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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Moderna Vaccine Creates Twice as Many Antibodies as Pfizer, Study Shows

Coronavirus: Modern vaccine generated more than double antibodies than Pfizer shot. Moderna Inc.’s Covid vaccine generated more than double the antibodies from a similar shot made by Pfizer Inc. and BioNTech SE in research that directly compared immune responses with inoculations.

A study of nearly 2,500 workers at a major hospital in Belgium found antibody levels among people who had not been infected with coronavirus before receiving two doses of the Moderna vaccine averaged 2,888 units per day. Milliliters, compared to 1,108 units / ml in a similar group that received two shots of the Pfizer shot.

The results, published Monday in a letter to the Journal of the American Medical Association, suggested that the differences could be explained by:

– larger amount of active ingredient in the Moderna vaccine – 100 micrograms versus 30 micrograms in Pfizer-BioNTech. Longer interval between doses of the Moderna vaccine – four weeks versus three weeks for Pfizer-BioNTech

Moderna’s vaccine was associated with a double risk reduction against breakthrough SARS-CoV-2 infections compared to Pfizers in a review of humans in the Mayo Clinic Health System in the United States from January to July. The results were reported in a separate study released prior to publication and peer review on 9 August.

The Moderna COVID‑19 vaccine (pINN: elasomeran), codenamed mRNA-1273 and sold under the brand name Spikevax, is a COVID-19 vaccine developed by Moderna, the United States National Institute of Allergy and Infectious Diseases (NIAID) and the Biomedical Advanced Research and Development Authority (BARDA).

It is authorized for use in people aged twelve years and older in some jurisdictions and for people eighteen years and older in other jurisdictions to provide protection against COVID-19 which is caused by infection by the SARS-CoV-2 virus. It is designed to be administered as two or three 0.5 mL doses given by intramuscular injection at an interval of at least 28 days apart.

It is an RNA vaccine composed of nucleoside-modified mRNA (modRNA) encoding a spike protein of SARS-CoV-2, which is encapsulated in lipid nanoparticles

By:

Source: Covid: Moderna Vaccine Creates Twice as Many Antibodies as Pfizer, Study Shows – Bloomberg

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Effectiveness of COVID-19 Vaccines in Preventing SARS-CoV-2 Infection Among Frontline Workers Before and During B.1.617.2 (Delta) Variant Predominance

Why Vaccinated People Are Getting ‘Breakthrough’ Infections

A wedding in Oklahoma leads to 15 vaccinated guests becoming infected with the coronavirus. Raucous Fourth of July celebrations disperse the virus from Provincetown, Mass., to dozens of places across the country, sometimes carried by fully vaccinated celebrants.

As the Delta variant surges across the nation, reports of infections in vaccinated people have become increasingly frequent — including, most recently, among at least six Texas Democrats, a White House aide and an aide to Speaker Nancy Pelosi.

The highly contagious variant, combined with a lagging vaccination campaign and the near absence of preventive restrictions, is fueling a rapid rise in cases in all states, and hospitalizations in nearly all of them. It now accounts for about 83 percent of infections diagnosed in the United States.

But as worrying as the trend may seem, breakthrough infections — those occurring in vaccinated people — are still relatively uncommon, experts said, and those that cause serious illness, hospitalization or death even more so. More than 97 percent of people hospitalized for Covid-19 are unvaccinated.

“The takeaway message remains, if you’re vaccinated, you are protected,” said Dr. Celine Gounder, an infectious disease specialist at Bellevue Hospital Center in New York. “You are not going to end up with severe disease, hospitalization or death.”

Reports of breakthrough infections should not be taken to mean that the vaccines do not work, Dr. Anthony S. Fauci, the Biden administration’s top pandemic adviser, said on Thursday at a news briefing.

“By no means does that mean that you’re dealing with an unsuccessful vaccine,” he said. “The success of the vaccine is based on the prevention of illness.”

