherham, Corby and Shotton — into uncertainty. Steel workers had been waiting for days for a decision to be made by the Tata board 4,700 miles away in Mumbai over the fate of Britain’s steelworks.

Stephen Kinnock, Labour MP for Aberavon — who had joined Community union officials in Mumbai to try to persuade the Tata board to keep Port Talbot, Britain’s largest steelworks, open — told the South Wales Evening Post that the company intended to sell the steelworks.
Instead of the hoped-for approval of a rescue plan, Tata is intent on selling its UK businesses in a move that will come as a hammer blow to the remnants of one-time British Steel.

Tata painted a stark picture of the prospects for its UK business, saying that trading conditions in the UK and Europe had rapidly deteriorated recently due to “structural factors” such as global oversupply, increasing imports, high manufacturing costs and weak domestic demand. These were likely to continue into the future and had “significantly” affected the long-term competitiveness of its UK operations.

In comments that may damp hopes of finding a buyer, the company’s board concluded that the turnround plan for the Port Talbot was “unaffordable”, the assumptions behind it “very risky” and the likelihood of delivery “highly uncertain”. 

Tata revealed that it had been in talks with the government, seeking support for the UK business — within the scope of European state aid rules — and that these would continue.

Earlier in the evening, the government had denied a claim that it was on standby to part-nationalise Port Talbot.
Amid repeated rumours that the state could step in to rescue the industry, one official said the government was “looking at all viable options”. Asked whether that included part-nationalisation, he said: “Not to my knowledge.” Ministers are open to providing support, for example loans or loan guarantees or through further help with procurement. But a private sector sale is the preferred solution, not least because taking responsibility for the steel plants could leave taxpayers on the hook for large losses and invoke EU state aid concerns.

Port Talbot is heavily lossmaking, reflecting the troubles faced by British steelmakers. A combination of high costs and low steel prices on the international market has severely damaged the sector, leading to thousands of job losses over the past year.

In recent weeks concerns had grown that Tata Steel had cooled on further large investment into its UK operations. The company has poured £3bn into its European operations since acquiring Anglo-Dutch steelmaker Corus in 2007 for £6.2bn.

Insiders might have a ‘deja vu’ feeling, when they hear bad news about the British steel industry.

In contrary to some of the boasting done in the full FT article, in which it is suggested that Port Talbot – as a poster example for Tata Steel UK – “is only half a chance away” from returning to profitability, the British steel industry has been a problem child for the last twenty-odd years and perhaps much longer.

The following snippets come from a (translated) Dutch Wikipedia article about Tata Steel and especially its Anglo-Dutch predecessor Corus Steel, which was formed during a merger of Dutch steel company Hoogovens (i.e. currently the Dutch part of Tata Steel) and British Steel (i.e. now the British part of Tata Steel):

On the European ranking of steel producers, the British company takes a fourth place, while Hoogovens is the current number eight with 6.7 million tonnes. Hoogovens is producing much more efficient, however; with only 20,000 workers the company booked a sales of NLG 10.8 billion, while the 50,000 employees of British Steel only realized NLG 21 billion in sales. British Steel suffers from the expensive Pound Sterling, which makes it much harder to sell its products outside the United Kingdom.

At the end of 2002, the industrial council of Corus The Netherlands administered a negative advice with respect to the intended sales of the (ex-Hoogovens) aluminium plants. Also the Supervisory Board of Corus The Netherlands resisted against this sales. President-Commissioner Leo Berndsen stated that Corus in the United Kingdom should reorganize more vigorously, in order to prevent that ‘the loss-bearing British steel plants would drag down Corus IJmuiden on their way to the gutter’.

In the seven years that Corus existed, the first four years showed substantial losses [see the following table - EL]. The large loss in the year 2000 was the result of a one-off reorganization provision of £ 1 billion.

Overview of the profits of Corus Steel,
since it took over Hoogovens IJmuiden
Data courtesy of: nl.wikipedia.org
Click to enlarge
In those days, the word on the street in The Netherlands about Corus United Kingdom was “that the very efficient and profitable steel plant, as well as the plants specialized in other steel products and metals (a.o. galvanized steel, aluminium, stainless steel and other, tailor-made steel products) in IJmuiden, The Netherlands, were abused in order to cover up the enduring losses of the inefficient and unprofitable British plants. Thus, the company not only depleted the profitability of their Dutch branch, but even dismantled the production facilities of Corus IJmuiden, as these were sold over the years to cover up for the British losses”.

