Raphael Stevens

AS IS OFTEN the case in multilateral matters, America held the key. When Janet Yellen, its treasury secretary, announced earlier this year that it was time to end the “global race to the bottom” on corporate tax, her remarks supercharged sputtering talks over a global deal to overhaul how much tax multinational companies pay, and where.Talks are focused on two main changes: reallocating taxing rights towards countries where economic activity takes place, rather than where firms choose to book profits; and setting a minimum global tax rate, likely to be in the region of 15%. Finance ministers from the G7 group of rich countries are set to signal their approval at a meeting on June 4th-5th. The broader G20 could agree terms as soon as July, spurring the other 120 or so countries and territories involved in the talks to fall into line. On May 26th Germany’s finance minister predicted a “revolution” in global tax rules “in just a few weeks”.All revolutions have winners and losers. In this case the clearest victors would be large economies where multinationals make lots of sales but book relatively little taxable profit, thanks to tax-planning that siphons income to low-tax jurisdictions. This mismatch has grown along with the rise of digital giants like Amazon, Apple and Google, the assets of which are largely intangible. Developing countries where global companies have factories and other operations stand to benefit, too, though not by as much as they think they should. The most obvious losers will be the tax havens that, starting more than half a century ago, took increasing advantage as globalisation made capital more footloose—offering what they saw as much-needed tax competition, and what many others saw as beggar-thy-neighbour economics.A study in 2018 concluded that around 40% of multinationals’ overseas profits are artificially shifted to low-tax countries. One official closely involved in the current talks thinks the deal taking shape could “all but kill the havens”. However, those places classed as tax havens come in various shapes and sizes, from taxless Caribbean paradises to merely tax-light hubs in Europe and Asia. Some have more to fear than others.Things look bleak for the palm-fringed, zero-tax territories, such as Bermuda, the British Virgin Islands (BVI) and the Cayman Islands. Though they make nothing in corporate-tax revenue, they have, to differing degrees, come to rely on fees from subsidiaries of large companies and a cottage industry of accountants, lawyers and other corporate-service providers that sprouted up locally to serve them. Their revenue is mere crumbs compared to the taxes saved by those firms, but a lot for such small economies. Corporate and financial services accounted for over 60% of the BVI’s government revenue in 2018.The type of deal that the Biden administration is pushing—which would apply the global minimum rate on a country-by-country basis, rather than in aggregate—would blow up these havens’ business model. They are livid, but there is nothing they can do. A diplomat says they are in the process of being “neutralised”, and are “irrelevant” to the talks. “No one wants to hear from them.” Some at least have other revenue streams: Cayman is a big domicile for hedge funds, Bermuda for insurers.Better-connected economies that have traditionally been friendly to corporate-tax-planners are less easy to dismiss. Several European Union countries, such as Ireland and Cyprus, have lured investment with a low corporate-income-tax rate (both levy 12.5%), or, as Luxembourg and the Netherlands have done, with rules that make them attractive conduits in tax structures, helping companies avoid tax in other countries. An IMF study in 2019 found that such “phantom” investment had pushed Luxembourg’s stock of foreign-direct investment to $4trn, an improbable one-tenth of the global total. Hong Kong and Singapore have also benefited as corporate-tax entrepots.Some of the more egregious loopholes fuelling these flows have been closed in the past few years, following an OECD-brokered deal in 2015. Among them is the Double Irish, which involves funnelling profits to subsidiaries registered in Ireland but tax-domiciled in Bermuda or the Cayman Islands, and which may have saved Google alone tens of billions of dollars over a decade.There is still plenty to lose, though. Ireland is particularly nervous, having come to rely on its 12.5% rate to attract foreign investment, much of it involving real people, offices and factories. Corporate tax now accounts for a record 20% of the country’s total tax take. The Irish have been lobbying America, the source of much of their investment, against a radical reallocation of taxing rights and a minimum tax above 12.5%. Ireland’s finance minister, Paschal Donohoe, has argued