No Corporate Tax Relief in Budget 2019, G20 Agrees to Push Ahead with Digital Tax, UK Signs Free Trade Deal with South Korea and Other Top Business News Today

No tax relief for large companies in Budget 2019. G20 agrees to push ahead with digital tax. UK signs free trade deal with South Korea, marking first post-Brexit deal secured in Asia. Small banks hit by RBI’s new framework for resolution of NPAs. RBI’s new prudential framework for stressed asset resolution “credit positive”, as per Moody’s. Finance Minister might retain fiscal deficit target at 3.4% of GDP. Microsoft to launch its next-generation console before the end of 2020. Google shares more details on Stadia. Finance Minister Nirmala Sitharaman pitches for 'significant economic presence' concept to tax global digital companies. Boris Johnson emerges as front-runner for Prime Minister of UK, threatens to withhold payment from the EU unless terms improve.

 

Moving on to the top Business news today: 

 

 RBI 

Small banks hit by RBI’s new framework for resolution of NPAs. RBI’s new prudential framework for stressed asset resolution “credit positive”, as per Moody’s. 
 

The What: The Reserve Bank of India (RBI) on Friday issued a new prudential framework for the resolution of stressed assets, replacing the February 12, 2018 circular that was recently struck down by the Supreme Court. The new framework will give lenders 30 days to review a borrower account before labelling it as a non-performing asset (NPA) in case of default.
 

Catch-22: This new framework is likely to hit smaller banks.
 

As per the new framework, 75% of creditors’ vote is enough to pass a resolution plan. While this would mean quicker resolutions as banks with less exposure can’t stall deals any longer, it also instructs that dissenting lenders must sell at liquidation value, greatly lowering the bargaining power of smaller banks that have less exposure in specific deals. 
 

Any Comments?: Moody’s Investors Service on Monday said that the framework is ‘credit positive’

However, the credit rating agency identified slower-than-expected progress under the Insolvency and Bankruptcy Code (IBC) as the key hurdle to the timely resolution of stressed assets. The cleanup of the bank’s balance sheets could therefore still take another two to three years, it said. 

 

 BUDGET 

 

No tax relief for large companies in Budget 2019. Finance Minister might retain fiscal deficit target at 3.4% of GDP. 

 

No Corporate tax relief in sight for Large companies: Former Finance Minister Arun Jaitley had promised a cut in corporate tax rate to 25% from 30% for large companies, but things are looking bad for large companies as his successor has stepped in.

 
Finance Minister Nirmala Sitharaman, who is set to present the Budget 2019 on July 5th is unlikely to cut corporate tax rate. Additionally, the upcoming budget 2019 may increase long term capital gains tax.

 
Currently, long-term capital gains exceeding INR1 lakh are taxed at 10%.

 
The Finance Minister is expected to forecast a fiscal deficit target for FY20 at 3.4% of GDP, retaining the figure presented in the interim Budget earlier year.

 
Behind the Scenes: The Government is exploring ways to earn more tax revenue either by tapping new sources or by digging into existing ones so as to support the existing revenue shortfall and additional promises made. 

 
Tax relief in the forthcoming budget is likely to be limited to areas that will not pinch the government but improve the financial situation. 
 
 
 GAMING 
 
 
Microsoft to launch its next-generation console before the end of 2020. Google shares more details on Stadia.
 
 
A Giant Leap for Microsoft: At the E3 Game Expo, Microsoft announced that its next-generation console, codenamed Project Scarlett is set to go on sale before the end of 2020

 
While the company did not reveal the cost or the design of the device, it said that the device is supposed to be the “biggest leap” over a previous generation there had ever been.
 
 
Other details shared about the Xbox One successor were that it would:
 
 
  • Allow games to be played at up to 120 frames per second

 

  • Support 8K-resolution playback, although it was not clear if this would be limited to video-streaming, or include games as well

 

  • Allow real-time hardware-accelerated ray tracing to create more realistic lighting effects

 

  • Contain a solid-state drive, which will help reduce load times 
 
Losing Bet?: Google revealed more details about its cloud gaming platform Stadia last week, namely, its US pro-tier pricing at $9.99 per month for unlimited 4K 60fps streaming and access to a library of titles, the requirement of a 35 mpbs connection to stream Stadia Pro (which will launch in November), and a 1080p free tier, launching later, that will allow gamers to play titles they buy from the Stadia store.

 
However, the company may have bitten off more than it can chew, for even with Google’s cheap costs, Microsoft has an upper hand over it when it comes to infrastructure and experience. 
 
 
 
 DIGITALTAX 
 

Finance Minister Nirmala Sitharaman pitches for 'significant economic presence' concept to tax global digital companies. G20 agrees to push ahead with digital tax.
 

Too Big to Rein In: As part of the two-day meeting of the G-20 countries, Finance Minister of India, Nirmala Sitharaman pushed for the adoption of the principle of ‘significant economic presence’ to tax global digital companies.
 

Also This: The Finance Minister also pitched for development of a common defensive toolkit of measures to deal with non-compliant tax jurisdictions or nations which refuse to share tax related information.
 

Ground Rules: Group of 20 Finance Ministers have agreed to compile common rules to close loopholes used by global tech giants such as Facebook to reduce their corporate taxes.
 

The new rules would mean higher tax burdens for large multinational firms but would also make it harder for countries like Ireland to attract foreign direct investment with the promise of ultra-low corporate tax rates.
 
 
 BREXIT 
 

Boris Johnson emerges as front-runner for Prime Minister of UK, threatens to withhold payment from the EU unless terms improve. UK signs free trade deal with South Korea, marking first post-Brexit deal secured in Asia.
 
 
Front-Runner: Boris Johnson, London’s ex-mayor and the current favourite to be the UK’s next Prime Minister told the Sunday Times that if he succeeded Theresa May, he would refuse to pay a £39bn ($50bn) divorce bill unless the EU offered a better withdrawal agreement than the one currently on the table.
 
 
EU officials, however have said that they are not willing to change the terms of the deal reached with May.
 
 
Deal or No Deal: A strong advocate of Brexit, Johnson vowed to take Britain out of the EU by the deadline that was pushed back to Oct. 31 from March 29 even if there is no deal with the EU on withdrawal terms in place. 
 
 
Ready…Set…Go: With the party expecting to name its new leader in late July, the race to replace May as Conservative Party leader - and in turn the head of Britain’s government  - officially begins Monday.
 
 
Maintaining the Status Quo: The UK and South Korea have signed an outline free trade agreement (FTA) to maintain existing trade arrangements post-Brexit, marking the first post-Brexit trade deal secured by the UK in Asia. Both countries aim to ratify the deal by the end of October and implement it in November.
 
 
Race Against Time: The agreement intends to provide stability under a no-deal Brexit, with the UK pushing to strike agreements with its trading partners as the deadline approaches on October 31.
 
 
So far 12 countries and regions, including Israel, Norway, Iceland, Switzerland and Chile, have signed “continuity” deals with the UK.
 
 
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