Oil price soars to highest level in years

Gas prices are displayed at a Mobil station in New York. Oil prices are surging to the highest in years, spurred by tension in the Middle East.
Updated 19 April 2018
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Oil price soars to highest level in years

  • Syria tension sends price surging
  • Oil reaches highest in three and a half years

Oil surged Thursday close to three and a half-year peaks on simmering Mideast tensions and keen US demand.

World oil prices extended Wednesday’s gains on the back of data showing a drop in US stockpiles — indicating improved demand — and expectations that a Russia-OPEC output cap deal will be kept in place.

Tensions in the oil-rich Middle East also kept prices elevated.

“Saudi Arabia still calls the shots on global oil markets, and it is increasingly obvious the Saudis are comfortable with oil at $80 or more,” said Interactive Investor analyst Lee Wild.

“Add a drop in weekly US oil reserves to the mix and the only way for crude prices is up.”

In early morning deals, oil surged to summits last seen in November 2014 before paring gains.

London Brent struck $74.44 per barrel and New York crude touched $69.27.

European equity markets meanwhile diverged amid lingering fears over Syria and a possible China-US trade war, but London rose 0.2 percent despite news of sliding March retail sales.

The British capital’s benchmark FTSE 100 index was given a shot in the arm from media reports that Japan’s Takeda Pharmaceuticals was mulling a takeover tilt at Shire.

Shire, which is based in Ireland and listed on the London stock market, saw its share price rocket 6.19 percent to 3,986.5 pence.

Both companies have yet to comment on the latest takeover speculation, but Takeda had stated in March that it was considering the purchase of Shire.

Asian markets enjoyed another day of gains Thursday as the region’s energy firms also tracked a surge in oil prices.

Fresh hopes that Donald Trump and North Korea’s leader Kim Jong Un will hold a historic summit within months also provided some much-needed optimism.

The positive trading environment is a far cry from the unease felt at the start of the week after US-led strikes on Syrian targets — in response to an alleged chemical attack — sparked worries of a confrontation with Russia, which is an ally of the Damascus regime.

However, reports have suggested Russian President Vladimir Putin is looking to ease tensions as he faces fresh sanctions.

China’s announcement of a timetable to remove restrictions on foreign ownership in its car market, the world’s biggest, also lifted optimism that a simmering trade war with the US can be avoided.

Tough rules on doing business in the country’s auto sector had been a major source of anger for Trump, who has already threatened tariffs on billions of dollars of Chinese imports in recent weeks as part of his “America First” protectionist agenda.

However, in its quarterly report on the US economy, the Federal Reserve warned there were concerns about the trade tensions among businesses and farmers, who had seen prices rise already.

The central bank’s Beige Book report said the world’s top economy continued to see moderate growth and it expected to lift interest rates twice more this year, having already hiked them in March.

Meanwhile, the British pound struggled to bounce back against the dollar after diving from post-Brexit vote highs on data Wednesday showing a surprise drop in British inflation.


Jordanian cabinet approves new IMF-guided tax law to boost finances

Updated 21 May 2018
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Jordanian cabinet approves new IMF-guided tax law to boost finances

AMMAN: Jordan’s cabinet on Monday approved major IMF-guided proposals that aim to double the income tax base, as a key part of reforms to boost the finances of a debt-burdened economy hit by regional conflict.
“When only 4 percent of Jordanians pay (personal) income tax, this may not be the right thing,” Finance Minister Omar Malhas said in remarks after the cabinet meeting, adding the goal was to push that to eight percent. The draft legislation was submitted to parliament.
The IMF’s three-year Extended Fund Facility program aims to generate more state revenue to gradually bring down public debt to 77 percent of GDP in 2021, from a record 95 percent.
A few months ago Jordan raised levies on hundreds of food and consumer items by unifying general sales tax (GST) to 16 percent — removing exemptions on many basic goods.
In January subsidies on bread were ended, doubling some prices in a country with rising unemployment and poverty among its eight million people.
The income tax move and the GST reforms will bring an estimated 840 million dinars ($1.2 billion) in extra annual tax revenue that will help reduce chronic budget shortfalls normally covered by foreign aid, officials say.
Corporate income tax on banks, financial institutions and insurance companies will be pushed to 40 percent from 30 percent. Taxes on Jordan’s phosphate and potash mining industry will be raised to 30 percent from 24.
The government argues the reforms will reduce social disparities by progressively taxing high earners while leaving low-paid public sector employees largely untouched.
“This is a fair tax law not an unfair one,” said Malhas, who shrugged off criticism the law is lenient on many businesses connected to politicians whose transactions are not subject to tax scrutiny.
Husam Abu Ali, the head of the Income and Sales Tax Department, said a proposed IMF-recommended Financial Crime Investigations Unit will stiffen penalties for tax evaders. Critics say it will not tackle pervasive corruption in state institutions.
Abu Ali said the government could be losing hundreds of millions of dollars through tax evasion, which is as high as 80 percent in some companies.
The amendments lower the income tax threshold and raise tax rates. Unions said the government was caving in to IMF demands and squeezing more from the same taxpayers.
“It is penalizing a group that has long paid what it owes the state,” the unions syndicate said in a statement.
“It imposes injustice on employees whose salaries have barely coped with price hikes rising madly in recent years.”