that smaller countries should be allowed to use tax policy to make up for the advantages of scale, location and resources that big ones enjoy.Even a minimum rate of 12.5%, or only slightly above it, could cost Ireland, though, when you factor in tax breaks. Many big companies using it pay an effective rate in the single digits. The country’s “patent box”, a scheme for profits from innovation, charges just 6.25%. A firm paying, say, 8% might quickly tire of Irish charms if faced with a seven-percentage-point top-up. The government has pencilled in an annual tax-revenue loss from the putative global deal of €2bn ($2.5bn)—around 2.4% of Ireland’s public revenue, and the equivalent on a GDP basis to America losing nearly $140bn.Ireland has some friends in the EU. Hungary, with a rate of 9%, is a noisy champion of tax competition. Cyprus and Malta are sympathetic, too, though “happy to sit in Ireland’s shadow”, says another official. Outside the EU, Singapore and Switzerland have signalled that they consider 15% too high. The Asian hub would be happier with 10%.Luxembourg and the Netherlands, however, have undergone Damascene conversions. The Grand Duchy, lambasted after a leak in 2014 exposed sweetheart tax deals with dozens of multinationals, has passed reforms that narrow tax-arbitrage opportunities and increase tax-ruling transparency. It says it could live with any deal that levels the playing field. The Dutch government, stung by public criticism of its tolerance of tax tricks, has also been trying to close loopholes. Hans Vijlbrief, the Dutch state secretary of finance, says they won’t be the ones to obstruct the deal. “My goal is to not be mentioned any more in the list of tax paradises.”Paradise lostThat leaves Ireland and its band of EU malcontents in a bind. They could in theory wield vetoes, since the bloc’s tax decisions require unanimity. But that looks highly unlikely given the support for change from the union’s big members and America—not to mention the awful politics of blocking a deal seen by the public as necessary to force big business to pay its fair share.Moreover, America and others could impose minimum taxes on their own companies even without a global deal; indeed, America already has a version for intangible income, albeit set at just 10.5%. The revolution is coming, barring an unexpected breakdown in talks. And with it, a golden era for the world’s tax havens may be drawing to a close. More

In this articleETH=BTC.BS=-USSTIGRFUTUIn this photo illustration a Bitcoin logo seen displayed on a smartphone with stock market percentages in the background.Omar Marques | SOPA Images | LightRocket | Getty ImagesBEIJING — Two of China’s rivals to stock trading app Robinhood are looking to cryptocurrencies as a way to compete overseas.The companies, Futu and Tiger Brokers, disclosed during earnings calls last month they are applying for licenses in Singapore and the U.S. that would allow local customers to trade digital currencies.The move comes as cryptocurrencies such as bitcoin have climbed back into the spotlight in recent months, while Chinese regulators have increased their efforts to limit speculation in the market. In the last few weeks, authorities issued new warnings against digital currency trading and a crackdown on bitcoin mining — an energy-heavy computing process that allows participants to earn bitcoin.But in the financial trading world, demand for cryptocurrencies is high as bitcoin’s price surged to record levels above $60,000, before dropping sharply to around $35,000.Robinhood, which launched bitcoin and ethereum trading in the U.S. in early 2018, has added 3 million customers a month this year for its crypto business. In April, U.S.-based cryptocurrency trading site Coinbase debuted on the Nasdaq.”We do hear a lot of interest from our users across the world in terms of crypto. We have listened to that,” Arthur Chen, Futu’s chief financial officer, told CNBC last week. He said the company hopes to offer cryptocurrency-related products as soon as the end of this year.Both Futu and Tiger Brokers got their start primarily from Chinese employees of major tech companies like Alibaba and Baidu. Since these companies are listed in the U.S., that piqued their employees’ interest in trading stocks abroad.However, both companies are increasingly focused on markets outside mainland China. In addition to essentially banning yuan-bitcoin transactions, Beijing tightly controls capital flows out of the mainland.Futu has gained 100,000 paying clients in Singapore less than three months since launching there in early March, Chen said. He said about one-fourth of new paying clients in the first quarter came from Singapore and the U.S.In the international retail trading market, the two companies face competition not just from