Britain’s Chancellor of the Exchequer Rishi Sunak (from left), U.S. Treasury Secretary Janet Yellen, Managing Director of the IMF Kristalina Georgieva and Canada’s Finance Minister Chrystia Freeland chatting on the first day of the Group of Seven Finance Ministers Meeting at Lancaster House in London on June 4, 2021.
Stefan Rousseau | AFP | Getty Images
LONDON — The finance ministers of the most advanced economies, known as the Group of Seven, have backed a U.S. proposal which calls for corporations around the world to pay at least a 15% tax on their earnings.
“I’m delighted to announce, that G-7 finance ministers today after years of discussions, have reached a historic agreement to reform the global tax system, to make it fit for the global digital age — and crucially to make sure that it’s fair so that the right companies pay the right tax in the right places,” British Finance Minister Rishi Sunak announced in a video statement on Saturday.
“Under the principles of the landmark reforms, the largest global firms with profit margins of at least 10% will be in scope – with 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries where they make sales,” he said in a series of tweets.
“The G7 also agreed to the principle of a global minimum corporation tax on large firms of at least 15% operated on a country-by-country basis – creating a more level playing field for UK firms and cracking down on tax avoidance,” he added.
If finalized, it would represent a significant development in global taxation.
President Joe Biden and his administration had initially suggested a minimum global tax rate of 21% in an attempt to end a race to the bottom among different countries in luring international businesses. However, after tough negotiations, a compromise was reached over 15%.
A global deal in this field would be good news for cash-strapped nations, who are trying to rebuild their economies after the coronavirus crisis.
But Biden’s idea had not been received with the same level of excitement across the world. The U.K., for example, which is also a member of the G-7, did not immediately voice its support for the proposal.
U.S. President Joe Biden speaks during a meeting with a bipartisan group of members of Congress.
Pool | Getty Images News | Getty Images
The issue can be contentious within the European Union as well, where various member states charge different corporate tax rates and can attract big-name firms by doing so. Ireland’s tax rate, for example, is 12.5%, while France’s can be as high as 31%.
Speaking in April, Irish Finance Minister Paschal Donohoe said smaller nations should be allowed to have lower tax rates given that they don’t have the same capacity for scale as the larger economies do, the U.K.’s Guardian newspaper reported.
The world’s most powerful economies have been at odds over taxation for some time, in particular in the wake of plans to tax digital giants more. The U.S., under the Donald Trump presidency, vehemently opposed digital tax initiatives in different countries, and threatened to impose trade tariffs.
Federal Reserve gives U.S. banks a thumbs up as all 23 lenders easily pass 2021 stress test
The Federal Reserve announced Thursday that the biggest U.S. banks could easily withstand a severe recession, a milestone for the once-beleaguered industry.
The Fed, in releasing the results of its annual stress test, said that all 23 institutions in the 2021 exam remained “well above” minimum required capital levels during a hypothetical economic downturn.
That scenario included a “severe global recession” that hits commercial real estate and corporate debt holders and peaks at 10.8% unemployment and a 55% drop in the stock market, the Fed said. While the industry would post $474 billion in losses, loss-cushioning capital would still be more than double the minimum required levels, the Fed said.
If there was an anticlimactic note to this year’s stress test, it’s because the industry underwent a real-life version in the past year when the coronavirus pandemic struck, leading to widespread economic disruption. Thanks to help from lawmakers and the Fed itself, banks fared extremely well during the pandemic, stockpiling capital for expected loan losses that mostly didn’t materialize.
Nevertheless, during the pandemic, banks had to undergo extra rounds of stress tests and had restrictions imposed on their ability to return capital to shareholders in the form of dividends and buybacks. Those will now be lifted, as the Fed has previously stated.
“Over the past year, the Federal Reserve has run three stress tests with several different hypothetical recessions and all have confirmed that the banking system is strongly positioned to support the ongoing recovery,” Vice Chair for Supervision Randal K. Quarles said in a statement.
After passing this latest exam, the industry will regain a measure of autonomy it lost since the last crisis. After playing a key role in the 2008 financial crisis, banks were forced to undergo the industry exam, and had to ask regulators for permission to boost dividends and repurchase shares.
Now, under something called the stress capital buffer framework, banks will gain flexibility in how they want to dole out dividends and buybacks. The stress capital buffer is a measure of capital each firm needs to carry based on the riskiness of their operations. The new regime was supposed to start last year, but the pandemic intervened.
“So long as they stay above that stress capital buffer requirement and all their other requirements every quarter, a bank can technically do whatever it chooses to do with regards to buybacks and dividends,” Jefferies bank analyst Ken Usdin told CNBC this week.
During a background call with reporters, senior Fed officials pushed back against the idea that the new regime resulted in a free-for-all. Banks are still subject to restrictions, and the Fed is confident that the stress capital buffer framework will protect their ability to support the economy during a downturn, they said.
While analysts have said they expect the industry can hike buybacks and dividends by tens of billions of dollars starting in July, the Fed has instructed lenders to wait until Monday afternoon to disclose their plans, according to people with knowledge of the situation. That’s when a flurry of press releases is expected.
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People queue outside a vaccination center in Sydney on June 24, 2021, as residents were largely banned from leaving the city to stop a growing outbreak of the highly contagious Delta Covid-19 variant spreading to other regions.
