A2| Wednesday, January 11, 2017 THE WALL STREET JOURNAL.
Trump donor Robert Mer-
cer hosted an annual holiday
party at his Long Island estate
on Dec. 3. A Page One article
Monday about the hedge-fund
manager’s involvement in
Donald Trump’s campaign in-
correctly said the party oc-
curred 10 days after the Nov. 8
U.S. election.The first name of WeChat
founder Allen Zhang was mis-
spelled as Allan in a Technol-
ogy article on Tuesday about
the unit of Tencent Holdings
Inc.CORRECTIONS
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WORLD NEWS
At least 25 people died in
severe flooding in southern
Thailand since New Year’s
Day, leaving businesses para-
lyzed and thousands of tour-
ists stranded.
The Interior Ministry said
Tuesday that the main high-
way connecting the south
with the rest of the country
was swamped. It said 12 ofthe country’s 67 provinces
have been hit by rain and sur-
face runoff since Jan. 1, af-
fecting more than one million
people. One of the main air-
ports and schools in the
south were shut.
Thailand’s wet season usu-
ally ends in late November.
Heavy rain and flooding are
rare in January.“We have sent soldiers, po-
lice and the Ministry of the In-
terior to ease the situation,”
Deputy Prime Minister Prawit
Wongsuwan said. (A soldier is
lowered from a helicopter to a
rescue boat, above.)
Southern Thailand is a ma-
jor rubber-producing area. The
floods have come at a particu-
larly bad time for farmers,said Uthai Sonlucksub, presi-
dent of the Natural Rubber
Council of Thailand.
The Meteorological Depart-
ment forecasts more heavy
rain in the region, which has
popular beaches and resorts
that attract millions of foreign
tourists every year.
—A Wall Street
Journal Roundup“A lot of people are off the
beaten track, staying in pri-
vate homes, taking private
taxis, eating in private restau-
rants,” he said, referring the
visitors. “And so this has been
a powerful boost for that en-
trepreneurial community.”
Enrique Núñez del Valle,
for instance, runs a pictur-
esque restaurant-cafe, La
Guarida, with seating for 100
clients, large for Cuba. Sitting
at a table on the roof, he said
the inflow of money supports
not only his business, but also
50 workers and, through
them, all manner of other
businesses.
“If there’s a limit to the fi-
nancial flow, it is the people
who’ll be hurt,” he said.
Mr. Rizo, the architect,
said he started the year with
eight projects and is now
down to three. But he hasn’t
given up: he is even consid-
ering a new business provid-
ing tours of Cuba’s wild
western province.
“I’m not waiting for a re-
sponse from the Cuban gov-
ernment, or the American,” he
said. “People say, ‘You have to
wait and see what happens.’
We’ve been waiting 50 years.”
—Ryan Dube in Lima
and Anatoly Kurmanaev
in Cienfuegos, Cuba,
contributed to this article.starting to look for where can
they have a structure that
pays a reasonable amount of
tax, and is less likely to be
challenged.”
Snap said Tuesday it will
immediately start collecting
all international revenue
through its business in the
U.K. A spokeswoman said the
company will then shift soon
to collecting revenue from for-
eign clients at local branches,
and pay local taxes.
For clients in countries with
no local Snap branches, the
company will continue to book
revenue in Britain.
That breaks from the prac-
tice at many other tech firms,
including Google parent Al-
phabet Inc. and Facebook Inc.
Many of those bigger firms
have chosen headquarters in
smaller European countries
that have allowed them to take
advantage of a patchwork of
national rules to lower taxes,
including legally moving prof-
its to tax havens such as Ber-
muda. The U.K.’s 20% corpo-
rate income tax is relatively
low and is slated to go down
to 17% beginning in 2020, but
that rate still is well above the
12.5% rate in Ireland, a popu-
lar destination for many firms.
The decision to establish a
cleaner structure also is a lot
easier for Snap than for other
tech firms, which have set up
shop around the world well
before all the new scrutiny of
the various tax strategies.
The financial stakes also
are lower for Snap, which isn’t
bringing in nearly as much
money as some of its more-es-
tablished Silicon Valley peers.
Snap is primarily known for
its Snapchat messaging app
that is particularly popular
among teens and millennials.
