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Italy Targets Google with New Tax Measures, U.S. Considers Economic Retaliation

Italy has set its sights on Google with new tax measures aimed at ensuring that major multinational tech companies pay their fair share of taxes. Following the recent taxation of Amazon, the Italian government is now focusing on Google as part of its broader initiative to tighten regulations on digital giants operating within the country. However, these moves have sparked tensions with the United States, which is contemplating economic retaliation in response.

Italy’s decision to impose additional taxes on Google follows a growing trend in Europe where governments are pushing for more stringent tax policies for large tech corporations. These companies, including Google, Amazon, and Facebook, have long been accused of exploiting loopholes in international tax laws to reduce their tax liabilities in countries where they generate significant revenue. Italy’s government, like several others in Europe, has expressed frustration with the minimal taxes paid by these tech giants, given their substantial earnings from Italian consumers.

The Italian authorities argue that Google and other digital platforms benefit immensely from local markets without contributing proportionately to the public finances. The new tax measures are designed to close this gap, ensuring that these companies contribute more to the Italian economy. Italy’s move aligns with similar actions by other European countries, such as France and Spain, which have also introduced digital services taxes targeting multinational tech companies.

In response to these developments, the United States has hinted at potential economic reprisals. Washington has long opposed unilateral tax measures imposed by European nations on American tech companies, arguing that such policies unfairly target U.S. firms and violate international trade agreements. The U.S. government has previously threatened to introduce tariffs or other trade barriers as a form of retaliation against countries that implement these digital taxes.

This situation places Italy in a delicate position. On one hand, the country is seeking to address the imbalance in tax contributions from global tech firms, which many view as essential for ensuring a fairer distribution of tax burdens. On the other hand, Italy risks sparking a trade conflict with the U.S., its key ally and major trading partner. Such a dispute could have significant economic repercussions, not only for Italy but also for broader European-U.S. relations.

The broader context of this dispute lies in the ongoing global debate over how to tax digital services in a rapidly evolving global economy. The Organisation for Economic Co-operation and Development (OECD) has been working on a global framework to address these issues, but progress has been slow. In the absence of an international agreement, countries like Italy are taking matters into their own hands, leading to potential clashes with the U.S.

Trade deficit declines an annual 18.5% in January-August

Cyprus’ trade deficit declined to €4.98 billion from January to August 2024, registering an annual reduction of 18.5% compared with €6.12 billion in the respective period of last year.

According to provisional data released by Cystat, total imports for January – August 2024 declined by 15.5% to €7.57 billion compared to €8.96 billion in the respective period of last year.

Total exports of goods in January-August 2024 amounted to €2.59 billion compared to €2.84 billion in January-August 2023, registering a decrease of 9%.

In August, total imports stood at €948.6 million as compared to €1.243,1m in August 2023, recording a decrease of 23%.

Imports from other EU Member States were €564.8m and from third countries €383.8m, compared to €692.4m and €550.7m respectively in August 2023.

Imports in August 2024 include the transfer of economic ownership of vessels and aircraft, with a total value of €38.8m as compared to €246.7m in August 2023.

According to Cystat, total exports of goods in August 2024 were €276.4m as compared to €422.8m in August 2023, recording a decrease of 34.6%.

Exports to other EU Member States were €70m and to third countries €206.4m, compared to €79.1m and €343.7m respectively in August 2023.

Agriculture Minister announces €109.3 million strategy for primary sector

Cyprus has launched a new strategy for its agricultural sector, aiming at sustainable development, innovation, and economic resilience.

Minister of Agriculture, Rural Development, and Environment Maria Panayiotou introduced the strategy at a press conference on 10 October, stressing that “it is not just an initiative, but a roadmap reflecting our vision for the future of Cypriot agriculture.”

The strategy, which includes 11 key actions with a budget of €109.3 million, covers the period from 2024 to 2028 and was approved by the Council of Ministers on October 2, 2024.

“Our aim is to establish a new model for the primary sector, ensuring sustainable production, economic support, and access to new technologies,” Panayiotou said. She noted the government’s commitment to providing solid tools and support for farmers, moving beyond emergency measures to a robust, development-oriented approach.

The new strategy aims to increase the contribution of the agricultural sector to Cyprus’ GDP, which currently stands at 1.8%. It will focus on expanding the sector’s capabilities while promoting sustainability and resilience in the face of ongoing challenges.

“We want to ensure the needs of the domestic market are met while promoting Cypriot products in new international markets,” Panayiotou added.

Key elements of the strategy include boosting the professional farming sector through priority measures and scoring systems, water management interventions to combat drought, and the adoption of smart farming technologies. The strategy will also address market gaps by supporting the use of untapped agricultural land and promoting cooperation among producer groups.

