Qwick Takes: The global minimum corporate tax
This week, Talking Biz News Deputy Editor Erica Thompson reached out to Qwoted’s community of experts to inquire about the implications of the minimum corporate tax the G7 agreed this week.
Check out some of the top commentary:
The G-7 statement was aspirational and needs to be adopted by the broader groups and then adopted by the various governments through legislation. We are not looking at tax year 2021 or 2022, if at all.
To many, taxes are the price we pay for a society and to others, they are the curse to growth. I do not think that the countries will adopt the 15% floor if there is the risk that neighbors will not. The more terrifying statement came when they said that they may tax the tech world based on where the consumer lives without the entity having a physical presence. With 3 billion users, I am sure Facebook took notice. Now, that may be something which the EU can adopt and raise some revenue, which may simply result in higher fees to those residents/advertisers.
The tax increases hit hardest at companies with sizable intangible assets, easily shifted to Ireland and to other low tax centers with low tax rates on corporate income. Nearly two-thirds of the companies with effective tax rates of less than 15% were U.S. based. Large tech and pharmaceutical firms are most exposed to the tax increases, ironically among the most innovative sectors of the U.S. economy relied on to help drive economic and earnings growth.
Passage of the global tax proposals in the foreseeable future is viewed as a long shot, limiting the impact on earnings and on stock prices. Ratification by national legislatures will be time consuming in any event. Republican gains in the mid-term elections next year likely would put a quick end to the debate in the U.S., an early bellwether shaping votes in other countries. Even if something were to be passed soon, the increased tax bite on several so-called “FAANGS” would be limited.
A silver lining to the tax proposals would mitigate the effect of the tax proposals, particularly for large tech firms. First, the new proposals would likely supplant a digitalization tax now being adopted overseas and more directly targeted at the large high tech firms. Second, company tax and other planning would benefit from the increased visibility once the tax debate is resolved. And third, a uniform global plan let’s companies avoid a more complicated, patchwork system of varying country tax codes.
Darin Tuttle, founder, Tuttle Ventures LLC:
With the G7 agreeing to global minimum tax rates for corporations, any other smart country will immediately lower its corporate tax rate and reap the benefits of foreign direct investment. There is no one world government and impossible to enforce.