This was what I heard about Corus United Kingdom and the Corus General Management in those years. Whether those accusations were true or not, I don’t know. 

Of course, there might be some nationalist feelings involved in there, but the fact was that Corus IJmuiden (aka Hoogovens) had been much more successful in the past than British Steel, with their ‘made to measure’ steel, their aluminium plants and their ‘immersing-galvanization’ plant that produced steel for the booming car industries in Europe. And even though the profitability of Corus UK – and later Tata UK – might have improved indeed over the years, many Dutch steel workers probably still feel that Corus had been the worst thing that could have happened to them.

Recently Tata Steel has not been on my radar anymore, so it is hard for me to say anything about the current profitability ratio of Tata’s Dutch steel plant versus the British plants. Nevertheless, I get the impression from this Times article that the British plants are still heavily loss-making and can still not compete against their more efficient competitors all over Europe.

On top of that, there is the current situation that China is allegedly dumping steel on the international (and thus European) markets, according to various news media, like the EU Observer here:

Representatives of the steel industry warned that the EU Commission “massively underestimates” the effects of Chinese dumping on jobs, growth and investment in Europe.

“China is financing overcapacity, which leads to overproduction, which leads to selling below reasonable prices, below the cost of production. Nobody can compete with that,” said Milan Nitzschke, spokesperson for Aegis European alliance of about 30 European industrial sectors.

A letter sent to the EU Commission earlier this month by seven ministers from Germany, Italy, the UK, France, Poland, Belgium and Luxembourg underlined anxieties about Europe’s steel industry. The ministers urged the EU to step up action to help the ailing steel industry and stop cheap imports from China and Russia.

When China is indeed dumping steel on the European markets, this makes it even more difficult for the British steel plants to become profitable again.

Yet, except for the Chinese dumping of steel products, all these facts about the profitability of Corus United Kingdom and their enduring headwinds were probably known by heart among the Tata management. 

Therefore I am dead certain that the Indian company Tata knew extremely well what it entered into, when it took over Corus, including the plants in the United Kingdom. I also presume that Tata took that decision based on rational key data and sound prognoses of future profitability and not either based upon irrational romanticism or out of sheer rancour against 'its former colonizer'.

Therefore there might be another elephant-in-the-room that urges the recent fire-sale plans of Tata United Kingdom these days, of which the FT reports. Not only China...

In my humble opinion, that elephant might be the more than average chance for a Brexit within the next few months... When the Brexit takes place indeed, it will be even harder to sell British steel to the European continent at competitive prices and against a decent profit.

In the first place, the United Kingdom will have to renegotiate all pan-European contracts, rulings and subsidies that are now implicitely offered by their membership of the European Union, as after a Brexit the country will stand on its own two feet. 

Further, the abandonment of the European Union could lead to a situation of enduring political instability within the United Kingdom itself, as Scotland and Wales might see this as a good moment to leave the United Kingdom themselves. The damage of such a destructive political process might be immense and that risk could be much too substantial for Tata headquarters.

On top of that, the stability of the Pound Sterling – being the British currency – could get under serious jeopardy as a consequence of the Brexit, as many countries could consider to divest in the UK territory. This makes it even harder for the British steel mills to make a decent profit, as all raw materials have to be bought against then soaring Euro and Dollar prices.

All in all, the situation for the British steel industry looks extremely dire, with no easy Plan B available. One can’t really blame Tata for trying to sell an already enduringly unprofitable, loss-bearing complex of steel mills in the United Kingdom, under the immense pressure of the Chinese steel dumping and the looming Brexit.

A re-nationalization of British steel – as mentioned in the full Financial Times article – could be an option, but this option will probably fall on deaf ears with the Tories, who seem still to be clueless about the immense changes possibly coming from a Brexit.

And the chances that another large party will purchase the obsolet-ish and unprofitable British steel industry, seems close to nought in my humble opinion. 

That is bad news for the 15,000 workers in the British steel industry, for which I feel really sorry. Nevertheless, this could be the real reason behind Tata's firesale of Tata United Kingdom!

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