Panayiotou emphasised that the new strategy would support the long-term competitiveness of Cyprus’ agricultural sector, focusing on high-quality, affordable products for consumers and fair incomes for farmers.

The actions in the strategy will be funded through the Common Agricultural Policy (CAP) and national resources, with the University of Cyprus’ Economic Research Centre tasked with evaluating its overall impact on the economy. The 11 actions cover areas such as green competitiveness, livestock sector support, new financing tools for agriculture, quality certification for Cypriot products, and risk management in agricultural production.

Zero VAT on products to benefit vulnerable groups

Minister of Finance Makis Keravnos has announced the implementation of 0% VAT on certain products, aiming mainly at vulnerable groups, young couples and the middle class.

The announcement was made following a 10 October meeting he had at the Presidential Palace with the President of the Republic Nikos Christodoulides.

The products to be included in a proposal that will be submitted to the next Cabinet meeting, according to Keravnos, include children’s diapers, adult diapers, baby formula, hygiene products for women, fruits and vegetables. These products will be sold “with zero VAT, without a specific expiration date” for the measure.

“We believe that these products are products that mainly concern young couples, the middle class,” Keravnos said, adding that “we feel that at the moment it is time for this category of products to re-enter the zero VAT rate.”

The Finance Minister said that the economic policy followed by the Government “is a policy that aims to financial stability, sustainability and resilience of the economy in this difficult geopolitical environment that we live in, to strengthen the middle class and vulnerable groups.”

He noted that according to data the government presented, “as a result of the economic policy we are pursuing, the middle class has been strengthened and from 58.6% of the population in 2015 it has reached 64.1%.” Therefore, according to Keravnos, “the guiding principle of any economic and social policy is the strengthening of the middle class, which has traditionally been the backbone of the economy and the society.”
Asked about possible criticism regarding reintroducing products with zero VAT rate, Keravnos said that the government does not act on “any populism or unnecessary criticism” but “we are following and implementing policies based on the needs of the society and the economy.”

Cabinet approves 2025 Fiscal Programme, growth expected at 3.7% this year

The Cabinet approved the draft 2025 Fiscal Programme of the Republic, Government Spokesperson Konstantinos Letymbiotis has said, noting that growth this year is expected to reach 3.7%.

In statements after the 9 October meeting of the Cabinet, the Spokesman said that the Minister of Finance will submit the Fiscal Programme to the General Directorate of Economic and Financial Affairs of the European Commission.

He said that this is the second evaluation that takes place in the autumn of each year on the basis of plans and budget programmes submitted by the countries by October 15 each year. The evaluation, he said, concerns the revised, expected fiscal results for the current year and the revised forecasts, mainly for the next year, on the basis of the government’s budget plan for the coming year.

The Spokesperson said that the EU evaluates the plans no later than November 30 each year. Based on the main macroeconomic scenario included in the draft fiscal program 2025, he said, the Cypriot economy is expected to grow at a rate of 3.7% in 2024 in real terms.

Inflation, based on the harmonized index of consumer prices, is expected to be 2.2% in 2024 and fall further to 2% in 2025-2027, he added.

Letymbiotis noted that the fiscal balance of the general government in 2024 is expected to have a surplus of 3.9% as a percentage of GDP.

Concluding, he said that public debt for 2024 is estimated to be 68.9% of GDP, compared to 77.4% of GDP at the end of the previous year.

Cyprus has the largest share of petrol use in EU

Petrol/diesel oil was the main energy source in road transport in the EU in 2022, while Cyprus had the largest share of use of motor petrol among member states, according to data released by Eurostat.

Petrol/ diesel oil and motor petrol remained the leading energy sources in road transport in 2022, according to the statistics.

In the EU, petrol/diesel oil (excluding the biofuel portion) was the main source of energy in road transport in 2022, with a 65% share. Motor petrol (excluding the biofuel portion) followed at 25%, ahead of renewables and biofuels (6%), liquefied petroleum gases (2%), natural gas (1%) and electricity (0.3%).

In most EU countries, petrol/diesel oil was the primary source of energy for road transport, though there were noticeable differences between the countries.

The highest shares were reported in Latvia (80%) and Lithuania (76%), followed by Ireland, Austria, and Spain, each at 74%. In contrast, the lowest shares were recorded in Sweden (45%), Cyprus (46%) and the Netherlands (48%).

The share of motor petrol was highest in Cyprus (50%), the Netherlands (42%), and Malta (36%). The lowest shares were reported in Lithuania (13%), Latvia (14%) and Bulgaria (15%).

Energy consumption in transport at pre-pandemic levels

According to the statistics, in 2022 transport activities accounted for 31% of the final energy consumption in the EU, which made it the highest consumer of final energy, ahead of households (27%) and industry (25%).

