While American Express has not been as negatively impacted by defaults and delinquencies as other credit card companies, the company’s bottom line has been hit hard by its business model tied into the well-to-do traveling and dining out. Restaurants have been shuttered in many countries, and hotel and airfare usage has fallen to the point that many airlines have sought government help and hotels are facing bankruptcy.
“We recognize that the road ahead continues to be uncertain,” American Express CEO Stephen Squeri said in a prepared statement.
American Express’s discount revenue, or the money it makes off each swipe or tap of one of its cards, was roughly $4.99 billion in the quarter. That’s down from $6.83 billion in the same period a year earlier. American Express earns a small percentage from each transaction on its network, so the less activity on its network, the less revenue the company generates.
The company is also facing consumers and small businesses, hit hard by the pandemic or preparing for more tough times, cutting back spending and cutting up cards. The average spending on an American Express card fell to $4,486 from $5,630 a year earlier.
— Associated Press
AIG settles foreign tax shelter accusations
American International Group agreed to give up claims to more than $400 million of foreign tax credits and to accept a 10 percent tax penalty to settle accusations it used abusive tax shelters, the U.S. Justice Department announced Friday.
Acting U.S. Attorney Audrey Strauss in Manhattan said the settlement related to seven cross-border transactions between the insurer’s AIG Financial Products unit and foreign banks dating from the mid-1990s.
She said there was “overwhelming evidence” that the seven transactions had no economic substance and were designed to generate bogus foreign tax credits to reduce AIG’s U.S. tax liabilities for the 1997 tax year.
AIG had filed a lawsuit in 2009 challenging an Internal Revenue Service decision from the prior year to disallow the tax credits and impose a 20 percent tax penalty.
But the government said the seven transactions enabled the New York-based insurer to “game” the tax system by exploiting differences between foreign and U.S. tax laws, and “sucked hundreds of millions of dollars” from the U.S. Treasury.
“AIG created an elaborate series of sham transactions that were designed to do nothing — and in fact did nothing — other than generate hundreds of millions of dollars in ill-gotten tax benefits,” Strauss said.
The settlement was approved on Thursday by U.S. District Judge Louis Stanton.
“We are pleased to put this longstanding matter behind us,” AIG said in a statement.
Also in Business
Tesla is recalling about 30,000 imported Model S and Model X vehicles in China because of suspension problems, a setback for the U.S. electric-car maker just as it faces intensifying competition in the world's largest auto market. The company is recalling vehicles made between Sept. 17, 2013, and Jan. 15, 2018, according to a statement by the State Administration for Market Regulation on Friday. There are two different suspension defects, and some of the recalled vehicles may have both of them, the authority said.
Britain signed a trade deal with Japan on Friday, its first with a major economy since Brexit, as the clock runs down on British efforts to reach an agreement with the European Union by the end of the year. In a ceremony in Tokyo, British International Trade Secretary Liz Truss and Japanese Foreign Minister Toshimitsu Motegi put their names to the pact, which was reached in principle in September. The deal largely preserves the terms under which Britain traded with Tokyo as a member of the E.U.
— From news services