the customs value; zero-rated exports; a permanent establishment; local tax; tax planning.
1. exists where there is a fixed place of business, such as a local branch or office through which the business is conducted.
2. It is also possible to strip out some of the cost components when determining .
3. Although are , the exporter has to be able to prove that the goods are exported.
4. The UK's network of more than 100 tax treaties ensures that is not paid on business profits where there is no permanent establishment.
5. Effective is one area that may help to reduce overall costs.
IV. Give Russian equivalents for the following words and phrases used in the text:
customs duties; to cut costs; tax planning; high-tariff items; the "successive sales"; the supply chain; the costs of production; buying commissions; transport management fees; intellectual property license fees; financing charges; inward and outward processing; the evidence required for a removal; corporation tax planning.
V. Open the brackets using the suitable modal verbs (must, should, have to, cant):
1. Every element of the business process (to examine) to see how the effects of the strong currency can best be countered.
2. Foreign customs duties are an obvious target for goods' exporters as any reductions, particularly on high-tariff items, (to go) straight to the bottom line.
3. Although exports are zero-rated, the exporter (to be able) to prove that the goods are exported.
4. Foreign tax (be) creditable against UK corporation tax liability, any excess of foreign tax over the UK liability represents an absolute cost.
5. The excess from any source in a particular year (to be) carried forward or applied to other sources of income.
VI.Complete the sentences choosing the suitable verbal (Infinitive or Gerund) from the brackets.
1. He stopped (working/to work) on the project after three months because of ill-health.
2. She was driving in a hurry but she stopped (answering/to answer) her mobile phone.
3. Did you remember (calling/to call) the customer yesterday?
4. I cant remember (offering/to offer) you a replacement.
5. The sales assistant forgot (giving/to give) the customer a discount.
6. The customer forgot (completing/to complete) the five-year guarantee form.
VII. Summarise the text, using the words and phrases given below:
to maintain competitiveness; to reduce overall costs; to produce sizeable savings; to value goods for customs duty purposes; to eliminate sth from calculation; to determine the customs value; to ignore certain cost inputs; to apply rules carefully; to submit VAT returns monthly; to differ from the requirements outside the community; to be located in overseas markets; to generate high taxes locally; to represent an absolute cost; local tax on business profits; a fixed place of business; a local agent.
VIII. Translate into English:
1. , .
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2. .
3. 30%, , , .
5. , , , .
6. , .
IX. Meet as one group. One of you should lead the meeting. Supply details to prove the following:
1. Every element of the business process needs to be examined to see how the effects of the strong currency can best be countered.
2. The international aspects of corporation tax planning are also important.
X. Work as two groups. Discuss the following statements:
1. Exporters who sell from a strong currency into a weaker one face an uphill battle to maintain competitiveness.
2. Local tax is not paid on business profits where there is no permanent establishment.
Unit 1.6. The European Central Bank
Text 1
The European Bank Supervision
Pre-reading tasks
1. Suggest a purpose for reading the text.
2. What can the text be about?
3. Do you agree that the ECB has been widely criticized?
The infant European Central Bank (ECB) has been bullied by almost everybody in its first 14 months in the monetary playground. It has been widely criticized for its lack of transparency and accountability, and for a flawed system of financial supervision. A new report published by the Centre for Economic Policy Research (CEPR.) agrees with most of the criticisms, but rejects the popularly prescribed remedies.
The ECB is certainly less transparent than the Bank of England, which has been set a clear inflation target by the chancellor, and publishes minutes of policy meetings and the voting records of individual members of its Monetary Policy Committee. The ECB, in contrast, sets its own target. Indeed, it has set itself two targets: for monetary growth and for inflation. Since these can conflict, it is hard for the markets to understand how the ECB reaches its decisions. The bank's refusal to publish voting records or minutes clouds matters further.
To increase transparency, most outsiders have urged the ECB to publish votes and minutes. But the authors of the CEPR report argue that, under its current set-up, the ECB is wise not to. Attributing votes and opinions to members from different countries would increase the focus on national differences, and so undermine the bank's credibility.