Road transport was the largest energy consumer, responsible 74% of all energy consumption in transport, or 10,996 petajoules (PJ). Water transport accounted for 13% of all energy consumed in transport (1,935 PJ), followed by air (11%; 1,700 PJ) and rail transport (1%; 214 PJ).

Compared with 2021, air transport recorded the highest increase in energy consumption, with a striking 57% rise. In 2022, energy consumption levels in air transport were approaching the pre-pandemic figures, following sharp declines in 2020 and 2021.

Energy consumption also increased, if not as rapidly in road transport, which also approached 2019 levels.

Dr. Demis Hassabis Awarded Nobel Prize in Chemistry for Groundbreaking AI Contributions

Dr. Demis Hassabis, a renowned British-Cypriot artificial intelligence (AI) researcher and co-founder of DeepMind, has been awarded the Nobel Prize in Chemistry for his revolutionary work in using AI to advance the understanding of chemical processes. His contributions have transformed the fields of chemistry and molecular biology, propelling scientific discovery into new realms of possibility.

Hassabis’ award marks a significant milestone in the intersection of AI and the natural sciences. By leveraging AI to tackle complex scientific challenges, he has helped scientists understand the intricate molecular structures and interactions that underpin biological systems and chemical reactions. His work has not only provided deep insights into the fundamental processes of life but also paved the way for innovative approaches to drug discovery, materials science, and renewable energy solutions.

One of the key breakthroughs that earned Hassabis this prestigious recognition is DeepMind’s AlphaFold, an AI system designed to predict the 3D structures of proteins. Understanding protein folding is one of the most complex problems in molecular biology, and accurate predictions of these structures are crucial for numerous applications, including the development of new medications and therapies. Before AlphaFold, scientists relied on time-consuming and expensive methods to determine protein structures. Hassabis’ innovation has significantly accelerated this process, offering a more efficient and cost-effective solution that has already had a profound impact on research worldwide.

AlphaFold’s ability to predict the structure of nearly every known protein has been hailed as one of the most important scientific achievements in recent years. The system’s accuracy and speed have opened up new opportunities for scientists, enabling them to conduct research that was previously impossible or too resource-intensive. From addressing global health challenges like antibiotic resistance to advancing personalised medicine, the implications of AlphaFold’s success are far-reaching and transformative.

Dr. Hassabis’ achievement also highlights the growing role of AI in scientific discovery. Traditionally, the Nobel Prize in Chemistry has been awarded for advancements in laboratory-based research, but Hassabis’ work demonstrates the potential of AI as a powerful tool for solving some of the most pressing challenges in the natural sciences. This recognition by the Nobel Committee underscores the importance of interdisciplinary collaboration, where AI, computer science, and traditional scientific disciplines converge to create groundbreaking innovations.

Beyond his work in chemistry, Hassabis has been a key figure in advancing AI research and its applications across various fields. As the co-founder of DeepMind, he has driven the development of AI systems that can not only solve scientific problems but also tackle challenges in areas such as healthcare, gaming, and climate change. His visionary leadership has positioned DeepMind as a global leader in AI research and innovation, influencing industries and academic institutions alike.

The Nobel Prize in Chemistry – for a breakthrough in the study of proteins

A discovery in the field of proteins earned the Nobel Prize in Chemistry. The discovery solves one of the most difficult problems in biology and could be used to create drugs and vaccines.  Honorees were David Baker and Demis Hassabis. Both work for London-based research lab Google DeepMind, a division of Google. Professor John Jumper also received part of the award.

KEY FACTS

  • David Baker, Demis Hassabis and John Jumper have been awarded the 2024 Nobel Prize in Chemistry for their scientists’ research into the structure of proteins. The prize is worth SEK 11 million ($1.1 million).
  • Demis Hassabis is one of the founders of DeepMind. John Jumper led the development of the protein prediction software AlphaFold, and David Baker is a professor at the University of Washington.
  • Half of the prize was awarded to Baker “for computational protein design,” and the other half was split between Hassabis and Jumper “for protein structure prediction,” the academy said.
  • Proteins are the building blocks of life and are found in every cell of the human body. The discovery solves one of the most difficult problems in biology and could be used to create drugs and vaccines. 
  • This is the third prize awarded this year. Yesterday, the Nobel laureates in physics were announced, and the day before that, discoveries in medicine were honored.

IMPORTANT QUOTE

“The 2024 Nobel Prize in Chemistry is dedicated to proteins – the ingenious chemical weapons of life. David Baker has achieved the almost impossible feat of creating entirely new types of proteins. Demis Hassabis and John Jumper have developed an artificial intelligence model to solve a 50-year-old problem: predicting the complex structures of proteins. These discoveries have enormous potential,” the Nobel Committee said.

