Corporate Taxes Poised to Rise After 136-Country Deal

 
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Nearly 140 countries agreed Friday to the most sweeping overhaul of global tax rules in a century, a move that aims to curtail tax avoidance by multinational corporations and raise additional tax revenue of as much as $150 billion annually.

But the accord, which is a decade in the making, now must be implemented by the signatories, a path that is likely to be far from smooth, including in a closely divided U.S. Congress.

The reform sets out a global minimum corporate tax of 15%, targeted at preventing companies from exploiting low-tax jurisdictions.

Treasury Secretary Janet Yellen said the floor set by the global minimum tax was a victory for the U.S. and its ability to raise money from companies. She urged Congress to move swiftly to enact the international tax proposals it has been debating, which would help pay for extending the expanded child tax credit and climate-change initiatives, among other policies.

“International tax policy making is a complex issue, but the arcane language of today’s agreement belies how simple and sweeping the stakes are: when this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living, or scale a business,” Ms. Yellen said.

The agreement among 136 countries also seeks to address the challenges posed by companies, particularly technology giants, that register the intellectual property that drives their profits anywhere in the world. As a result, many of those countries established operations in low-tax countries such as Ireland to reduce their tax bills.

The final deal gained the backing of Ireland, Estonia and Hungary, three members of the European Union that withheld their support for a preliminary agreement in July. But Nigeria, Kenya, Sri Lanka and Pakistan continued to reject the deal.

The new agreement, if implemented, would divide existing tax revenues in a way that favors countries where customers are based. The biggest countries, as well as the low-tax jurisdictions, must implement the agreement in order for it to meaningfully reduce tax avoidance.

Overall, the OECD estimates the new rules could give governments around the world additional revenue of $150 billion annually.

The final deal is expected to receive the backing of leaders from the Group of 20 leading economies when they meet in Rome at the end of this month. Thereafter, the signatories will have to change their national laws and amend international treaties to put the overhaul into practice.

The signatories set 2023 as a target for implementation, which tax experts said was an ambitious goal. And while the agreement would likely survive the failure of a small economy to pass new laws, it would be greatly weakened if a large economy—such as the U.S.—were to fail.

“We are all relying on all the bigger countries being able to move at roughly the same pace together,” said Irish Finance Minister Paschal Donohoe. “Were any big economy not to find itself in a position to implement the agreement,  that would matter for the other countries. But that might not become apparent for a while.”

 

Congress’ work on the deal will be divided into two phases. The first, this year, will be to change the minimum tax on U.S. companies’ foreign income that the U.S. approved in 2017. To comply with the agreement, Democrats intend to raise the rate—the House plan calls for 16.6%—and implement it on a country-by-country basis. Democrats can advance this on their own and they are trying to do so as part of President Biden’s broader policy agenda.

The second phase will be trickier, and the timing is less certain. That is where the U.S. would have to agree to the international deal changing the rules for where income is taxed. Many analysts say that would require a treaty, which would need a two-thirds vote in the Senate and thus some support from Republicans. Ms. Yellen has been more circumspect about the schedule and procedural details of the second phase.

Friction between European countries and the U.S. over the taxation of U.S. tech giants has threatened to trigger a trade war.

In long-running talks about new international tax rules, European officials have argued U.S. tech giants should pay more tax in Europe, and they fought for a system that would reallocate taxing rights on some digital products from countries where the product is produced to where it is consumed.

The U.S., however, resisted. A number of European governments introduced their own taxes on digital services. The U.S. then threatened to respond with new tariffs on imports from Europe.

The compromise was to reallocate taxing rights on all big companies that are above a certain profit threshold.

Under the agreement reached Friday, governments pledged not to introduce any new levies and said they would ultimately withdraw any that are in place. But the timetable for doing that has yet to be settled through bilateral discussions between the U.S. and those countries that have introduced the new levies.

Even though they will likely have to pay more tax after the overhaul, technology companies have long backed efforts to secure an international agreement, which they see as a way to avoid a chaotic network of national levies that threatened to tax the same profit multiple times.

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The Organization for Economic Cooperation and Development, which has been guiding the tax talks, estimates that some $125 billion in existing tax revenues would be divided among countries in a new way.

Those new rules would be applied to companies with global turnover of €20 billion (about $23 billion) or more, and with a profit margin of 10% or more. That group is likely to include around 100 companies. Governments have agreed to reallocate the taxing rights to a quarter of the profits of each of those companies above 10%.

The agreement announced Friday specifies that its revenue and profitability thresholds for reallocating taxing rights could also apply to a part of a larger company if that segment is reported in its financial accounts. Such a provision would apply to Amazon.com Inc.’s cloud division, Amazon Web Services, even though Amazon as a whole isn’t profitable enough to qualify because of its low-margin e-commerce business.