Robinhood but traditional players such as Interactive Brokers. Both Futu and Tiger seek to attract customers with an in-app social network where users can swap trading ideas and watch investor education courses.By the end of March, Futu said it had 789,652 customers with assets in their trading accounts, more than three times that of a year ago.Tiger said the number of customers with deposits more than doubled in the first quarter from a year ago to 376,000.Cooling interest in IPOsCustomers are very interested in cryptocurrencies and Coinbase’s stock listing attracted new users, Tiger Brokers’ CEO Tianhua Wu told CNBC last week.But he said users’ overall interest in initial public offerings has cooled off from last year. While exuberance over IPOs then might have generated $1 billion or more worth of orders around a listing, now the offerings are drawing far less in terms of orders, Wu said.Last week, both Futu and Tiger Brokers were added to MSCI stock indexes, which are tracked by trillions of global investment dollars.Read more about cryptocurrencies from CNBC ProGoldman, Roubini and Novogratz explain where they stand on bitcoin and etherCathie Wood sees deflation returning, boosting innovation stocks and bitcoinHow another ‘crypto winter’ could affect Coinbase’s stock price, according to Mizuho— CNBC’s Kate Rooney contributed to this report. More

In this article.SPX.IXIC.DJITraders on the floor of the New York Stock Exchange.Source: NYSEStock futures are slightly lower in overnight trading after major indexes saw gains in May.Futures on the Dow Jones Industrial Average fell 35 points, or 0.10%. S&P 500 futures shed 0.09% and Nasdaq 100 futures ticked 0.03% lower.The moves in overnight trading come after the blue-chip Dow and the S&P 500 gained 1.93% and 0.55% in May, respectively, to mark their fourth consecutive positive month. The S&P 500 closed Friday just 0.8% off its record high.The small cap Russell 2000 rose 0.11% in May to post its eighth positive month in a row — its longest monthly win streak since 1995.The Nasdaq gained 2.06% last week to post its best weekly performance since April. However, the tech-heavy composite lost 1.53% in May, breaking a 6-month win streak.A key inflation gauge — the core personal consumption expenditures index — rose 3.1% in April from a year earlier, faster than the forecasted 2.9% increase. Despite the hotter-than-expected inflation data, treasury yields fell on Friday.”Overall, given the market’s reaction to [Friday]’s PCE release, investor concerns about inflation may have been exaggerated — or perhaps already priced in,” Chris Hussey, a managing director at Goldman Sachs, said in a note.”Consensus may be building that the inflation we are seeing today is ‘good’ inflation — the kind of rise in prices that accompanies accelerating growth, not a monetary policy mistake,” Hussey said.Investors are awaiting the Federal Reserve’s meeting scheduled for June 15-16. Key for the markets is whether the Fed begins to believe that inflation is higher than it expected or that the economy is strengthening enough to progress without so much monetary support. May’s employment report, set to be released on Friday, will provide a key reading of the economy. According to Dow Jones, economists expect to see about 674,000 jobs created in May, after the much fewer-than-expected 266,000 jobs added in April.Zoom Video Communications and Hewlett Packard Enterprise are set to report quarterly earnings results on Tuesday after the bell.— CNBC’s Patti Domm contributed reporting. More

The post-lockdown spending frenzy may contribute to a sharp rise in inflation, but Ed Yardeni believes the economy can handle it.Yardeni, who spent decades on Wall Street running investment strategy for major firms including Prudential and Deutsche Bank, sees inflationary pressures as a temporary byproduct tied to massive reopenings and historic liquidity.”People are just going to keep spending,” the Yardeni Research president told CNBC’s “Trading Nation” on Friday. “A lot of pent-up demand is getting satisfied here both in goods and services.”Wall Street got further confirmation last week of strong inflation growth through the core personal consumption expenditures, a key gauge closely followed by the Federal Reserve. It rose a faster-than-expected 3.1% in April from a year earlier.”When the lockdown restrictions were gradually lifted, we did see this tremendous surge in shopping, and shopping does release dopamine in the brain,” said Yardeni. “A lot of people just ran out and started doing shopping.”First it was goods, and now it’s services, according to Yardeni.”A lot of services were really eliminated in terms of what was open,” he noted. “Clearly, we’re seeing the services opening up.”Yardeni expects upward pressure on inflation to last at least