Global Tax Agreements Start in Venice
After a successful G7 summit earlier in June—where the world’s leading economic powers agreed on establishing a global minimum tax rate—finance ministers from the Group of 20 nations are now meeting in Venice, Italy to discuss the details of new international tax agreements. The United States’ G7 proposal to regulate the global minimum tax at 15% was widely accepted last week when 130 countries signed on the initial blueprints. Even heavy hitters like China, Russia, and India—where multinational corporations are plentiful—gave their seal of approval on the plan.
The establishment of a global minimum tax is the first step the US and the world are taking to close loopholes—like the offshoring of profits in tax havens—used by large corporations for tax avoidance. Such tax havens, like Ireland and some nations in the Caribbean, have built their economies around their status as a tax haven and have yet to join the agreement that will ultimately upend their economic systems.
New Capital Gains Rates Can Bring Major Capital Losses
Biden and members of his administration have proposed changes to the capital gains tax rate under the American Families Plan. The current top capital gains tax rate is 23.8% and is set to increase to 43.4% under the new plan.
The proposal strives to eliminate loopholes for the top bracket of taxpayers. However, economic predictions show that this strategy may not play out well in the long run for a vast majority of investors and businesses. According to Accounting Today, “the proposal is estimated to impact two-thirds of overall capital investment, causing catastrophic effects on the creation of jobs and growth of the economy as a whole.”
If the proposal is to pass, high-income investors will need to consider new strategies for asset management to best keep hold of their finances.
Bitcoin: Intangible Asset with a Tangible Concern
Accountants all over the country have struggled for years with how to account for digital assets like cryptocurrencies. There currently exist no Generally Accepted Accounting Principles (GAAP) providing guidance on the matter, which has left accountants to run off of a general consensus that cryptocurrencies like Bitcoin are to be treated as “indefinite-lived intangible assets.”
The defining of cryptocurrency as an intangible asset for accounting purposes affects how well companies can book gains on their crypto assets. Conversely, some Senators as well as members of Biden’s administration, like Janet Yellen, are arguing to establish cryptocurrencies under their own asset classification for proper and streamlined regulation.
These concerns have become more prevalent for Bitcoin investors in recent months as Tesla CEO, Elon Musk, has given his blessing to other cryptocurrencies like Dogecoin and Ethereum.
It’s all causing CFOs to ask: is Bitcoin still worth it?
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