Page 59 - The Economist20171214

The Economist December 16th 2017 Business 59
2 important constituencies dissatisfied. choice. By this week, over 2,900 firms had
Technology-intensive firms are up in moved legal headquarters elsewhere in
arms about a proposed reduction in tax Spain as a result of the crisis—around half
breaks for investing in research and devel- to Madrid. The central government made
opment. Drugmakers are fighting a provi- shifting easier to do with a decree on Octo-
sion that would make it more expensive to ber 6th that removed a previous require-
develop “orphan drugs” for serious dis- ment for a shareholders’ meeting to grant
easesaffectingrelativelyfewpeople. Many permission first. Before the crisis, the re-
other lobbies are unhappy. All will agitate gion hosted seven of the 35 companies on
forchanges to the taxcode in future. Madrid’s IBEX stock index. Only one, Gri-
Second, taxexperts have outlined ways fols, a pharmaceutical firm, remains.
in which the Republican proposals can be The exodus slowed after Madrid im-
gamed. Companies would be able to ma- posed direct rule in late October and the
nipulate a deduction for export earnings, jailing of separatists in early November.
for example, by “round-tripping” products But uncertainty persists over the result of
outofand then backinto America. Individ- an election on December 21st. Business
uals can benefit, too. They can set up cor- would like a lower vote for separatists, but
porations and give up salaries, taxed at that would not dispel theirworries.
rates of 40% or more, in favour of fees paid Moving legal headquarters need not
by those firms, which would be taxed at mean that business operations and fac-
20%. Other examples abound. The main tories leave Catalonia. But in practice mov-
winners from all this seem likely to be ac- ing headquarters can affect where staff, es- Employees, customers, separatists
countants and tax lawyers. Gaming the pecially senior ones, spend time. This is
American tax code used to be a select, cor- especially the case for some 1,000 firms age has also been done to the brand of Bar-
porate sport, but it now looks to become that have taken a slightly biggerstep—shift- celona. He frets that fellow Spaniards may
everyman’s pastime. 7 ingtheirfiscal as well as theirlegal registra- boycott his own firm’s sparkling product
tion. “You move the board, then the CEO, this Christmas, as they have in the past
then senior management. There is a natu- when there were separatist tensions. A
Business and politics ral knock-on effect,” says one company lawyer who advises a Catalan sweets fac-
Adéu to Catalonia boss. “The danger is ifthe brains start leav- tory and a maker of baby products says
both firms worry that compatriots will
ing,” warns a memberofa business lobby.
The financial industry has seen the big- shun their wares. Depending on the elec-
gest shift. Before the crisis, Catalonia was tion, business confidence could slowly re-
home to several of Spain’s largest insur- turn—but many firms will probably keep
ancefirms.FivehavemovedtoMadrid;the their headquarters elsewhere for the fore-
BARCELONA sixth, a subsidiary of AXA, a French giant, seeable future, just in case. 7
Firms in the region vote with theirfeet said it is going to Bilbao. The two biggest
againstpolitical and legal uncertainty
Catalan banks, CaixaBank and Banco Sa-
E ARE used to dealing with badell, reportedly saw billions of euros of America’s box office
“W political crises, but not a break in deposits withdrawn weekly at the peak of
theruleoflaw,”saysthebossofabigBarce- the crisis. That stopped, and their battered Blockbusted
lona cement firm, of Catalonia’s constitu- share prices stabilised, only when they left
tional crisis. Fearing separatists in the re- Catalonia. Neither of the big banks will re-
gion would declare independence, as they turn. “We don’t see any reason to reverse
did on October 27th, he shifted its head- that decision, even in the medium term,”
quarters to Madrid. That ended decades of says an executive at one ofthem. Noteven “The LastJedi” will reverse
family tradition, but there is no plan to re- Firms in other industries are delaying Americans’ retreatfrom cinemas
turn. “It was a painful decision, but we had expansion. “Our corporate clients in Cata-
no alternative,” he says. lonia have stopped investment,” says the HE new “Star Wars” film opens this
Catalonia accountsforroughlya fifth of banker. An official at Barcelona’s city hall Tweek. “The Last Jedi” arrives in cine-
Spain’s GDP and a quarter of its exports, (his office overlooks a huge poster de- mas in time to boost expected ticket sales
but only a sixth of the country’s popula- manding“freedomforpoliticalprisoners”) fortheyeartoabout$11bninAmerica,only
tion. Its diversified economy is the envy of confirms that investment has slowed. Big slightly down from last year’s record. But
much of Spain, notes Jordi Alberich Llave- Spanish companies in various industries the American film industry is in trouble.
ria of Cercle d’Economia, a business lobby say local uncertainty is worse than what Tickets sold per person have declined to
in Barcelona, thanks to flourishing medi- they face in Britain because of Brexit, their lowest point since the early1970s, be-
um-sized, family-run industrial,textile and where there is at least a legal process. fore the introduction of the multiplex. Ex-
perfume-making firms. It has become a Other economic activity has slowed, pensive flopshave prompted studio execu-
hub for multinationals, carmakers, phar- too. Barcelona lawyers, usually busy with tives to complain that Rotten Tomatoes, a
maceutical firms, fashion boutiques and propertydevelopments,saytheyhavehad ratings website, is killing off films before
hundreds ofstartups. little business since September. Guifré Ho- their opening weekends. The studios
The cement-maker’s boss worries that medes Amat, a property agent who also count on remakes and sequels to attract
those industrial and entrepreneurial tradi- manages5,000flatsandhousesinBarcelo- fans;suchfilmsaccountforallofthisyear’s
tions may fade because of political tur- na, says trade is flat, after two booming top ten at the boxoffice.
moil. In an independent Catalonia, his years. Once-keen foreign buyers of second It may get worse. Americans are losing
company’s double-taxation deals with homes—notably rich Egyptians, Chinese the film-going habit as new sources of en-
other countries (70% of its revenues come and Turks—watch and wait. tertainment seize their attention. Netflix
from abroad) might have been invalid. José Luis Bonet, boss of Freixenet, a big and other streaming services have made it
Many others have made the same producer of Cava wine, suggests that dam- more convenient to watch movies and TV1