Blueprints developed at other central banks may not work at the ECB, because there is a tension within Europe between the desire for more integration and a reluctance to cede national political control. The CEPR report considers ways to reduce this tension. First, the ECB should be set an explicit inflation target by the European Parliament, so there can be no disagreement about the goal of monetary policy. Second, it recommends that the power of the executive board be increased relative to that of national central-bank governors, who are more likely to be influenced by national interests. At the moment, all 11 governors can vote, outweighing the six-member executive board. Better, perhaps, if only five, say, were allowed to vote at any time, with revolving terms - like the arrangements for district-bank presidents in America's Federal Reserve System.
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The same tension between European integration and national control also poses problems for bank supervision. Banks are likely to become more pan-European as the single currency encourages cross-border mergers and greater cross-border exposures. A failure in one country could thus spill more quickly to other parts of Europe. Unfortunately, the existing framework is ill - equipped to handle a Europe-wide banking crisis, because supervision remains in the hands of national regulators. For its part, the ECB may not have enough information in a crisis, and it would find it hard to co-ordinate the activities of national regulators.
From an economic point of view, it would be best if bank supervision were centralized, either under the ECB or in a new independent European regulator.
Text-study
I. Learn the following words
transparency
supervision -
target -
urge -
credibility - ,
failure ,
to outweigh -
II. Answer the following questions
1. What was the ECB widely criticized for?
2. What is the difference between the Bank of England and the ECB?
3 Why should the ECB increase transparency?
3. How, in the view of many critics, should it increase its transparency?
4. What do the authors of the CERP report think of the measures designed to increase the Bank's transparency?
5. What is the tension existing within Europe caused by?
6. How could this tension be reduced?
7. How does the tension between European integration and national control affect bank supervision?
8. What can you say about centralization of bank supervision?
9. What can be done instead of centralization to improve bank supervision?
10. What are the aspects of the so-called disclosure?
III. Complete the sentences with suitable words and word combinations from the box.
| the infant European Central Bank; transparency; accountability; national interests; inflation target; monitoring banks; executive board; co-ordinate; a market-oriented reform. |
1. has been bullied by almost everybody in its first 14 months in the monetary playground.
2. It has been widely criticized for its lack of and , and for a flawed system of financial supervision.
3. The ECB is certainly less transparent than the Bank of England, which has been set a clear by the chancellor.
4. First, the ECB should be set an explicit inflation target by the European Parliament, so there can be no disagreement about the goal of
5. Second, it recommends that the power of the executive board be increased relative to that of national central-bank governors, who are more likely to be influenced by .
6. At the moment, all 11 governors can vote, outweighing the six-member .
7. For its part, the ECB may not have enough information in a crisis, and it would find it hard to the activities of national regulators.
8. It would still need the backing of a lender of last resort, but might make banks better able to cope with trouble.
IV. Translate into English
1. , .
2. , .
3. , , .
4. , - , , .
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5. , .
V. Fill in the blanks in the text with suitable prepositions.
From an economic point view, it would be best if bank supervision were centralized, either under the ECB or in a new independent European regulator. However, the report argues that centralization is not politically feasible in the near future, as it would require governments to relinquish national control and deprive some central banks one of their only remaining functions. Instead, it suggests the exact opposite: a truly decentralized approach, shifting the role monitoring banks to the market setting Europe-wide full disclosure rules. The idea, based partly on the "New Zealand model", is that increasing information about the riskiness of banks, this would increase their incentives to act prudently and so reduce the risk failure.
VI. Insert the articles where necessary.
Fuller disclosure needs to be supported by measures to reduce contagion effect of a failure by, for example, reducing uncollateralized interbank exposures among European banks. It would still need backing of a lender of last resort, but market-oriented reform might make banks better able to cope with trouble.
The ECB has been lucky: it has not yet faced financial crisis. It will one day. Better, therefore, to reform system beforehand. Sadly, history shows that it always takes crisis to persuade policymakers to act.