The other part of the agreement sets a minimum tax rate of 15% on the profits made by large companies. Smaller companies, with revenues of less than $750 million, are exempted because they don’t typically have international operations and can’t therefore take advantage of the loopholes that big multinational companies have benefited from.

Low-tax countries such as Ireland will see an overall decline in revenues. Developing countries are least happy with the final deal, having pushed for both a higher minimum tax rate and the reallocation of a greater share of the profits of the largest companies.

 
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NFT Of The World Wide Web Source Code Sells For $5.4 Million

Tim Berners-Lee, inventor of the internet

On Wednesday, 32 years after English computer scientist Tim Berners-Lee penned “Information Management: A Proposal,” the genesis of the World Wide Web, Sotheby’s auctioned the Web’s original source code for $5.4 million. It was, of course, in the form of a nonfungible token aka an NFT.

The source code for the Web was sold to an anonymous buyer, according to Sotheby’s. There were a total of 51 bids on the NFT.

“NFTs, be they artworks or a digital artifact like this, are the latest playful creations in this realm, and the most appropriate means of ownership that exists, Berners-Lee said in a statement about the auction. “They are the ideal way to package the origins behind the Web.”

Sotheby conducted the auction, titled “This changed everything” from June 23 through June 30 with the bidding starting at $1,000. The British-founded global marketplace for art collectibles has recently added digital collectibles such as NFTs to its offerings. The proceeds from the $5.4 million will go toward initiatives that Tim Berners-Lee supports, including his open source technology Solid.

NFTs are rapidly becoming a way for members of the digital community to create a virtual museum and document historic moments on the internet, whether that was the $4 million sale of the Doge meme NFT or when Twitter CEO Jack Dorsey sold an NFT of his first tweet for $2.9 million or when digital artist Itzel Yard sold an NFT art made from the key of the first Tor Browser, making her the highest-selling female NFT artist.

Gauthier Zuppinger is the co-founder of nonfungible.com, a database that tracks the sales of NFTs and crypto collectibles. He compared the source code to CryptoPunks, one of the first non-fungible tokens on the Ethereum blockchain. Zuppinger says the code’s singularity and its monumental role in the foundation of the digital world contributed to the skyrocketing bidding price for the NFT.

So what exactly does the anonymous buyer receive? It doesn’t receive any unique usage rights because the source code for the web has been public domain since 1991 when CERN released the worldwide web code library.

The NFT itself contains a myriad of technical tid-bits and gemstones in the history of the Web. The four elements include the original time-stamped files containing the code that was written between October,1990, and August, 1991. The 9,555 lines of code written in the Objective-C programming language depicts the application of three inventions made by the physicist-turned-software engineer: HTML (Hypertext Markup Language); HTTP (Hyper Transfer Protocol); and URIs (Uniform Resource Identifiers). The buyer will also receive a letter from Berners-Lee, an animated visualization and a digital poster of the code.

“As people seem to appreciate the autographed versions of books, now we have NFT technology, I thought it could be fun to make an autographed copy of the original code of the first web browser,” Berners-Lee’s statement reads.

Apart from being the man behind the Web, Berners-Lee is also a director of the World Wide Web consortium, which looks over the development of the Web. As the co-founder and chief technology officer of Inrupt, he is honing open source technology called Solid to come closer to his original vision for the Web to be a shared information space for all members of the society.

Dr. Merav Ozair, an expert on cryptocurrencies and blockchain technology and a fintech faculty member at Rutgers Business School, compared the NFT sale of the World Wide Web source code to the historic moment when the founding fathers of the United States of America signed the Declaration of Independence. The only difference is that the code that created the web also changed the way the world functions today.

“This was also a historic moment when he created a code that initiated everything, and this is not something only for the U.S. it’s for the global community, everywhere,” she says.

Ozair says the auction marks the kick off of Web 3.0, a version of the web where cryptocurrencies thrive.

The source code for the web is already public domain. In fact, Berners-Lee fought with CERN officials for it to be that way, says Marc Webber, the curatorial director of the internet history program at the Computer History Museum.

“It’s a little bit paradoxical. You know, you’ve got an NFT on this completely public domain open thing,” says Webber, who has been researching the history of the web since 1995.

The auction has instigated curiosity about web history, Webber says. But the commodification of computer and technology history could make it difficult for museum curators like him to procure such digital artifacts when NFTs offer the owner lump sum pay-offs and a wide audience.

Webber says that Berners-Lee has had multiple opportunities to cash in on his invention but has always chosen not to so that the web remains in the public domain. “I do know that this is not like a simple ploy to get money,” he says.

Follow me on Twitter or LinkedIn.

I write about tech startups and innovation. I am receiving my master’s degree in magazine journalism from the University of Missouri. I’ve previously written and worked for Vox Magazine in Columbia, Missouri and Kauffman Foundation in Kansas City.