Still, vaccinated people can come down with infections, overwhelmingly asymptomatic or mild. That may come as a surprise to many vaccinated Americans, who often assume that they are completely shielded from the virus. And breakthrough infections raise the possibility, as yet unresolved, that vaccinated people may spread the virus to others.

Given the upwelling of virus across much of the country, some scientists say it is time for vaccinated people to consider wearing masks indoors and in crowded spaces like shopping malls or concert halls — a recommendation that goes beyond current guidelines from the Centers for Disease Control and Prevention, which recommends masking only for unvaccinated people.

The agency does not plan to change its guidelines unless there is a significant change in the science, said a federal official speaking on condition of anonymity because he was not authorized to speak on the matter.

The agency’s guidance already gives local leaders latitude to adjust their policies based on rates of transmission in their communities, he added. Citing the rise of the Delta variant, health officials in several California jurisdictions are already urging a return to indoor masking; Los Angeles County is requiring it.

“Seatbelts reduce risk, but we still need to drive carefully,” said Dr. Scott Dryden-Peterson, an infectious disease physician and epidemiologist at Brigham & Women’s Hospital in Boston. “We’re still trying to figure out what is ‘drive carefully’ in the Delta era, and what we should be doing.”

The uncertainty about Delta results in part from how it differs from previous versions of the coronavirus. Although its mode of transmission is the same — it is inhaled, usually in indoor spaces — Delta is thought to be about twice as contagious as the original virus.

Significantly, early evidence also suggests that people infected with the Delta variant may carry roughly a thousandfold more virus than those infected with the original virus. While that does not seem to mean that they get sicker, it does probably mean that they are more contagious and for longer.

Dose also matters: A vaccinated person exposed to a low dose of the coronavirus may never become infected, or not noticeably so. A vaccinated person exposed to extremely high viral loads of the Delta variant is more likely to find his or her immune defenses overwhelmed.

The problem grows worse as community transmission rates rise, because exposures in dose and number will increase. Vaccination rates in the country have stalled, with less than half of Americans fully immunized, giving the virus plenty of room to spread.

Unvaccinated people “are not, for the most part, taking precautions, and that’s what’s driving it for everybody,” said Dr. Eric J. Rubin, the editor in chief of the New England Journal of Medicine. “We’re all susceptible to whatever anyone’s behavior is in this epidemic.”

Dr. Gounder likened the amount of protection offered by the vaccines to a golf umbrella that keeps people dry in a rainstorm. “But if you’re out in a hurricane, you’re still going to get wet,” she said. “That’s kind of the situation that the Delta variant has created, where there’s still a lot of community spread.”

For the average vaccinated person, a breakthrough infection is likely to be inconsequential, causing few to no symptoms. But there is concern among scientists that a few vaccinated people who become infected may go on to develop long Covid, a poorly understood constellation of symptoms that persists after the active infection is resolved.

Much has been made of Delta’s ability to sidestep immune defenses. In fact, all of the existing vaccines seem able to prevent serious illness and death from the variant. In laboratory studies, Delta actually has proved to be a milder threat than Beta, the variant first identified in South Africa.

Whether a vaccinated person ever becomes infected may depend on how high antibodies spiked after vaccination, how potent those antibodies are against the variant, and whether the level of antibodies in the person’s blood has waned since immunization.

In any case, immune defenses primed by the vaccines should recognize the virus soon after infection and destroy it before significant damage occurs.

“That is what explains why people do get infected and why people don’t get seriously ill,” said Michel C. Nussenzweig, an immunologist at Rockefeller University in New York. “It’s nearly unavoidable, unless you’re going to give people very frequent boosters.”

There is limited evidence beyond anecdotal reports to indicate whether breakthrough infections with the Delta variant are more common or more likely to fan out to other people. The C.D.C. has recorded about 5,500 hospitalizations and deaths in vaccinated people, but it is not tracking milder breakthrough infections.

