Transcript:
Easan Arulanantham:
“So, earlier today, there’s some agreement on the 15% Global Tax. Could you explain what that is, and what it could mean for the US?”
Tom Vaughan:
Oh, yeah, this just came out literally just before the show started. I was reading an article on this. It’s been talked about for a while now. So the concept is, and this is very different, and I think this is very exciting, actually. The concept is that companies, and they’ve now said big companies so, small companies will be excluded from this, companies will have to pay a minimum of 15% tax in the country where the sale was generated. So that think about this for a minute. So if you’re a big company, and you sell to US customers, but you have plants in Ireland. Ireland has a much lower tax bracket than US. Then through a series of maneuverings might be able to claim a lot of that revenue in Ireland at this lower tax rate. And of course, then the US, who is created this big consumer base, isn’t getting the tax dollars for that. And so what that’s a huge deal. So think about the US is the number one consumer country in the world. And we have this scenario where we’ve got all kinds of money floating outside the country paying taxes and other tax havens. And now they’re going to make it an even 15%. So even Ireland is 15%. That would be unbelievable, because it would bring in, I think, a huge amount of money into the US Treasury, in new tax revenues from these companies. And it It creates a scenario where you’re not…
Janet Yellen has been talking about “a race to the bottom.” Where eventually there’s a country out there with a 3% rate, and everybody’s got their business there. And so I think they’ve got agreements with basically 95% of the Gross Domestic Product of the world, in the agreement right now, and it’s taken a while to get a couple of these countries to sign on. I don’t know what the next step is honestly, because it just came out. I don’t know the details, and they haven’t mentioned any yet either. I think the conceptually, they’re trying to work on this from a high level standpoint, and then we’ll get some more of the details that come out for how that works. But you have an awful lot of big companies here in the US, and abroad, selling a lot of products to US consumers, that are not paying taxes at a proper level, in my opinion, here in the US. And so that would change with this, in my opinion, from what I’ve read. So I actually think it’s a really exciting arena. We’ll have to see how it plays out.
But there is one part of it, there’ll be a little interesting in that it is a possible increase in taxation to some of these companies. And that affects stock price, right? So we’ll have to see what that means, right? So if a company was paying 6%, and now they’re paying 15%, that’s less… earnings, because of the higher tax rate. And higher tax rates aren’t awful for the stock market. If you look back over a period of time, they can be short term problems until things get worked out. But it is something to consider as far as what impact that might have on the stock market. But overall, from what I’ve read, I think it’s a really great concept. It would solve a lot of problems that have been happening.