The Daily Update: Global tax Agreement / Non-Farm Payrolls

The US has won the backing for a global minimum tax rate as part of a wider revamp of the rules for taxing international companies. The Organisation for Cooperation and Development (OECD) agreement was backed by representatives from 130 countries, representing 90% of global GDP, among them all the 20 major economies. These included India and China, both of which previously had reservations about the proposed overhaul.

The governments will now look to pass laws nationally to ensure that companies headquartered in their own countries pay a minimum tax rate of at least 15% in each of the nations in which they operate, reducing opportunities for tax avoidance. The new minimum tax rate is expected to yield up to $150bn in additional revenue every year, the OECD said.

One of the nine countries that did not sign the agreement was Ireland. According to Paschal Donohoe, the Minister for Finance, whilst Ireland is ‘absolutely committed’ to the process of reforming the global corporate tax regime, raising the global minimum tax rate above its current 12.5% could take away its competitive edge for foreign investment. The Department of Finance has previously estimated that signing the agreement would cost Ireland nearly EUR2.5bn in annual tax revenue.

This afternoon we also had June’s Non-farm Payroll numbers. The market estimates before the figures were for 720k jobs added, an unemployment rate of 5.6% and participation rate of 61.7%.

The actual number of jobs added was 850k with the previous month’s figure revised up to 583k from 559k. The unemployment rate rose to 5.9% versus the prior month’s reading of 5.8% and the participation rate stayed the same at 61.6%.