George Lucas, Raiz Group CEO
This week saw two of the most influential Democratic lawmakers on US tax policy — Ron Wyden chair of the Senate finance committee and Richard Neal chair of the House ways and means committee — back a new plan by the Biden administration on global corporate taxation.
The US Treasury recently proposed the sweeping multilateral deal to the OECD that would include a new global minimum corporate tax rate, maybe higher than 20 per cent, aimed to discourage multinational companies from shifting profits to low-tax countries.
Under the plan, set out in a document sent to 135 countries negotiating tax reforms at the OECD, national governments could tax the global profits of roughly 100 of the biggest and most profitable multinationals, including America’s own big tech groups, based on their sales in those countries.
The OECD is said to be looking for an agreement by the middle of the year. However, once a deal is reached it still needs to be ratified by Governments involved, and the US Republicans on Capitol Hill will likely pose a roadblock, warning that the changes could harm US multinationals.
US tax code plan to close corporate loopholes
At the same time, US President Joe Biden is looking to follow through on his campaign pledge to raise corporate taxes with US tax code changes, although this may not materialise for many months.
The Made in America Tax Plan would raise the corporate tax rate from 21 to 28 percent and attempt to shut loopholes around offshoring profit. The plan, tied to President Biden’s $2 trillion infrastructure revamp, would reportedly claw back about $2 trillion in corporate profits into the US.
Biden tax reforms aimed at multinationals
The impact of these plans could have a larger impact on some sectors of the US stock market than on others like the pharmaceuticals industry, “big tech” firms, and the tech sector more generally.
In the 2019 fiscal year, US companies in these groups generally paid far lower effective rates of corporation tax than the median firm in the S&P 500.
More broadly, there is growing evidence that those with money will have to give up a large part of their wealth in coming years, especially if the Biden tax changes and OECD deals are ratified.
Another potential hit to those with money is the willingness of central banks to let inflation run higher than their targets while maintaining low interest rates, meaning the wealthy will earn a lot less on their money after correcting for inflation.
There’s also the impact of COVID-19, which should see wages rise relative to rents and interest rates.
US and European stocks reach fresh highs
Despite all this, US and European stock markets reached all-time highs last week, ending a robust week for global equities on both sides of the Atlantic.
The US S&P 500 is sitting just shy of 4,100 points, which was the median analyst target for the end of 2021 for the US equity benchmark, as calculated by Bloomberg. So, it could be said that US stocks have effectively jammed a year’s worth of gains into a little more than four months.
By contrast, Chinese stocks are not doing as well as the country’s producer price index jumped by the most in two years. The rise in factory gate prices in March shifted the focus to the possibility of rate rises and a tightening of financial conditions in China.
Don’t have the Raiz App?
Download it for free in the App store or the Webapp below:
If you have read all or any part of our email, website, or communication then you need to know that this is factual information and general advice only. This means it does not consider any person’s particular financial objectives, financial situation, or financial needs. If you are an investor, you should consult a licensed adviser before acting on any information to fully understand the benefits and risk associated with the product. This is your call but that is what you should do.
You may be surprised to learn that RAIZ Invest Australia Limited (ABN 26 604 402 815) (Raiz), an authorised representative AFSL 434776 prepared this information.
We are not allowed, and have not prepared this information to offer financial product advice or a recommendation in relation to any investments or securities. If we did give you personal advice, which we did not, then the use of the Raiz App would be a lot more expensive than the current pricing – sorry but true. You therefore should not rely on this information to make investment decisions, because it was not about you for once, and unfortunately, we cannot advise you on who or what you can rely on – again sorry.
A Product Disclosure Statement (PDS) for Raiz Invest and/or Raiz Invest Super is available on the Raiz Invest website and App. A person must read and consider the PDS before deciding whether, or not, to acquire and/or continue to hold interests in the financial product. We know and ASIC research shows that you probably won’t, but we want you to, and we encourage you to read the PDS so you know exactly what the product does, its risks and costs. If you don’t read the PDS, it’s a bit like flying blind. Probably not a good idea.
The risks and fees for investing are fully set out in the PDS and include the risks that would ordinarily apply to investing. You should note, as illustrated by the global financial crisis of 2008, that sometimes not even professionals in the financial services sector understand the ordinary risks of investing – because by their nature many risks are unknown – but you still need to give it a go and try to understand the risks set out in the PDS.
Any returns shown or implied are not forecasts and are not reliable guides or predictors of future performance. Those of you who cannot afford financial advice may be considering ignoring this statement, but please don’t, it is so true.
Under no circumstance is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
This information may be based on assumptions or market conditions which change without notice and have not been independently verified. Basically, this says nothing stays the same for long in financial markets (or even in life for that matter) and we are sorry. We try, but we can’t promise that the information is accurate, or stays accurate.
Any opinions or information expressed are subject to change without notice; that’s just the way we roll.
The bundll and superbundll products are provided by FlexiCards Australia Pty Ltd ABN 31 099 651 877 Australian credit licence number 247415. Bundll, snooze and superbundll are trademarks of Flexirent Capital Pty Ltd, a subsidiary of FlexiGroup Limited. Lots of names, which basically you aren’t allowed to reproduce without their permission and we need to include here.
Mastercard is a registered trademark and the circles design is a trademark of Mastercard International Incorporated.
Home loans are subject to approval from the lending institution and Raiz Home Ownership makes no warranties as to the success of an application until all relevant information has been provided.
Raiz Home Ownership Pty Ltd (ABN 14 645 876 937), an Australian Credit Representative number 528594 under Australian Credit Licence number 387025. Raiz Home Ownership Pty Ltd is 100% owned by Raiz Invest Australia Limited (ABN 26 604 402 815).