VII. Translate the following passage into Russian.
First, the ECB should be set an explicit inflation target by the European Parliament, so there can be no disagreement about the goal of monetary policy. Second, it recommends that the power of the executive board be increased relative to that of national central-bank governors, who are more likely to be interested by national interests. At the moment, all 11 governors can vote, outweighing the six member executive board. Better, perhaps, if only five, say, were allowed to vote at any time, with revolving terms - like the arrangements for district-bank presidents in America's Federal Reserve System.
VIII. Explain the italicized grammar constructions in the following sentences.
1.To increase transparency, most outsiders have urged the ECB to publish votes and minutes.
2. But the authors of the CEPR report argue that, under its current set-up, the ECB is wise not to.
3. Attributing votes and opinions to members from different countries would increase the focus on national differences, and so undermine the bank's credibility.
4. Second, it recommends that the power of the executive board be increased relative to that of national central-bank governors, who are more likely to be interested by national interests.
5. Banks are likely to become more pan-European.
IX. Comment on the following phrases.
a flawed system of financial supervision; minutes of policy meetings; the voting records; the Monetary Policy Committee; monetary growth; under its current set-up; blueprints; a reluctance to cede national political control; cross-border mergers: cross-border exposures; feasible; disclosure rules; uncollateralized interbank exposures; policymakers.
X. Summarise the article, using the words and phrases given below:
to be widely criticized for smth; to reject the popularly prescribed remedies; to set a clear inflation target; to cloud matters; to reach ones decisions; to increase the focus on national differences; to undermine the bank's credibility; to develop blueprints; to cede political control; to reduce tension; to outweigh; to pose problems; to handle a crisis; to relinquish national control; to act prudently.
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XI. Work as one group. Speak about the importance of the single currency for the bank supervision reform in Europe.
XII. Study the text in groups.Argue for or against the following:
From an economic point of view, it would be best if bank supervision were centralized, either under the ECB or in a new, independent European regulator.
Text 2.
European Banks Monetary Policy
The drafters of financial laws in Brussels have a horrible three years ahead. One confides that on some mornings she would rather just hide her head under the duvet.
The challenge, apart from applying Alexandre Lamfalussy's recent recommendations on the regulation of securities markets in the European Union, is to turn 560 pages of guidance on international banking supervision into EU law. Not only that, the law must cover securities houses and investment firms as well as banks.
In January the Basle committee on banking supervision, which represents bank supervisors in big industrial countries, produced refined proposals that will revolutionize the supervision of the world's biggest banks. Instead of setting a fixed ratio of capital to so-called risk assets, the new framework, dubbed Basle 2, will allow the most sophisticated banks to use their own measures of risk to calibrate the amount of capital they must set aside.
Banks already use internal models to calculate market risk. They are developing new techniques to assess other risks they run, broadly known as operational risk. Supervisors will review this process continuously, adjusting capital requirements above the minimum the bank has calculated, with rewards for good behaviour. The goal is a safer, more market-driven - and hence more efficient - banking sector.
The previous Basle framework, set in 1988, laid down clear capital charges for credit exposures according to whether the borrower was a country, a bank, or a non-bank. It did much to encourage banks worldwide to build a sounder capital base, but it was crude. It tempted some banks, especially in Japan and South Korea, to make loans on the basis of the capital charge the loans attracted rather than of banking prudence, with disastrous results. Supervisors hope that Basle 2 will reduce such distortions.
The nightmare on the other side of the duvet is the task of translating a regime - which is still evolving and which is aimed at the top tier of international banks - into European law for all financial firms. Basle 2 must be turned into a third capital-adequacy directive (CAD 3), which may overlap with a bunch of other directives on solvency, large exposures and capital. These will need to be cancelled or amended. It must also have relevance to hundreds of small European banks and (mainly British) investment firms. Then the draft must go through the European Parliament and the European Council of Ministers before it becomes a directive; after which it must be written into the rulebook of each member state, often with new legislation.