Additional data is emerging from the Covid-19 Sports and Society Workgroup, a coalition of professional sports leagues that is working closely with the C.D.C. Sports teams in the group are testing more than 10,000 people at least daily and sequencing all infections, according to Dr. Robby Sikka, a physician who worked with the N.B.A.’s Minnesota Timberwolves.

Breakthrough infections in the leagues seem to be more common with the Delta variant than with Alpha, the variant first identified in Britain, he said. As would be predicted, the vaccines cut down the severity and duration of illness significantly, with players returning less than two weeks after becoming infected, compared with nearly three weeks earlier in the pandemic.

But while they are infected, the players carry very high amounts of virus for seven to 10 days, compared with two or three days in those infected with Alpha, Dr. Sikka said. Infected players are required to quarantine, so the project has not been able to track whether they spread the virus to others — but it’s likely that they would, he added.

“If they’re put just willy-nilly back into society, I think you’re going to have spread from vaccinated individuals,” he added. “They don’t even recognize they have Covid because they think they’re vaccinated.”

Elyse Freitas was shocked to discover that 15 vaccinated people became infected at her wedding. Dr. Freitas, 34, a biologist at the University of Oklahoma, said she had been very cautious throughout the pandemic, and had already postponed her wedding once. But after much deliberation, she celebrated the wedding indoors on July 10.

Based on the symptoms, Dr. Freitas believes that the initial infection was at a bachelorette party two days before the wedding, when a dozen vaccinated people went unmasked to bars in downtown Oklahoma City; seven of them later tested positive. Eventually, 17 guests at the wedding became infected, nearly all with mild symptoms.

“In hindsight, I should have paid more attention to the vaccination rates in Oklahoma and the emergence of the Delta variant and adjusted my plans accordingly,” she said.

An outbreak in Provincetown, Mass., illustrates how quickly a cluster can grow, given the right conditions. During its famed Fourth of July celebrations, the small town hosted more than 60,000 unmasked revelers, dancing and mingling in crowded bars and house parties.

The crowds this year were much larger than usual, said Adam Hunt, 55, an advertising executive who has lived in Provincetown part time for about 20 years. But the bars and clubs didn’t open until they were allowed to, Mr. Hunt noted: “We thought we were doing the right thing. We thought we were OK.”

Mr. Hunt did not become infected with the virus, but several of his vaccinated friends who had flown in from places as far as Hawaii and Alabama tested positive after their return. In all, the cluster has grown to at least 256 cases — including 66 visitors from other states — about two-thirds in vaccinated people.

“I did not expect that people who were vaccinated would be becoming positive at the rate that they were,” said Steve Katsurinis, chair of the Provincetown Board of Health. Provincetown has moved swiftly to contain the outbreak, reinstating a mask advisory and stepping up testing. It is conducting 250 tests a day, compared with about eight a day before July 1, Mr. Katsurinis said.

Health officials should also help the public understand that vaccines are doing what they are supposed to — preventing people from getting seriously ill, said Kristen Panthagani, a geneticist at Baylor College of Medicine who runs a blog explaining complex scientific concepts.

“Vaccine efficacy isn’t 100 percent — it never is,” she said. “We shouldn’t expect Covid vaccines to be perfect, either. That’s too high an expectation.”

By:

Source: Why Vaccinated People Are Getting ‘Breakthrough’ Infections – The New York Times

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SEC Reportedly Halts Chinese Firm IPOs After Ride-Hailer DiDi Global’s $50 Billion Crash

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The Securities and Exchange Commission has stopped accepting registrations for the issuance of securities by China-based companies until it outlines the risks posed by such investments, Reuters reported Friday, marking the agency’s first set of action after mounting government interference in China this month erased billions of dollars in market value from recently listed DiDi Global and other China-based companies.

Key Facts

The SEC has said it won’t accept new registrations until it has released specific guidance on how companies should disclose the risks posed by China-based investments, unnamed sources familiar with the matter told Reuters. There are reportedly no such IPOs in the works, but it’s unclear how long the guidance may take to develop.

