MacroResearchBoard

The U.S. Faces The Largest Burden From The Global Minimum Tax – June 14, 2021

A just-published report examined a number of topical global investment issues, including the recently agreed G7 proposal for a global minimum tax. The impact of the proposal will likely be modest for most major equity markets, albeit with a larger hit to U.S. earnings, especially for mega-cap companies. The agreement among the G7 nations is significant, but there will be a long road to global implementation, and any deal is unlikely to completely stymie corporate lawyers and accountants tasked with minimizing tax payments. Moreover, in the coming year, corporate earnings will continue to benefit from the improving global economic expansion.

The two main investment implications are:

• Cyclically, the proposal lends additional support to our expectation that global ex-U.S. markets offer a more favorable risk-reward profile than the U.S. market.
• From a longer-term perspective, the multi-decade era of declining corporate tax rates, which provided a tailwind for global earnings and stock prices, has passed.