Basle 2 has problems of its own, to do with the calibration of risk, and with fierce and sometimes philosophical arguments about the definition of operational risk. There is also the danger that banks will have to scramble for new capital in the teeth of some future recession. Studies are in progress, and horse-trading between the big banks and regulators has only just begun. So this is not a good time to be enshrining raw and untested concepts into European law.
The European Commissions consultative document has the same ambitious plans for risk measurement, but it also highlights the special need for banks to finance small and medium-size enterprises (SMES), most of which have no public credit rating (Basle 2 relies on public ratings as well as ratings used internally by banks). An increased capital charge for Europes small banks, or heavier reporting requirements, could well raise the cost of borrowing for SMES in Europe.
Text-study
I. Learn the following words.
confide - (confide in) , ;
securities -
ratio -
refine -
infringe - , (, )
cancel - , ; ( ) to cancel debts
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II. Answer the following questions.
1. What models do banks use to calculate market risk?
2. What other risks do banks run?
3. How will supervisors review the process of risk assessment?
4. How will Basle 2 differ from the previous Basle framework?
5. When is Basle 2 meant to be ready?
6. What steps should be made to prepare the Basle 2 framework?
7. What problems does Basle 2 have?
8. What are the factors that could raise the cost of borrowing for small and medium-size enterprises in Europe?
9. What is the difference between continental and British fund managers?
10. What is implied by a process of continuous evolution of the new Basle proposals?
11. Why do many of those affected objects to writing Basle 2 into European law?
III. Complete the sentences with suitable words from the box.
| the regulation of securities market in the European union; the Basle committee on banking supervision; market risk; operational risk, capital-charges; public ratings; banking sector, loans, distortions |
1. The challenge on , is to turn 560 pages of guidance on international banking supervision into EU law.
2. , which represents bank supervisors in big industrial countries, produced refined proposals that will revolutionize the supervision of the world's biggest banks.
3. Banks already use internal models to calculate .
4. They are developing new techniques to assess other risks they run, broadly known as ..
5. The goal is a safer, more market-driven - and hence more efficient - ..
6. The previous Basle framework, set in 1988, laid down clear for credit exposures according to whether the borrower was a country, a bank, or a non-bank.
7. It did much to encourage banks worldwide to build , but it was crude.
8. It tempted some banks, especially in Japan and South Korea, to make loans on the basis of the
9. The attracted rather than of banking prudence, with disastrous results.
10. Supervisors hope that Basle 2 will reduce such .
IV. Fill in the blanks with articles if needed.
Continental fund managers tend to be owned by banks, with stacks of capital, whereas Britain has scores of independent fund-management firms with little capital behind them. A threatened charge for operational risk, based on the amount of funds under management, might be out of proportion to risks many firms actually run. Or so argues the Association of Private Client Investment Managers & Stockbrokers in London. It depends on whether firm gives advice to clients, for which it can be sued, or bears the risks of clearing and settling securities. If neither case applies, the case for putting up more capital is less strong. Yet such niceties are not written into either the consultative document or Basle 2. The aim is to produce a draft directive by October this year. However, other groups are also likely to lobby the Commission and the European Parliament for special treatment. That could slow things down greatly.
In addition, there are fears that directive will not be flexible or speedy enough to match what is proving to be a process of continuous evolution of new Basle proposals.
V. Fill in the blanks with suitable prepositions.
Eurocrats wonder whether, after a battle over applying comitology to securities regulation, there will be the appetite to fight for it in CAD 3. It may nonetheless be the only sensible way to recalibrate capital ratios and update concepts as the uncertain sciences measuring credit and operational risk evolve. "What we need", mused a British regulator this week, "is a rolling directive."
British regulators are concerned that the European Commission may not meet the deadline, leaving London-based banks unable to apply Basle 2 in step with the Americans, Japanese and other non-EU banks. They are working on an answer. Happily, Britain's Financial Services Authority has always insisted capital ratios well above the existing EU minimum of 8%. So long as banks reach that 8% floor, they can start applying Basle 2 principles to any capital charge the minimum, without infringing existing EU law. Whether continental banks, notably in France and Germany, will be able to do the same is open to question: they have long had a habit of sailing quite a bit closer to the regulatory minimum. Many of those affected feel it is crazy to write Basle 2 into European law when it is still half-cooked. The target of the Basle committee is the internationally active banks.
