- The Party Seems to be Over for Technology and Pharmaceutical Companies
- Oil Markets Focus on Nuclear Deal Negotiations
- The Cryptocurrency Market Surpasses $2 trillion
The Party Seems to be Over for Technology and Pharmaceutical Companies
While the new tax plan announced by US President Joe Biden last week is expected to affect technology and pharmaceutical companies particularly, tax experts stated that the most challenging task for representatives is to minimize the deficits that could reduce the law’s impact.
Since the most valuable assets in technology and pharmaceutical companies are intellectual property and patents, they are thought to significantly reduce tax costs by ‘moving’ to other countries.
Both Republicans and Democrats have tried to raise tax revenue from corporations’ overseas activities in the United States, and President Donald Trump’s 2017 tax reform contained provisions to do so. Biden’s proposal is harsher, with a minimum tax of 21% on international earnings and a minimum levy of 15% on profits published on financial statements. It prohibits businesses from deducting research and development expenses and paying workers in stock.
The provisions — part of the administration’s plan to finance a $2.25 trillion infrastructure package — mean that with the changes made, technology and pharmaceutical companies could lose many of the tax planning tools that have enabled them to pay low tax rates for years.
“The plan aims to prevent circumvention of the system,” said Matthew Gardner, Head of the Institute for Tax and Economic Policy. The party seems to be over for technology and pharmaceutical companies, “he added.
In the system Trump created in 2017, companies were paying almost half of the tax they paid abroad in the United States. On the other hand, legislators thought it was better to collect at least half the tax than not at all.
To avoid the possibility of global arbitrage after Biden’s plan, Treasury Secretary Janet Yellen suggested the start of a worldwide tax base implementation.
“Tax planning is always going to be present as long as there are differences in tax laws across different countries,” said Kyle Pomerleau, a resident fellow at the American Enterprise Institute. “Companies are going to take advantage of that.”
Oil Markets Focus on Nuclear Deal Negotiations
Germany, Russia, China, the European Union, France, and the United Kingdom will meet with Iranian and US counterparts in Vienna this week to discuss efforts to put the two countries back into full line with the Joint Comprehensive Plan of Action (JCPOA, otherwise known as the Iran nuclear deal).
The talks are the first step forward in the US-Iran dialogue since the Trump administration pulled out of the deal in May 2018 and reimposed sanctions on Iran’s Islamic Republic, causing the latter’s oil exports to drop.
Such an agreement could have a profound impact on the global energy market.
However, oil slid ahead of talks this week between world powers to salvage a nuclear deal with Iran due to weak expectations that the Nuclear deal could be re-enacted, while rising virus cases in parts of the world, such as India, muddied the demand outlook.
West Texas Oil rose 0.8% after falling 4.6% on Monday amid concerns about increasing coronavirus cases in Europe.
The meeting between the US, Iran, and other parties to the nuclear deal in Vienna aims to lift sanctions on Iran’s oil exports, while analysts expect the talks to be complicated.
“I think nuclear talks, coupled with a surge in Covid-19 cases in certain regions, means that prices will likely be fairly volatile,” said Warren Patterson, head of commodities strategy at ING Group. A breakthrough on Iran is unlikely, and even if it did happen, the market would be able to absorb a relatively significant increase in Iranian supply and still draw down inventories, he said.
Oil surged around 22% in the first quarter as vaccine developments sparked optimism about the recovery. In recent weeks, oil volatility has also increased due to increased coronavirus cases in some countries.
For May settlement, West Texas Oil (WTI) rose 0.8% to $59.12 a barrel in the Nymex market.
Brent for June settlement is trading at around $62.53 a barrel on the London ICE Futures Europe market, up 0.6% after falling 4.2% on Monday.
The Cryptocurrency Market Surpasses $2 Trillion
Cryptocurrencies have exceeded $2 trillion in market cap in the past two months, with the spikes triggered by corporate demand. The intense interest in cryptocurrencies other than Bitcoin caused the total market value of cryptocurrencies to exceed $2 trillion. Bitcoin’s share made up about half of the market.
Bitcoin, the largest of the more than 6,600 coins tracked by CoinGecko, is worth more than $1 trillion alone after its price more than doubled in 2021 to $58,858. The five following most significant coins — Ether, Binance Coin, Polkadot, Tether, and Cardano — have a combined value of about $422 billion.
Institutional investors’ interest in cryptocurrencies in a world dominated by near-zero interest rates has brought Bitcoin to new records. Tesla, which decided to keep $1 billion of its reserves as Bitcoin, also announced that it would accept Bitcoin payments for the cars it produced. On the other hand, Morgan Stanley allowed its wealthiest customers to add cryptocurrencies to their portfolios, while payment companies such as Mastercard and PayPal took steps towards Bitcoin.
Ethereum, the second-largest cryptocurrency in terms of market cap, was up 1.3% at $2,103. Its market cap was $244 billion on Monday. It hit a record high of $2,144.99 last Friday.
“Momentum and interest have begun to expand beyond bitcoin and ethereum,” said Paolo Ardoino, chief technology officer at crypto exchange Bitfinex.
“As the industry continues to mature, we expect more blockchain-based applications to be introduced to the world, and coinciding with that, a surge of interest around other alternative assets… as they become more market-ready,” he added.
Besides, bitcoin surged after Grayscale Bitcoin Trust — the world’s largest institutional holder of the cryptocurrency, with $34 billion under management — said it plans to convert the trust to an exchange-traded fund.
Coinbase Global, the largest US-based crypto exchange, announced this month that it is preparing for an IPO to be traded on Nasdaq.