SAEED KHAN | AFP | Getty Images
The “delta variant” has come to dominate headlines, having been discovered in India where it provoked an extreme surge in Covid-19 cases before spreading around the world.
But now a mutation of that variant has emerged, called “delta plus,” which is starting to worry global experts.
India has dubbed delta plus a “variant of concern,” and there are fears that it could potentially be more transmissible. In the U.K., Public Health England noted in its last summary that routine scanning of Covid cases in the country (where the delta variant is now responsible for the bulk of new infections) has found almost 40 cases of the newer variant, which has acquired the spike protein mutation K417N, i.e. delta plus.
It noted that, as of June 16, cases of the delta plus variant had also been identified in the U.S. (83 cases at the time the report was published last Friday) as well as Canada, India, Japan, Nepal, Poland, Portugal, Russia, Switzerland and Turkey.
As is common with all viruses, the coronavirus has mutated repeatedly since it emerged in China in late 2019. There have been a handful of variants that have emerged over the course of the pandemic that have changed the virus’s transmissibility, risk profile and even symptoms.
Several of those variants, such as the “alpha” strain (previously known as the “Kent” or “British” variant) and then the delta variant, have gone on to be dominant strains globally, hence the attention on delta plus.
India’s Health Ministry reportedly said Wednesday that it had found around 40 cases of the delta plus variant with the K417N mutation. The ministry released a statement on Tuesday in which it said that INSACOG, a consortium of 28 laboratories genome sequencing the virus in India during the pandemic, had informed it that the delta plus variant has three worrying characteristics.
These are, it said: increased transmissibility, stronger binding to receptors of lung cells and the potential reduction in monoclonal antibody response (which could reduce the efficacy of a lifesaving monoclonal antibody therapy given to some hospitalized Covid patients).
India’s Health Ministry said it had alerted three states (Maharashtra, Kerala and Madhya Pradesh) after the delta plus variant was detected in genome-sequenced samples from those areas.
The detection of a variation to the delta variant largely blamed for India’s catastrophic second wave of cases has stoked fears that India is ill-prepared for a potential third wave. But some experts are urging calm.
Dr. Chandrakant Lahariya, a physician-epidemiologist and vaccines and health systems expert based in New Delhi, told CNBC on Thursday that while the government should remain alert to the progress of the variant, there is “no reason to panic.”
“Epidemiologically speaking, I have no reason to believe that ‘Delta plus’ alters the current situation in a manner to accelerate or trigger the third wave,” he told CNBC via email.
“If we go by the currently available evidence, Delta plus is not very different from Delta variant. It is the same Delta variant with one additional mutation. The only clinical difference, which we know till now, is that Delta plus has some resistance to monoclonal antibody combination therapy. And that is not a major difference as the therapy itself is investigational and few are eligible for this treatment.”
He advised the public to follow Covid restrictions and to get vaccinated as soon as possible. Analysis from Public Health England released last week showed that two doses of the Pfizer–BioNTech or Oxford-AstraZeneca Covid-19 vaccines are highly effective against hospitalization from the delta variant.
The WHO has said it is tracking recent reports of a “delta plus” variant. “An additional mutation … has been identified,” Maria Van Kerkhove, WHO’s Covid-19 technical lead said at a briefing last week.
“In some of the delta variants we’ve seen one less mutation or one deletion instead of an additional, so we’re looking at all of it.”
Booking volumes increase 45% over Q1
The cruise ships “Carnival Sunrise” (L) and “Carnival Vista” (R) part of the Carnival Cruise Line, are seen moored at a quay in the port of Miami, Florida, on December 23, 2020, amid the Coronavirus pandemic. (Photo by Daniel SLIM / AFP) (Photo by DANIEL SLIM/AFP via Getty Images)
DANIEL SLIM | AFP | Getty Images
Carnival Corporation saw booking volumes increase 45% in the second quarter of this year compared to the first quarter, the cruise operator announced in a business update on Thursday
Carnival also said its cumulative advanced bookings for 2022 are ahead of its 2019 bookings, indicating the company expects a solid return to business after the pandemic shut down the cruise industry.
However, Carnival reported an adjusted net loss of $2 billion for the second-quarter of 2021. It expects a net loss on an adjusted basis for the third quarter and full year as well.
The company’s monthly cash burn rate for the first half of 2021 was $500 million.
Due to several outbreaks aboard cruise ships last year, the cruise industry was one of the last sectors allowed to resume operations.
The Centers for Disease Control and Prevention allowed cruises to return this year with strict safety protocols and requirements in place to prevent outbreaks from occurring onboard.
Carnival has resumed sailing or announced plans to resume sailing 42 ships from eight of the company’s nine cruise brands by the end of November this year.
“We are working aggressively on our path to return our full fleet to operations by next spring. So far, we have announced that 42 ships, representing over half of our capacity, have been scheduled to return to serving guests by this fiscal year end,” Carnival Corporation President and CEO Arnold Donald said in a press release.
Cruise line stocks are slowly rebounding this year after suffering huge losses during the pandemic.
Shares of Carnival fell more than 2% on Thursday. Carnival’s stock has risen 28% this year, putting its market cap at just over $27 billion.
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