Big tech stocks shrug off G7 tax plan for now

The G7 nations have agreed to back a minimum global corporate tax rate of at least 15%

Mon, 07 Jun, 2021 - 19:51

Big technology stocks took in their stride a deal by the world's richest nations on a global minimum corporate tax aimed at the US tech heavyweights as global equity markets hovered close to a record peak.

The G7 nations agreed on Saturday to back a minimum global corporate tax rate of at least 15%, squeezing more money out of multinational companies such as Amazon.com and Google.

Microsoft and Facebook both rose marginally, while Apple and Amazon showed marginal declines.

But analysts said immediate market implications would be minimal since the details remained to be negotiated over the coming months.

Prelude to talks

The G7 pact is just a prelude to talks with the broader Group of 20 in coming months, let alone the ultimate agreement — in negotiations under the leadership of the Organisation for Economic Co-operation and Development — among about 140 nations that will be needed.

"While it all sounds good, the road to implementation [of the tax deal] is full of rocks and potholes," said Ken Polcari, managing partner at US-based Kace Capital Advisors.

"I would not react by becoming a seller in any of these names on this headline just yet," he said.

The G7 framework agreement has made for a tougher sales job for US president Joe Biden’s proposed changes to US tax law.

It leaves a potential gap with the 21% rate that Mr Biden has pitched to Congress for US companies’ profits logged abroad.

“It’s very difficult, and maybe impossible, to call for 15% for an international standard and somehow convince lawmakers on Capitol Hill on 21%,” said Rohit Kumar, a principal at PwC’s Washington National Tax Services.

Abuse of power

Meanwhile, Google has agreed to pay €220m to settle a French antitrust probe over its abuse of power in online advertising.

The French Competition Authority said Google has been unfairly sending business to its advertising server and its online ad auction house, to the detriment of rivals.

In addition to the fine, Google promised to remedy the situation by improving the interoperability of its Google Ad Manager services for third parties.

“The decision fining Google is particularly significant as it is the first throughout the world to tackle complex algorithmic auction processes used for online display advertising,” said Isabelle de Silva, who heads France’s Autorité de la concurrence.

With separate cases into Google, Apple, and Facebook, French antitrust regulators are starting to rein in anti-competitive behaviour in online advertising. While Google’s case ended with a fine, Facebook last week tried to avoid that by making commitments to placate regulators.

Elsewhere, oil climbed above $72 a barrel, extending this year's rally built on rising recovery demand and supply curbs from the Opec and its allies, before giving up the gains as investors took profits.

US treasury and eurozone government bond yields edged up in largely subdued trade ahead of the ECB’s meeting on Thursday, the same day highly anticipated US inflation data will be released.