KEY STORY 

The Nobel Prize for Medicine was awarded on Monday. The prize went to the discoverers of micro RNA and its role in gene regulation. Yesterday, the distinction for physics went to scientists who made discoveries that give more opportunities to machine learning. John Hopfield of Princeton University and Geoffrey Hinton of the University of Toronto were honored for their pioneering work on artificial neural networks, which underpin much of modern artificial intelligence.

Oil Prices Surge: The Three Key Factors Behind the Rally

Oil prices have been on a sharp upward trajectory in recent months, driven by a confluence of factors that are reshaping the global energy market. As the price of crude continues to rise, analysts have identified three primary factors fueling the rally: OPEC+ production cuts, geopolitical tensions, and rising global demand. These forces are creating a perfect storm, with significant implications for the global economy, energy security, and inflation.

1. OPEC+ Production Cuts

One of the most influential factors in the recent surge in oil prices has been the decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to implement further production cuts. To stabilise global oil markets and support higher prices, OPEC+ has strategically reduced output. These cuts have tightened global supply, causing prices to climb as demand outpaces available production. Saudi Arabia, the world’s largest oil exporter, and Russia, a key player in the alliance, have been at the forefront of these efforts, showing little indication of reversing course in the near future.

The impact of these cuts has been immediate and profound, with oil prices reaching their highest levels in nearly a year. By limiting the availability of crude, OPEC+ has exerted significant control over the market, ensuring that prices remain elevated even as other global uncertainties persist. For countries heavily reliant on oil imports, this rise in prices is contributing to inflationary pressures, particularly in energy-dependent industries.

2. Geopolitical Tensions

Geopolitical risks have also played a crucial role in the recent oil price rally. Conflicts and instability in key oil-producing regions, such as the Middle East and Russia, have heightened concerns about the security of global oil supplies. The ongoing war in Ukraine continues to disrupt global trade routes and has led to sanctions on Russian oil exports, further reducing available supplies in Europe and beyond.

Additionally, tensions in the Middle East, particularly in countries like Iran and Saudi Arabia, are contributing to market volatility. Any escalation in these areas could lead to supply disruptions, further tightening the market and driving prices higher. For investors and businesses alike, the uncertainty surrounding geopolitical developments is adding a risk premium to oil prices, making energy markets increasingly difficult to predict.

3. Rising Global Demand

While supply constraints have dominated headlines, rising global demand for oil is equally responsible for the current price rally. As economies recover from the pandemic and industrial activity picks up, the energy demand has surged. This is particularly true in emerging markets, where economic growth is driving increased consumption of fuel for transportation, manufacturing, and electricity generation.

China, the world’s second-largest oil consumer, has seen a resurgence in demand as it navigates its economic recovery, further straining global supplies. In addition, seasonal factors such as the Northern Hemisphere’s winter months typically lead to increased demand for heating oil and fuel, putting further pressure on prices.

CySEC promotes early financial education for children

The Cyprus Securities and Exchange Commission (CySEC) has placed a significant focus this year on the financial education of children and adolescents as one of two key pillars of its activities for the 2024 World Investor Week.

Taking place from 7 to 14 October, World Investor Week is a week-long, global campaign promoted by the International Organisation of Securities Commissions (IOSCO). The second pillar also involves safeguarding and educating young people, with a specific focus on the social media realm and the growing impact of financial influencers, or “finfluencers.”

As part of this educational initiative, CySEC’s activities include delivering lectures and distributing educational material in schools and universities in collaboration with the Ministry of Education, Sports, and Youth. CySEC is also engaging with parent associations in schools and has developed a series of lectures specifically for parents. A key element of this effort is the publication of a Parents’ Guide to Financial Education, which offers valuable information and practical advice to help parents understand and support their children with financial literacy.

The Parents’ Guide also contains a dedicated section for adolescents, who often manage larger sums of money, face more external influences and encounter greater risks, particularly in the online space.

Commenting on CySEC’s new initiative to support young people, CySEC Chairman, Dr. George Theocharides, emphasised that childhood and adolescence are critical periods for shaping financial behaviours and attitudes. He said, “Parents are essentially the first and most important teachers when it comes to imparting fundamental knowledge on managing money and integrating financial learning into everyday life. They can do this by discussing family financial matters with their children, using easy and enjoyable methods of learning in daily household activities, and, most importantly, by setting a good example.”

The Parents’ Guide highlights the advantages that financial literacy offers to children, including:

CySEC’s Officer A, in charge of the Financial Education Programme, Elena Karkoti, encouraged parents to engage in conversations with their children about family financial matters, such as income, salary deductions, fixed expenses (utility bills, loan payments, rent), and what the family budget entails. She said, “Children learn a lot by observing. When parents demonstrate good financial habits, such as budgeting, saving, and responsible spending, children are more likely to adopt these practices in their own lives.”

CySEC invites all interested parties to actively participate with their own initiatives during World Investor Week. More information about CySEC’s initiatives can be found on the Financial Education Portal.

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