In September, it changed its
corporate name to Snap to re-
flect its ambitions beyond the
messaging app and began sell-ContinuedfromPageOne
national Airport before head-
ing to Germany, according to
a federal complaint. He ap-
peared in a Miami federal
court Monday and is cur-
rently being detained pending
another hearing scheduled
for Thursday.
Volkswagen’s guilty plea
sets it apart from other recent
criminal cases against auto
makers. Toyota and General
Motors Co. in recent years re-
solved criminal cases stem-
ming from safety failures and
each agreed to deferred-prose-
cution agreements under
which the government pledged
to later seek to dismiss
charges so long as the compa-
nies complied with the deals’
terms. Both of those auto
makers admitted to their
safety failures, expressed re-
gret and promised reforms.
Toyota paid a $1.2 billion pen-
alty to settle its criminal case;
GM paid $900 million.
The Wall Street Journal re-
ported Friday that Volkswagen
was nearing an agreement to
resolve the criminal case, with
a settlement expected to be
unveiled as soon as this week.
Meanwhile, Volkswagen
said Tuesday that world-wide
sales of its various brands
rose 3.8% last year, to 10.3 mil-
lion vehicles, despite the die-ContinuedfromPageOneNotice to Readers
Andrew Browne’s China’s
World column will return
next week.sel crisis and economic trou-
bles in emerging markets. In
December alone, the com-
pany’s sales surged nearly 12%
compared with December
2015, to 933,300 vehicles.
Besides its namesake VW
brand, the group produces
nameplates including Audi and
Bentley vehicles and Scania
trucks, as well as the mass-
market Seat and Skoda brands
in Europe.
Volkswagen’s strongest
growth was in China, where
sales increased 12% to 3.
million vehicles. For the first
time, China accounted for half
of the Volkswagen brand’s
world-wide sales.
In a sign of how Volks-
wagen has been humbled byits diesel crisis, its sales state-
ment makes no mention of hit-
ting its long-held target of
taking first place in global
sales. That is a contrast to
past years, when the company
would boast that it was on
track to beat Toyota and GM
years ahead of schedule. When
Volkswagen announced its
goal of surpassing rivals in
2007, it aimed to achieve the
milestone in 2018.
Toyota has managed to fend
off Volkswagen’s assault with
lapses of only a few months
over the past two years. But
the Japanese auto maker ac-
knowledged last month that it
would sell about 10.09 million
vehicles in 2016, slightly lower
than the prior year. The nar-row gap of about 200,000 ve-
hicles between the two global
leaders illustrates how fierce
the competition has been.
GM, which has lagged be-
hind Volkswagen and Toyota,
will release 2016 global sales
figures later this month.
Many analysts see Volks-
wagen’s unbridled ambition to
be No. 1 as the foundation of a
toxic corporate culture that
accepted nothing less than to-
tal victory and encouraged
employees to decide it was
better to cheat than admit de-
feat. Chief Executive Matthias
Müller, who took over in 2015
after the scandal was revealed,
has pledged to remake the
company’s culture and focus
less on sales growth.VW
ing Spectacles, a pair of sun-
glasses that are outfitted with
a camera. Snap makes the bulk
of its money showing ads to
Snapchat users. While it isn’t
profitable and isn’t likely to be
posting a big overseas tax bill
for now, its success reaching a
young audience has garnered
ad dollars from big brands
such as PepsiCo Inc. and led to
partnerships with media com-
panies such as BuzzFeed Inc.
and The Wall Street Journal.
Non-U.S. ad revenue totaled
just $18.3 million, or 5% of its
total in 2015, according to es-
timates from market research
firm eMarketer. But that fig-
ure is expected to rise to $
million, or 25% of the total ad
revenue in 2018, eMarketer
says. For Snap, establishing
London as its main office for
overseas operations makes
plenty of practical sense.
It said the size of the U.K.
advertising market and the
company’s 10 million users in
the U.K. drove its decision.
The firm already has 75 em-
ployees in the city.
Other companies have taken
measures to begin cleaning up
their tax affairs in Europe.
Last year, Facebook began
directing big U.K. clients to
start paying a Facebook unit
in the country rather than
moving that revenue through
low-tax Ireland and then on to
the Cayman Islands. Alpha-
bet’s Google said it would
start attributing some revenue
from Google clients in the U.K.
to its local unit. And in 2015,
Amazon.com Inc. began to col-
lect customer revenue from
subsidiaries in several EU
countries where it does busi-
ness—instead of collecting it
all in Luxembourg.