Source: NFT Of The World Wide Web Source Code Sells For $5.4 Million

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Critics:

A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files. Access to any copy of the original file, however, is not restricted to the buyer of the NFT. While copies of these digital items are available for anyone to obtain, NFTs are tracked on blockchains to provide the owner with a proof of ownership that is separate from copyright.

The NFT market value tripled in 2020, reaching more than $250 million. During the first quarter of 2021, NFT sales exceeded $2 billion. A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, which can be sold and traded. The NFT can be associated with a particular digital or physical asset (a file or a physical object) and a license to use the asset for a specified purpose. NFTs (and the associated license to use, copy or display the underlying asset) can be traded and sold on digital markets.

NFTs function like cryptographic tokens, but unlike cryptocurrencies such as Bitcoin, are not mutually interchangeable, in other words, not fungible (e.g. one bitcoin is equivalent to any other bitcoin while every NFT may represent a different underlying asset and thus have a different value). NFTs are created when blockchains string records of cryptographic hash, a set of characters identifying a set of data, onto previous records therefore creating a chain of identifiable data blocks.

This cryptographic transaction process ensures the authentication of each digital file by providing a digital signature that is used to track NFT ownership. However, data links that point to details like where the art is stored can die.The speculative market for NFTs has led more investors to trade at greater volumes and rates.The buying surge of NFTs was called an economic bubble by experts, who also compared it to the Dot-com bubble.

By mid-April 2021, demand appeared to have substantially subsided, causing prices to fall significantly; early buyers were reported to have “done supremely well” by Bloomberg Businessweek. An NFT of the source code of the World Wide Web, credited to internet inventor computer scientist Sir Tim Berners-Lee, was auctioned in June 2021 by Sotheby’s in London, and was sold for USD$5.4

References

Facebook, Apple and The War Over Social Media Influencers

In this photo illustration the Apple and Facebook logos are...

Facebook, good. Apple, bad. Facebook, good. Everyone else, bad.

That’s a little reductive but essentially the message put out today by Mark Zuckerberg. Writing on his personal Facebook page, Zuckerberg announced that Facebook won’t take a cut of any earnings that influencers earn on its platform through a growing number of Facebook products until 2023—and when it does start, its fees will be “less than the 30% that Apple and others take.” In addition, Zuckerberg said Facebook would shortly release a helpful little dashboard for influencers to (ostensibly) better manage their earnings and see which companies take a portion of their income.

There’s a lot at stake here. To start, Zuckerberg has increasingly pinned a portion of Facebook’s hopes for future growth on creators and has announced a slew of new initiatives over the past year to encourage influencers to build audiences on Facebook products. Among other things, Facebook plans to roll out audio features with subscription plans, introduce a marketplace where brands and influencers can link up and launch a subscription newsletter service, Bulletin.

Complicating matters is the fact that many other rival companies—TikTok, Snapchat and YouTube, to name only a few—are working on similar things. As well as the fact that Facbeook and Instagram spent many years largely ignoring the influencers on its platforms, while those rivals did a better job at cultivating them and introducing opportunities to earn money off their newfound fame, making those sites a more diserable destination.

To help Facebook stand out, Zuckerberg is willing to do something the others probably aren’t: Let creators earn money on the site without taking a portion of those dollars. Those smaller companies are likely going to be more eager to show investors that these new creator-focused products generate money.

Facebook, by contrast, has the enviable position of . . . not really needing the money. It earned a $9.5 billion profit alone last year and has over $60 billion just in cash. Keeping creators happy and earning money on Facebook keeps them from running off to other sites, taking Facebook users with them. Users have been—and will continue to be—the real moneymakers for Facebook, the people who look at the ads that do make up the majority of the company’s revenue.

The second factor in all this is the burgeoning grudge match between Facebook and Apple—and between Apple and other parts of Big Tech. Apple recently introduced changes to its operating system that will make it harder for Facebook to earn money off ads, part of a larger disagreement between Facebook and Apple over data privacy on the internet.

For its part in the war, Facebook will be doing things like Monday’s announcement: finding ways to paint Apple’s policies as stifling to small businesses on the Web. (Facebook’s timing was blantantly conspicuous, Zuckerberg’s post coming a few hours before Apple begins its much-watched annual developers’ conference.)

Of course, other companies are taking the opportunity to do the same thing to Apple. Less than a month ago, a trial concluded between Apple and Fornite-maker Epic Games over Apple’s allegedly monopolistic grip on large swaths of the internet, a fight also first sparked over fees and a disagreement over who should earn what.

I’m a senior editor at Forbes, where I cover social media, creators and internet culture. In the past, I’ve edited across Forbes magazine and Forbes.com.