a few months.”The economy has a V-shaped recovery, and actually we’re back to where real GDP was right before the pandemic,” he said. “I would expect to see some slowing down in the economy later this year going into next year.”He anticipates demand will eventually wear off even in the housing market where prices are booming.”I can’t imagine that the kind of growth rates that we’ve been seeing over the past few quarters are sustainable,” said Yardeni.But when it comes to rents, Yardeni sees landlords getting more pricing power. He finds the rental market is tightening up pretty quickly right now.”We’ve kind of run out of an inventory of houses. All these people were hoping to buy something affordable and finding that prices are up 20% from a year ago, and there’s slim pickings,” he added. I’m concerned a lot of would-be homebuyers are just saying ‘You know what, no mas. I give up. Let’s just stay.'”What’s next for Treasury yieldsYardeni, a long-time stock market bull, believes the benchmark 10-year Treasury Note yield will remain rather benign despite surging prices.”It’s been remarkably stable in the past few months… in the face of higher than expected inflation news and lots of very strong economic indicators,” he said. “I do think we’re going to see 2% on the bond yield.”It’s not a level that should spook Wall Street, according to Yardeni. However, he predicts Federal Reserve policymakers will start talking about tapering earlier than investors think. As a result, he sees the 10-year yield ending 2022 around 2.5% to 3%.”Not exactly the end of the world because that’s where bond yields were before the pandemic,” Yardeni said. “That would actually be going back to normal.”The 10-year yield ended the week at 1.58%, down almost 6% over the past two months.Disclaimer More

Ruins of the Greenwood District after the massacre of African Americans in Tulsa, Oklahoma, in June 1921. American National Red Cross photograph collection.GHI | Universal Images Group | Getty ImagesA century ago this week, the wealthiest U.S. Black community was burned to the ground.At the turn of the 20th century, the Greenwood District of Tulsa, Oklahoma, became one of the first communities in the country thriving with Black entrepreneurial businesses. The prosperous town, founded by many descendants of slaves, earned a reputation as the Black Wall Street of America and became a harbor for African Americans in a highly segregated city under Jim Crow laws.On May 31, 1921, a white mob turned Greenwood upside down in one of the worst racial massacres in U.S. history. In the matter of hours, 35 square blocks of the vibrant Black community were turned into smoldering ashes. Countless Black people were killed — estimates ranged from 55 to more than 300 — and 1,000 homes and businesses were looted and set on fire.A group of people looking at smoke in the distance coming from damaged properties following the Tulsa, Oklahoma, racial massacre, June 1921.Oklahoma Historical Society | Archive Photos | Getty ImagesYet for the longest time, the massacre received scant mentions in newspapers, textbooks and civil and governmental conversations. It wasn’t until 2000 that the slaughter was included in the Oklahoma public schools’ curriculum, and it did not enter American history textbooks until recent years. The 1921 Tulsa Race Riot Commission was formed to investigate in 1997 and officially released a report in 2001.”The massacre was actively covered up in the white community in Tulsa for nearly a half century,” said Scott Ellsworth, a professor of Afro American and African studies at the University of Michigan and author of “The Ground Breaking” about the Tulsa massacre.”When I started my research in the 1970s, I discovered that official National Guard reports and other documents were all missing,” Ellsworth said. “Tulsa’s two daily white newspapers, they went out of their way for decades not to mention the massacre. Researchers who would try to do work on this as late as the early 1970s had their lives threatened and had their career threatened.”The body of an unidentified Black victim of the Tulsa race massacre lies in the street as a white man stands over him, Tulsa, Oklahoma, June 1, 1921.Greenwood Cultural Center | Archive Photos | Getty ImagesIn the week following the massacre, Tulsa’s chief of police ordered his officers to go to all the photography studios in Tulsa and confiscate all the pictures taken of the carnage, Ellsworth said.These photos, which were later discovered and became the materials the Oklahoma Commission used to study the massacre, eventually landed in the lap of Michelle Place at Tulsa Historical Society & Museum in 2001.”It took me about four days to get through the box because the photographs were so horrific. I had never seen those kinds of pictures before,” Place