More than 100 countries, including Australia, have endorsed a global minimum tax rate to deter the world’s largest companies from evading taxes by shifting their profits to low-tax countries.
The plan could provide for global corporations to be taxed at a rate of at least 15 percent, which was pushed by the Biden administration.
130 countries approved the revision of international tax rules at a two-day meeting hosted by the Paris-based Organization for Economic Co-operation and Development.
The OECD said a minimum global corporate tax of at least 15 percent could bring in around $ 150 billion ($ 200 billion) in additional global tax revenue annually.
The plan calls for more than $ 100 billion in profits to be taxed in the countries where the money is made, rather than being reallocated to countries with lower taxes.
The 130 countries represent more than 90 percent of the world economy.
“With a global minimum tax, multinational corporations will no longer be able to play countries off against each other to lower tax rates,” said US President Joe Biden in a statement.
“They will no longer be able to avoid their fair share by hiding profits made in the United States or any other country in countries with lower taxes.”
The agreement will be presented to the Group of Twenty (G20) major economies for political approval at a meeting in Venice next week.
Technical details are to be agreed by October so that the new rules can be implemented by 2023
The nine countries that did not sign include the low-tax EU members Ireland, Estonia and Hungary.
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Grant Wardell-Johnson, KPMG’s senior tax partner, said this was a “historic” and extraordinary achievement.
“It changes some basic tax rules that we’ve had for nearly a hundred years,” he told ABC.
“This is the first time we’ve had the idea of a global minimum tax rule that if the effective tax rate in a country falls below 15 percent or more, a top-up tax is charged.”
Mr Wardell-Johnson expects the G20 to agree to a 15 percent tax rate despite opposition from low-tax countries like Ireland.
“I think they will be forced to join because what if they don’t raise their tax rate, then the taxes will just be borne in a different jurisdiction,” he said.
He said regulated financial services and resources were not part of the deal, which would benefit Australia.
“Extractive industry profits are excluded from the deal, which means that other countries cannot obtain tax rights on our mining profits,” said Wardell-Johnson.
“And we will have small revenues from multinational companies that have a market in Australia.”
ASX rallies on the last trading day of the week
The Australian stock market closed higher thanks to an overnight rise in oil prices after OPEC failed to agree on production increases.
At noon it hurt profits, but a late rally sent the All Ordinaries index up 0.6 percent to 7,587.
The ASX 200 rose the same percentage to 7,309.
Most sectors rose, led by education stocks, oil companies, consumer staples finance companies and miners.
Only consumer discretionary stocks were weaker.
IDP Education was the top performer (+20.3 percent) on the ASX 200 after it announced it would buy the British Council’s English testing service in India.
A2 Milk (+5.2 percent) and Nickel Mines (+5 percent) also rose.
Travel agencies rose after Prime Minister Scott Morrison unveiled a four-stage reopening plan with Webjet (+4.9 percent), Flight Center (+4.5 percent) and Qantas (+3.5 percent).
And this despite the fact that the upper limit for international arrivals has been halved.
On the ASX 200, intellectual property company IPH (-5.3 percent), data center operator Megaport (-4.4 percent) and investment management company Netwealth (-3 percent) fell.
Gaming startup Bluebet (+55.7 percent) soared on its debut on the ASX.
The Australian dollar fell 0.1 percent to around 74.62 US cents at 4:40 p.m. AEST.
Large oil producers were unable to agree on an increase in supply at an overnight OPEC meeting.
Oil prices rose 1.4 percent overnight with Brent crude to $ 75.92 a barrel.
At 4:40 p.m. AEST it was down 0.2 percent to $ 75.72 a barrel.
Spot gold rose 0.1 percent to $ 1,778 an ounce as greenback and US Treasury bond yields fell.
Chinese markets collapsed after yesterday’s 100th anniversary celebration of the ruling Communist Party.
The Shanghai Composite lost 1.8 percent in afternoon trading, while Hong Kong’s Hang Seng lost 2 percent.
Westpac discloses suspected fraud
Westpac said it uncovered significant potential for fraud and has taken legal action against equipment financier Forum Finance.
The bank said the alleged fraud was related to leasing contracts with Westpac customers arranged by Forum Finance.
It said the investigation was ongoing and that the New South Wales Police, ASIC and APRA had been notified.