Source: Facebook, Apple—And The War Over Social Media Influencers

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Critics:

It’s a bit simplistic, but it’s the message Mark Zuckerberg is conveying today. Writing on his non-public Facebook page, Zuckerberg announced that Facebook will not take any reduction in the profits influencers make on its platform through a number in Facebook product development until 2023, and when it starts, its fees will be “less than the 30% that Apple and others take. In addition, Zuckerberg said Facebook would soon launch a useful little panel so influencers can (apparently) better manage their profits and see which corporations take part in their profits.

The stakes are high here. For starters, Zuckerberg has placed some of Facebook’s hopes for long-term expansion on creators and announced a series of new projects over the next year to inspire influencers to create audiences on Facebook products. Among other things, Facebook. plans to implement audio features with subscription plans, introduce a marketplace where brands and influencers can connect, and launch a subscription newsletter service, Newsletter.

To complicate matters, many other rival corporations (TikTok, Snapchat and YouTube, to name a few) are running similar things, as well as the fact that Facbeook and Instagram have spent many years largely ignoring influencers on their platforms, while rivals have done more of a job cultivating them and introducing opportunities to make money through their newfound fame. , making those sites a more disadvantageous destination.

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IRS Releases Child Tax Credit Payment Dates Here’s When Families Can Expect Relief

Treasury check on top of various currency bills - corona virus relief

The Internal Revenue Service said Monday it has begun sending letters to more than 36 million families likely eligible to receive payments starting in July under the newly expanded Child Tax Credit—one of the major antipoverty initiatives in President Biden’s stimulus plan—and announced the dates those payments are expected to hit bank accounts.

Key Facts

Biden’s $1.9 trillion American Rescue Plan significantly expanded the Child Tax Credit for the 2021 tax year: It will now provide eligible parents with a $3,000 credit for every child aged 6 to 17 and $3,600 for every child under age 6 (up from $2,000 per dependent child up to age 16).

Individuals earning up to $75,000 a year, heads of household up to $112,500 a year, and joint filers up to $150,000 a year are eligible to receive the full amount of the credit.

The amount of the payments will phase out by $50 for every $1,000 in adjusted gross income above those thresholds. The IRS will use information from 2019 or 2020 tax returns or the agency’s online Non-Filers tool to determine eligibility.

Some of that money will come in the form of advance payments, via either direct deposit or paper check, of up to $300 per month per qualifying child on July 15, August 13, September 15, October 15, November 15 and December 15, the IRS said Monday.

Families can claim the remainder of the credit on the 2021 tax returns they file next spring.

Big Number

$4,380. That’s the average benefit over 90% of families with children will receive under the expanded credit, according to the Tax Policy Center.

Tangent

The American Rescue Plan also made the Child Tax Credit fully refundable for 2021. It was previously refundable only up to $1,400 per child, and families needed to earn at least $2,500 to be eligible for any of that money. That means many low-income families or families with no income at all that would have been ineligible for some or all the old credit (because they didn’t earn enough to owe taxes to qualify) can receive the full benefit in 2021.

What To Watch For

The IRS said it will send a second letter to eligible families with information about the estimated monthly payments they can expect to receive. The IRS is also expected to open an online portal where families can check their eligibility, update information about income and qualifying children, check the status of their payments and opt out of the program.

Key Background

The White House has proposed extending the expanded Child Tax Credit for another five years under the American Families Plan (which has yet to be taken up by Congress), but many progressives want to make the expanded credit permanent. “No recovery will be complete unless our tax code provides a sustained pathway to economic prosperity for working adults and families,” 41 Democratic senators wrote in a letter to President Biden in March. “Your forthcoming Recovery Plan is the opportunity we have to make the expansions of these credits permanent.“

Further Reading

Expanded Monthly Child Tax Benefit Will Begin Hitting Bank Accounts July 15 (Forbes)

Here’s Everything You Need To Know About The New Expanded Child Tax Credit (Forbes)

41 Democratic Senators Ask Biden To Support Permanent Child Tax Credit And Earned Income Tax Credit (Forbes)

How Much Money You Will Get From Stimulus Checks, Unemployment Benefits And Everything Else Inside Biden’s $1.9 Trillion Relief Bill (Forbes)

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

Source: IRS Releases Child Tax Credit Payment Dates—Here’s When Families Can Expect Relief

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Critics:

There have been important changes to the Child Tax Credit that will help many families receive advance payments starting this summer. The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for tax year 2021 only.

The expanded credit means:

  • The credit amounts will increase for many taxpayers.
  • The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
  • The credit will include children who turn age 17 in 2021.
  • Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.

For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.

The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.

Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).

The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the CTC as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit (EITC). Filing electronically with direct deposit also can speed refunds and future advance CTC payments.

Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.

Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon.

The IRS also urges community groups, non-profits, associations, education groups and anyone else with connections to people with children to share this critical information about the CTC. The IRS will be providing additional materials and information that can be easily shared by social media, email and other methods.

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