The reported decision comes after SEC commissioner Allison Lee on Tuesday said Chinese companies listed in the U.S. should disclose the risks of Chinese government interference to investors as part of their required reporting disclosures.

Similarly, a group of five GOP Senators on Wednesday urged SEC Chair Gary Gensler to “demand immediate and robust action” addressing a recent crackdown by Beijing officials on Chinese companies listed on U.S. stock exchanges. The SEC did not immediately respond to Forbes’ request for comment.

Key Background

In a matter of days, China introduced regulatory actions targeting both ride-hailing app DiDi and the nation’s education companies—harsh measures showing investors how risky investing in the market can be, Tom Essaye, author of the Sevens Report wrote in a Tuesday note. Days after DiDi’s massive U.S. IPO, the Cyberspace Administration of China ordered app stores to remove the ride-hailer from their platforms, claiming it “severely violat[ed] regulations around the collection of personal data.

” DiDi stock has plunged nearly 50% since the action, wiping out nearly $50 billion in market value in less than one month. Then, in a weekend order earlier this month, China’s education ministry barred “capitalized operations” among “online training institutions,” saying such companies can no longer turn a profit or raise money in the public markets and triggering a selloff in the space that erased nearly half the market value of many education firms.

Crucial Quote

“Yes, there’s a huge market and lots of growth potential, but obviously there are regulatory risks that seem to be growing larger with every passing month,” notes Essaye.

Surprising Fact

The Nasdaq Golden Dragon China index, which tracks Chinese companies trading in the United States, is down 12% this week and nearly 34% over the past six months.

Big Number

$12.8 billion. That’s how much Chinese listings in the United States have raised so far this year, according to Refinitiv data cited by Reuters. Genser said that he was concerned U.S. investors frequently don’t understand the structure of the companies whose shares they are buying.

In cases where China forbids foreign ownership, “many China-based operating companies are structured as Variable Interest Entities (VIEs). In such an arrangement, a China-based operating company typically establishes an offshore shell company in another jurisdiction, such as the Cayman Islands,” Gensler said.

The Chinese government has taken action against U.S.-listed Alibaba  (BABA) – Get Report and Didi Global  (DIDI) – Get Report in recent months. Days after Didi executed its IPO earlier in July, China forbade the ride-hailing titan from signing up new users.

Further Reading

Exclusive-U.S. regulator freezes Chinese company IPOs over risk disclosures -sources (Reuters)

US-Listed Chinese Tech Stocks Erase Nearly $150 Billion In Market Value This Week As China Stokes Regulatory Fears (Forbes)

The move comes as the SEC works on new guidelines for disclosing to investors the risk of continued regulatory crackdowns by China’s government, knowledgeable sources told Reuters. In a statement Friday, SEC Chairman Gary Gensler said “I have asked staff to seek certain disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective.”

Follow me on Twitter. Send me a secure tip.

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com. And follow me on Twitter @Jon_Ponciano

Source: SEC Reportedly Halts Chinese Firm IPOs After Ride-Hailer DiDi Global’s $50 Billion Crash

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Critics:

The Wall Street Journal reported Thursday that Didi is contemplating going private to soothe Chinese regulators and make whole investors who have suffered losses as Didi’s shares declined since the IPO. Didi called The Journal’s report “not true.”

In any case, SEC commissioner Allison Lee said Tuesday that as part of their reporting chores, U.S.-listed Chinese companies must tell investors the risks of Chinese government interference in their activity, according to Reuters.

U.S. listings of Chinese stocks have jumped to a record $12.8 billion so far this year, according to Refinitiv. The market’s repeated surges to record highs have attracted Chinese companies. But the move against Didi has slowed things down.

Shares of Chinese companies listed in the U.S. tumbled late last week and early this week amid fears about the government crackdowns.Didi fell 30% from July 21 to July 27. It recently traded at $10.14, up 3%, but has dropped 28% since its IPO. Alibaba recently traded at $194.31, down 2%, and has slumped 15% in the last month.

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