Call Of Duties

Image source: Artem Zhukov @artemioz - Unsplash jeff Metzger, Revenant - Shutterstock

What's going on?

The US reckons new tax rules for multinational companies are long overdue, so it proposed a new plan this week to make it happen.

What does this mean?

The worlds governments have spent billions keeping their economies ticking over during the pandemic, so it’s not surprising that theyre keen to replenish their coffers by raising taxes. What is surprising is that the OECD the economic organization thats been locked for years in efforts to revamp the global tax system has finally made headway on exactly that.



Its thanks in large part to the US, which last week laid out plans for a minimum global tax rate of 21% a big jump from the 12.5% the OECDs long been proposing. The US is now reportedly suggesting countries should be able to tax all the biggest multinational companies based on how much they earn there. And while that wouldnt necessarily change how much theyd have to pay, itd certainly change whotheyd have to pay.

Why should I care?

For markets: Those taxes should come in handy.


The USs sudden enthusiasm for global taxation isnt bureaucratic selflessness: a higher worldwide minimum would allow the country to raise its national corporate tax rate from 21% to 28% without the risk other countries will undercut them and lure its companies overseas. Any extra cash in the bank wouldnt hurt either especially now it has a $2 trillion infrastructure plan to pay for.



The bigger picture: At least its something new to worry about.


US companies wont be best pleased: analysts reckon the proposed overhaul would cut their earnings growth by up to 9% next year, with the tech and pharma sectors at risk of even heftier shortfalls (tweet this). That might be why tax is now number two on the list of things investors are worried about, according to a survey by Royal Bank of Canada right behind central bank policies, but ahead of last quarters inflation fears.

Originally posted as part of the Finimize daily email.

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