VI. Explain the italicized grammar constructions in the following sentences.
1. The European Commissions consultative document, adapted from Basle 2, invites comment by May 31st.
2. It has the same ambitious plans for risk measurement, but it also highlights the special need for banks to finance small and medium-size enterprises (SMES), most of which have no public credit rating (Basle 2 relies on public ratings as well as ratings used internally by banks).
3. An increased capital charge for Europes small banks, or heavier reporting requirements, could well raise the cost of borrowing for SMES in Europe.
4. There are fears that the directive will not be flexible or speedy enough to match.
5. It may nonetheless be the only sensible way to recalibrate capital ratios.
VII. Translate the text from English into Russian in writing.
Instead of setting a fixed ratio of capital to so-called risk assets, the new framework, dubbed Basle 2, will allow the most sophisticated banks to use their own measures of risk to calibrate the amount of capital they must set aside. The previous Basle framework, set in 1988, laid down clear capital charges for credit exposures according to whether the borrower was a country, a bank, or a non-bank.
Studies are in progress, and horse-trading between the big banks and regulators has only just begun. So this is not a good time to be enshrining raw and untested concepts into European law. British regulators are concerned that the European Commission may not meet the 2004 deadline, leaving London-based banks unable to apply Basle 2 in step with the Americans, Japanese and other non-EU banks.
The European Commission's consultative document has the same ambitious plans for risk measurement, but it also highlights the special need for banks to finance small and medium -size enterprises, most of which have no public credit rating.
VIII. Translate the text into English
, 8%. , , , , .
2001 , .
.
, - 2.
IX. Explain the meaning of the following statements:
A threatened charge for operational risk, based on the amount of funds under management, might be out of proportion to the risks many firms actually run. By writing half-formed rules on capital adequacy into law, Europe is putting the cart before the horse.
X. Work as one group. Dwell upon eurocrats' position in regard to the Basle-2 framework.
Text 3
Does Euro Prove Top Currency?
Pre-reading tasks
1. Suggest a purpose for reading the text.
2. What do you think the text can be about?
3. What is your opinion of the euro?
The Euro proved the most popular currency in the international bond markets. Economists attribute the euro's success on the debt markets to the growth of liquid capital markets in Europe.
"The US dollar has punched well above its weight in the financial markets over the last 30 years because it had no competitor," said David Knott, head of fixed-income research at Deutsche Bank. "But now borrowers can choose between two markets."
Many analysts dismissed the euro's popularity in early 2010. They said volumes had been artificially lifted by the fact that many European companies wanted to establish a benchmark in the euro for public relations purposes.
However, the volume of bonds launched by US companies in euros has outweighed those issued by European companies during the year. This is in part because interest rates in the euro-zone are much lower (at 3 per cent) than in the US (5.5 per cent), meaning that US companies can borrow at cheaper rates in euros.
"There is a connection between the weakness of the euro and its popularity among borrowers - namely, low interest rates." said Avinash Persaud, head of global research at State Street Bank. "The euros weakness against the dollar may also have been helped by the fact that US borrowers will swap the proceeds of their bond issues by selling euros for dollars."
Bankers say the trend, which has been boosted by the decision of European investors to diversify away from domestic government bond markets since their domestic currencies were abolished, will continue during the next 12 months. In particular, non-European central banks are expected to step up their purchase of euro-denominated securities to rebalance foreign exchange reserves away from the US dollar.
US interest rates are likely to continue to rise during the next few months, according to most forecasts. This would increase borrowing costs for US companies, many of which would attempt to reduce costs by the euro.
"Borrowers around the world now have two markets to choose from and they will generally decide on the basis of cost," a banker said.
Text-study