All of these companies have
maintained they pay their fair
shareintax.
—Georgia Wells contributed
to this article.SNAP
HAVANA, Cuba—Cuba’s pri-
vate-business owners, having
profited from a growing flow
of funds and tourists from the
U.S. under the Obama adminis-
tration, are facing uncertainty
the influx—and their hard-won
gains—will continue.
U.S. President-elect Donald
Trump has suggested he
might reverse the actions
President Barack Obama has
undertaken since 2014 to
scale back Washington’s eco-
nomic isolation of Raúl Cas-
tro’s regime. Mr. Castro him-
self, meanwhile, has offered
his country’s budding entre-
preneur class no indication
that he intends to press on
with measures he began six
years ago to ease the way for
some private businesses.
A third of Cuba’s five million
workers are now in the private
sector, including 522,000 busi-
ness owners, up from 150,
six years ago. Much of the seed
capital for those businesses
came from Cuban-Americans’
remittances to relatives here, a
flow that has more than dou-
bled since President Obama
took office in 2009. Those
funds amounted to $3.4 billion
in 2015, the latest year for
which figures are available—
more than Cuba’s total exportearnings, according to Emilio
Morales, head of Miami’s Ha-
vana Consulting Group.
For many of the country’s
restaurants, bed-and-break-
fasts, nail salons, and cafes,
the mainstays of revenue are
the more than 3.5 million
tourists who now visit the is-
land annually. More of those
visitors have come from the
U.S. since 2014, and in late
2015 Mr. Obama removed lim-
its on remittances to Cuban
nationals and to the funds U.S.
citizens bring to the island.
Cuba’s small businesses in-
habit a fragile sector, how-
ever, susceptible to policies on
either side of the Florida
Straits.
Being an entrepreneur re-
mains a daily struggle in
Cuba, a country with a highly
controlled economy and a
government that frowns on
the very idea of accumulating
wealth.
Restaurateurs scour Ha-
vana for ingredients, while
mechanics look for parts. Per-
mits and Cuba’s regulations
are stringent, as the govern-
ment purposefully keeps busi-
nesses from growing too
large. Importing necessities is
nearly impossible.
“As a business, you never
know when you’re going to fail
and lose everything,” said
Yaylen Vilches, 25, who runs
El Dandy, a cafe-restaurant.
And while the Trump ad-
ministration’s approach to
Cuba remains unclear, the
president-elect’s warning that
he might not retain Mr.Obama’s administration’s
friendlier stance toward the
island has fueled concerns
among the emerging capitalist
class and, some entrepreneurs
say, already putting a chill on
investment.
Yoandy Rizo, a 33-year-old
architect, said his Havana-
based firm has grown rapidly
in recent years, largely thanks
to contracts to redesign restau-
rants for tourists and renovate
homes purchased by Cuban-
American exiles. But he said
that political uncertainty re-cently has prompted a client to
suspend a renovation project
that would meant six months’
work renovating a home.
“So I have an international
crisis on my hands, because of
Donald Trump, but I also have
a domestic crisis,” he said.
Last month, more than 100
Cuban business owners of
businesses from restaurants to
nail salons made public a let-
ter they had written to Mr.
Trump asking him not to scale
back U.S. reforms.
“As a successful business-man, we’re confident that you
understand the importance of
economic engagement be-
tween nations,” said the letter,
released at a press conference
on Capitol Hill.
The impact of people and
capital from the U.S. on the
country of 11 million has been
momentous, going well be-
yond the elegant hotels
where rooms cost hundreds
of dollars a night, said Ted
Henken, an expert on the Cu-
ban economy at New York’s
Baruch College.BYJUANFOREROCuba’s Private Sector Braces for Change
Possible shifts under
Trump on ties to U.S.,
leader’s inertia add up
to new uncertaintyPrivate food sellers lined the road to Santiago de Cuba before last month’s funeral for Fidel Castro.NICOLA LO CALZO/L’AGENCE À PARIS FOR THE WALL STREET JOURNALHeavy Flooding Kills Dozens, Paralyzes Southern Thailand
LILLIAN SUWANRUMPHA/AGENCE FRANCE-PRESSE/GETTY IMAGES
VW‘s deal with the U.S. requires approval from its supervisory board. The Detroit auto show, above.ANDREW HARRER/BLOOMBERG NEWSTo reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or http://www.djreprints.com