Westpac said no customers appeared to be affected, but the bank had a potential $ 200 million after-tax exposure.
Westpac boss Peter King said the alleged fraud was complex.
“In this preliminary stage, the potential fraud is well thought out and appears to have been perpetrated from outside.”
“Westpac takes fraud very seriously and will take all necessary measures to protect the interests of the bank and its customers.
Westpac shares closed slightly lower at $ 25.64.
Westpac repays customers nearly $ 90 million
Corporate regulators said Westpac will pay approximately $ 87 million to former customers whose financial advisors may not have disclosed key information about companies in which they owned shares.
The Australian Securities and Investments Commission (ASIC) said Westpac failed to notify around 32,000 customers of measures such as buybacks, stock issues and acquisitions between 2005 and 2019.
According to ASIC, there were an estimated 328,000 missed notifications.
“Westpac’s failure to notify customers of corporate actions means customers may have missed various opportunities,” said ASIC.
“These include buying additional shares often at a discount to market prices, creating temporary rights or options that can be sold for a profit, and being able to sell shares and receive a benefit that is taxable depending on the shareholder’s circumstances can be beneficial. “
Westpac reported the issues to ASIC in 2019 and the companies are no longer offering personal financial advice.
QBE to defend against COVID claims
Major insurer QBE said it would defend allegations that it wrongly denied some policyholders coverage for business interruption losses due to coronavirus bans and restrictions.
That was after small businesses like Strand Fitness filed class actions against QBE in federal court.
QBE said the issues raised in the trial are essentially similar to a second industry test trial in court and QBE’s lawsuit against Educational World Travel, which is in liquidation.
The company went under in the midst of the international travel ban due to the corona virus.
At the beginning of the year, insurers lost a first test case in which the courts ruled in favor of the policyholder.
Insurers argue that pandemics are not covered by most business interruption insurances.
QBE shares fell 0.6 percent to $ 10.66
Suncorp repays its employees $ 60 million
The bank and insurer Suncorp will begin repaying $ 60 million this month to current and former employees who have been underpaid.
The bank and insurer also confirmed the sale of half of their stake in RACT Insurance to the Royal Automobile Club of Tasmania for nearly $ 84 million.
It also expects the natural hazard damage allowance to reach $ 980 million in 2022.
Suncorp rose 1.2 percent to $ 11.11.
Hot demand for home loans
Demand for real estate in Australia is still strong despite record high house prices fueled by record low interest rates.
The Bureau of Statistics said new home loan commitments rose by a seasonally adjusted 4.9 percent in May to a new high of $ 32.6 billion.
The increase was driven by borrowing from investors, which more than doubled over the course of the year through May 2021.
Investor credit rose 13.3 percent to $ 9.1 billion, its highest level since April 2015.
In contrast, owner-occupier loans rose just 1.9 percent to $ 23.4 billion in May, despite an 88 percent increase over the year.
New record for S&P 500
The benchmark S&P 500 reached its sixth record high in a row on Wall Street at the beginning of the new quarter and after a record-breaking first half of the year.
Investors are waiting for the latest US employment numbers tonight.
The Dow Jones Index rose 0.4 percent to 34,634, the S & P500 rose 0.5 percent to 4,320, and the Nasdaq rose 0.1 percent to 14,522.
Most sectors of the S&P500 except consumer stocks rose.
The Walgreen Boots Alliance pharmacy chain lost 7.4 percent after it announced it would give fewer coronavirus vaccines in the fourth quarter.
The Chinese ride-sharing company Didi Global rose 16 percent to $ 16.40 on its second day of trading as a US company.
Weekly unemployment claims decrease
The US unemployment rate is expected to fall to 5.7 percent and 700,000 jobs will be created.
New applications for unemployment benefits continued to decline, reaching their lowest level since the pandemic shut down.
They fell by 51,000 last week to a seasonally adjusted 364,000.
Another report showed that worker layoffs were down nearly 90 percent from the previous year.
And the rate of expansion of the US factories slowed somewhat in June.
European markets on the rise
European stocks rose to near record highs.
The FTSE 100 rose 1.3 percent to 7,125, the DAX rose 0.5 percent to 15,604 and the CAC 40 rose 0.7 percent to 6,554.
ABC / Reuters