M.More than a decade has passed without any progress being made in introducing the global tax system into the modern age. But less than three months after taking office, President Joe Biden has raised hopes of a breakthrough with proposals that could kill tax havens and force multinational corporations to pay a fairer share of taxes.
The change in tone couldn’t be more pronounced. With last week’s proposal for a minimum global corporate tax rate, Washington turned away from years of economic orthodoxy dating back to the early 1980s and prioritized a neoliberal world vision – of free market competition, indifference from government, and relentless advocacy of the world Globalization.
According to proposals presented to tax negotiators from 135 countries to the OECD, the Biden Plan would force large corporations to pay taxes where their income is generated rather than where profits can be shifted. It would also set a global minimum tax rate agreed by the world’s largest economies.
This is a strong development. For years, big corporations have been weaving a happy dance through a broken patchwork of international tax regulations, advised by an army of lawyers and accountants where to settle down to cut their bills.
The market economists favored by previous presidents would have spoken out in favor of the advantages of globalization: cheaper products, more choice. However, the profit shifting of large corporations, which is turbo-charged in the digital age with its unprecedented ease of doing business across borders, has resulted in the treasury becoming ever shorter. The amounts lost to treasuries around the world have risen to £ 311 billion a year, according to the Tax Justice Network.
This comes at a time when Covid is driving national debt to staggering levels. Public anger over tax avoidance and asking companies to pay a fair share has also increased since the 2008 financial crisis.
US multinational corporations are serious offenders. The proportion of gross profits they shift to tax havens has increased from 5 to 10% in the 1990s to 25 to 30% today.
In a race to the bottom designed to attract large corporations to competing jurisdictions, the OECD average statutory corporate tax rate in 109 countries fell from 28% at the turn of the millennium to 20.6% in 2020. This was a tactic used ostentatiously was made by George Osborne, who cut the UK rate from 28% a decade ago to its current level of 19% – with little apparent benefit.
Some digital companies pay even lower effective tax rates worldwide (an average of the taxes paid in all countries where a company operates). Current figures show that Amazon pays 11.8%, Apple 14.4% and Facebook 12.2%.
For tax fighters, Biden’s intervention is a moment of hope. But the fear among progressives is that defeat will be snatched from the jaws of victory.
For Biden, ending the race to the bottom would help his government increase domestic corporate taxes from 21% to 28% without the threat of big corporations raising sticks and finding profits elsewhere.
Much remains to be negotiated, not least on the tax rate at which a global minimum tax is set. Washington wants 21%, but some nations have much lower rates. An agreement between the EU countries would not be easy as the rates range between 9% in Hungary and 12.5% in Ireland and 33% in France.
Could the agreed rate be so low that the initiative becomes meaningless? Could there be too many exceptions?
Possibly, but the hope is that with the US on board and a warm welcome from France and Germany, jurisdictions where a sufficiently large proportion of global economic activity occurs will effectively enforce compliance. After decades on the way to nowhere, global tax reform may finally be within our grasp.
Cinemas and streamers fight like Godzilla against Kong
Rescuers come in all shapes and sizes, and this time the conquering heroes have taken the form of a dinosaur and a giant monkey. Godzilla vs Kong has overcome the pandemic and paved the way to recovery for the stuttering global box office.
In its first week of release, the blockbuster grossed over £ 205 million internationally, making it the best-performing debut since the pandemic began.
With finances stretched ’til they drop, movie theater owners will breathe a sigh of relief and hope that this success is evidence that moviegoers have not been permanently deterred from the big screen experience.
Hollywood studios have used cinema closings to experiment how some films can be streamed directly to streaming services. However, this was not seen as a great success. In the United States, the world’s largest film market, Godzilla vs Kong was made available on WarnerMedia’s HBO Max service at the same time as theaters, and the big screen was able to hold its own.
The $ 48.5 million for the first five days in the U.S., with only about half the screens open, was seen as redemption after potential savers Wonder Woman and Tenet hit the box office in 1984 at the start of the pandemic were.
However, the Hollywood studios have succeeded in shortening the once sacrosanct period of exclusivity that theaters enjoy from many months to a few weeks. In reality, it has always been the case that most films handled most of the ticket sales shortly after they premiered.
The pandemic has created an unprecedented testing ground for studios and triggered a forced boom in home entertainment. Director Adam Wingard promised that his film would be the ultimate “decider” in the battle between Godzilla and King Kong. But cinema owners, streaming services, and movie studios may feel like it turned out to be a draw.
Deliveroo Flotation was supposed to teach Sunak to keep his mind to himself
A week after the Deliveroo car accident in an IPO, the picture is deteriorating. The stock fell 10% to 254.5 pence on Friday, falling from 390 pence to just over a third.
A drop of this magnitude should dispel any thought that the flop can only be explained as a protest by old-school city fund managers against the charged voting rights that Deliveroo founder Will Shu has granted himself.
The governance setup is indeed hated in many areas, but the online retailer Hut Group also has a controlling stake in the founder and the IPO fell apart last year. Deliveroo seems like a straightforward case of overvaluation at launch. Goldman Sachs and JP Morgan Cazenove, the investment banks running the listing, have given their numbers very wrong.
Deliveroo still has £ 1bn in fresh capital so it has the option to redeem itself. It just pissed off the 70,000 of its customers who bought stocks. But Rishi Sunak, the chancellor who foolishly fueled the Deliveroo hype in hopes of renaming the London stock market as a magnet for tech companies, urgently needs to reconsider his tactics.
The first lesson the Chancellor should learn is to keep his name off individual stocks. Tech investing is a high risk game. There will be big winners and big losers, and since the Chancellor has no special skills to distinguish from one another, it is very unwise to support certain companies on day one. Tech Push’s success is measured by the number of companies entering the market.
The second lesson is that the biotech sector, rather than the gig economy, is a fertile area. For the past 14 days, Oxford Nanopore chose a listing in London while Vaccitech chose New York. Sunak would do better to spend his time improving that conversion rate. And that quietly behind the scenes.