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The EU deal is set to set off the “domino effect” of the global minimum tax deal

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The European Union’s promise to enter a global deal to set a minimum tax rate for multinational corporations at 15 per cent is expected to lead to a flurry of implementation around the world.

Achim Bruce, acting deputy director at the Organization for Economic Co-operation and Development’s Tax Center, said the approval of the directive last week was a “major moment” for the deal’s success and would have a “domino effect,” causing other countries to accelerate efforts to implement the measure.

Plans, which were floated at the Organization for Economic Co-operation and Development in Paris, were agreed by 136 countries in October last year to implement a minimum tax of 15 percent. But progress in implementing the word has been slow, as none of the signatories have yet signed the Pledge Act.

The Organization for Economic Co-operation and Development views the directive as key to making taxation work because of the EU’s large number of multinational corporations, but Warsaw and Budapest traded it in to block the legislation.

The UK, South Korea and Switzerland have already produced a draft
legislation, while the United Arab Emirates, Australia, Hong Kong, New Zealand and
Singapore launched a consultation on OECD rules. Eight other countries have officially expressed their support for the tax. However, none of them had finished their execution plans.

The Council of the European Union, made up of ministers from member states, on Thursday approved a directive to impose a minimum tax on large multinational companies, ending months of fraught negotiations.

EU countries must now translate the proposals in the Directive into domestic legislation by the end of 2023. Failure to do so could result in a country being referred to the European Court of Justice.

Peter Barnes, a tax specialist at Washington law firm Kaplan & Drysdale, said the EU agreement “has been absolutely fantastic” and provides “cover for other countries that support global minimum taxes but don’t want to be the first to act.”

Julian Viner, director of taxation at law firm Clifford Chance, said:
The EU agreement would “spread adoption more widely”.

The Organization for Economic Co-operation and Development estimates that between 1,800 and 2,000 firms
It is headquartered in the European Union within the scope of global taxation
A total of about 8,000.

The tax deal was part of a broader package of measures agreed at last week’s EU leaders’ summit.

The deal, designed to crack down on tax evasion and end a race to the bottom in corporate taxes, will apply to all multinational companies with annual revenues of more than 750 million euros.

The next two to three months, Fenner said, will be an “important window” for states to adopt the tax, allowing businesses and authorities enough time to prepare before the deadline.

The tax is expected to raise an additional $150 billion annually worldwide. The tax is also designed to have spillover effects, as countries risk losing revenue if they don’t implement it. Financial authorities that adhere to the minimum tax can generate additional revenue by imposing a tax of up to 15 percent on the income of foreign subsidiaries located in countries that do not comply with the deal.

The United States attempted to introduce the 15 percent minimum earlier this year, however Delete important items of the OECD agreement, including measures aimed at eliminating the practice of multinational corporations setting up subsidiaries in tax havens.

Barnes said it would be “extremely difficult for US companies” to comply with both US and OECD rules, and the EU decision “should prompt” the US Congress to seek harmonization of the regulations. He added that doing so would ease the burden on multinational companies that have to comply with multiple tax laws instead of a single global standard.

Progress on a deal many in the tax industry believe is doomed comes at a critical time for the OECD. The organization’s tax department has also come under attack from some developing countries for creating a framework that was “non-comprehensive” and was too complex to manage, according to Christine Kim, a tax professor at Cardozo College of Law in New York.

Countries in Africa, many of which have not signed the OECD agreement, are increasingly turning to the United Nations for a greater voice in global tax matters. A resolution put forward by the African Group, one of the five UN regional groups, to draft proposals for a possible UN agreement on taxation, was passed in November.

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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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