Ken Fisher Examines the New Global Tax Proposal and What It Means for You

In his latest video, Fisher Investments’ founder and Co-Chief Investment Officer Ken Fisher examines how proposals for a global minimum business tax could potentially impact capital markets. Relative business tax rates are one way countries can attract companies to their shores. Lower tax rates may incentivize businesses to move operations if the result improves their bottom lines. Therefore, some investors are concerned that a coordinated effort to align corporate tax rates could have a negative impact on corporate profits and, hence, the stock market. Ken Fisher believes investors need not worry.

Ken sees a remote likelihood that a minimum global business tax rate is enacted. First, he points to the diminished proposals currently working their way through the legislative process in the United States—what he calls “President Biden’s Magical Disappearing Tax-Hike Process.” As with many political proposals, there is a gulf between what is promised and what can be passed into law.

Ken also looks at recent comments by Treasury Secretary Janet Yellen, who has said she’ll push forward on minimum tax proposals in the early months of 2022. That, Ken believes, is telling because Congressional redistricting will have “frozen” many Congress people who won’t know whom their voters will be in the 2022 midterm elections. As Ken sees it, legislators will be loath to support legislation that could almost immediately come back and harm their chances of being elected in the latter half of the year.

Ken next points to the difficulty of arranging acceptable terms to such a broad and diverse group of countries. Ken suggests that the arrangement’s weakness is in the continual incentive to lower tax rates in order to attract more businesses at the expense of the other members. He also highlights the technical difficulties in coordinating what can be drastically different accounting standards and definitions across the various countries.

All told, Ken concludes that the likelihood of a global minimum business tax being passed is remote. Hence, investor can ignore the issue for now.

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Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.

[philidelphiacollins]

Seems like the US could utilize several methods to force compliance with the proposed minimum global tax rate, such as locking the offending countries out of the US financial system, out of the SWIFT System, from buying treasuries, receiving financial aid, intelligence, etc etc etc

[Holger]

very interesting and informative Thank you for your work .... 👍

[Peter-zjhd]

great insight - we have either harmonised regulatory taxation levels, requiring a cabal of regulators, contradicting regulatory free market principles, or we have competition in taxation. Countries are incapable of agreeing anything and the cabal scenario is unlikely, so expect competition.

[MDJSTVFL]

As always great insight!! Thanks Ken for sharing

[c.s.froggis]

It will be a lot easier with a global currency, i.e. Bitcoin