said. “I didn’t know anything about the riot before I came to work here. I never heard of it. Since I’ve been here, I’ve been at my desk to guard them to the very best of my ability.”Patients recovering from injuries sustained in the Tulsa massacre. American National Red Cross Photograph Collection, November 1921.Universal History Archive | Universal Images Group | Getty ImagesThe Tulsa museum was founded in the late 1990s, but visitors couldn’t find a trace of the race massacre until 2012 when Place became executive director, determined to tell all of Tulsa’s stories. A digital collection of the photographs was eventually made available for viewing online.”There’s still a significant number of people in our community who don’t want to look at it, who don’t want to talk about it,” Place said.’The silence is layered’Not only did Tulsa city officials cover up the bloodbath, but they also deliberately shifted the narrative of the massacre by calling it a “riot” and blaming the Black community for what went down, according to Alicia Odewale, an archaeologist at University of Tulsa.The massacre also wasn’t discussed publicly in the African American community either for a long time. First out of fear — if it happened once, it can happen again.”You are seeing the perpetrators walking freely on the streets,” Odewale said. “You are in the Jim Crow South, and there are racial terrors happening across the country at this time. They are protecting themselves for a reason.”Moreover, this became such a traumatic event for survivors, and much like Holocaust survivors and World War II veterans, many of them didn’t want to burden their children and grandchildren with these horrible memories.Ellsworth said he knows of descendants of massacre survivors who didn’t find out about it until they were in their 40s and 50s.”The silence is layered just as the trauma is layered,” Odewale said. “The historical trauma is real and that trauma lingers especially because there’s no justice, no accountability and no reparation or monetary compensation.”A truck carries African Americans during race massacre in Tulsa, Oklahoma, U.S. in 1921.Alvin C. Krupnick Co. | National Association for the Advancement of Colored People (NAACP) Records | Library of Congress | via ReutersWhat triggered the massacre?On May 31, 1921, Dick Rowland, a 19-year old Black shoeshiner, tripped and fell in an elevator and his hand accidentally caught the shoulder of Sarah Page, a white 17-year-old operator. Page screamed and Rowland was seen running away.Police were summoned but Page refused to press charges. However, by that afternoon, there was already talks of lynching Rowland on the streets of white Tulsa. The tension then escalated after the white newspaper Tulsa Tribune ran a front-page story entitled “Nab Negro for Attacking Girl In Elevator,” which accused Rowland of stalking, assault and rape.In the Tribune, there was also a now-lost editorial entitled “To Lynch Tonight,” according to Ellsworth. When the Works Progress Administration went to microfilm the old issues of the Tribune in the 1930s, the op-ed had already been torn out of the newspaper, Ellsworth said.Many believe the newspaper coverage undoubtedly played a part in sparking the massacre.The aftermathPeople stand outside the Black Wall Street T-Shirts and Souvenirs store at North Greenwood Avenue in the Greenwood District of Tulsa Oklahoma, U.S., on Thursday, June 18, 2020.Christopher Creese | Bloomberg | Getty ImagesFor Black Tulsans, the massacre resulted in a decline in home ownership, occupational status and educational attainment, according to a recent study through the 1940s led by Harvard University’s Alex Albright.Today, there are only a few Black businesses on the single remaining block in the Greenwood district once hailed as the Black Wall Street.This month, three survivors of the 1921 massacre — ages 100, 106 and 107 — appeared before a congressional committee, and a Georgia congressman introduced a bill that would make it easier for them to seek reparations.Rev. Dr. Robert Turner of the Historic Vernon Chapel A.M.E. Church holds his weekly Reparations March ahead of the 100 year anniversary of the 1921 Tulsa Massacre in Tulsa, Oklahoma, U.S., May 26, 2021.Polly Irungu | ReutersMeanwhile, historians and archaeologists continued to unearth what was lost for decades. In October, a mass grave in an Oklahoma cemetery was discovered that could be the remains of at least a dozen identified and unidentified African American massacre victims.”We are able to look for signs of survival and signs of lives. And really look for those remnants of built Greenwood and not just about how they died,” Odewale said. “Greenwood never left.”— CNBC’s Yun Li is also co-author of “Eunice Hunton Carter: A Lifelong Fight for Social Justice.” More