The ambitious plan to get companies like Google and Amazon to pay more taxes: CNBC After Hours
MacKenzie Sigalos, CNBC Business News
Today inflation is picking up speed, but companies are making record profits. So what does the stock market care about? Plus, the world's most powerful governments want the world's most powerful companies to pay more taxes. And finally, Tesla CEO Elon Musk wraps up testimony in a lawsuit that could cost him billions of dollars. We explain why. I'm Mackenzie Sigalos—now in CNBC's San Francisco bureau—and this is CNBC After Hours.
Stocks ended the day in the red across the board. They didn't start that way though. An important inflation report, the consumer price index, came in hotter than expected, and that dragged on stocks throughout the day. At the same time, earnings season kicked off in a big way with major banks like Goldman Sachs and JPMorgan reporting profits that blew past what Wall Street was expecting. In fact, many on Wall Street expect corporate profits beyond Goldman and JP Morgan to blow past expectations this quarter. The world's most powerful governments, though, well, they want their cut. This past weekend, representatives from the 20 largest economies on earth gathered in Venice, Italy to hammer out details of a massive change in the way that governments tax companies that operate all over the world, mainly big tech companies like Amazon, Google and Facebook. The meeting of the group of 20, or G-20, for short, took place after 130 countries agreed to a proposal from US Treasury Secretary Janet Yellen, that companies should pay a minimum of 15% in taxes no matter what countries they're based in. CNBC Digital's Natalie Zhang dug deeper into the story. Take a look.
Natalie Zhang, CNBC Business News
The finance chiefs of the G-20 are one step closer to rewriting the global tax rules. 130 of the world's most powerful economies signed off on a global minimum corporate tax of at least 15%. The minimum rate, nicknamed the Amazon tax, targets profitable companies that pay low taxes.
Jeff Cox, CNBC Business News
The timing of this right now is very interesting, because we have corporate earnings season coming up. And that's the time when we don't just get to see what the profit profits are for companies, we get to hear from the CEOs and they will tell us where they think the future is heading. So this is going to be a good thing to look out for to listen to when folks like Jamie Dimon are going to be talking this week for JPMorgan and talking about what their structures going to be like.
Jennifer Blouin, Professor of Accounting, Wharton School, University of Pennslyvania
This proposed global minimum tax regime has a lot of issues that need to be worked through. Because effectively what it does is undermine each jurisdiction's ability to incentivize investment in its locale. And so this is why it is a concern for U.S. companies even if they are planning in Delaware, because by investing and taking advantage of existing laws that are provided to them to incentivize them to invest, they may then run afoul of the global minimum tax. They have to think carefully about whether or not these global minimum taxes actually undermine investment instead of legitimately put in place by countries to help incentivize their local companies to build more and hire more people.
Natalie Zhang, CNBC Business News
Countries with low corporate tax rates, like Ireland, remain holdouts. In an effort to stop the race to the bottom, US Treasury Secretary Janet Yellen has supported a two-pillar plan. The first pillar would change how large global companies get taxed based on where they sell services rather than where the companies are headquartered. The second pillar is the 15% global minimum tax rate. The G-20 has until October to get all countries on board when the final sign-off on a global minimum tax deal will take place.
MacKenzie Sigalos, CNBC Business News
Alright, time for today's numbers round.
First up is 5.4. Prices for everyday items like milk, eggs and gas are rising at the fastest pace in nearly 13 years. The Consumer Price Index, which measures those kinds of things, jumped 5.4% in June. Well, the big jump in CPI came largely from the price of used cars and trucks. Those jumped 10.5% in June. And that fits with this story that the spike in inflation is just temporary and from strong consumer demand rather than something going haywire in the economy.
Next — $2 billion. Elon Musk just wrapped up testifying before a courtroom in Delaware, after about nine hours on the witness stand. The Tesla CEO was defending his company's acquisition of SolarCity in 2016 for $2.6 billion. The testimony was part of a lawsuit from shareholders alleging that the acquisition was actually a bailout for SolarCity. If Musk loses the lawsuit he could have to pay upwards of $2 billion. But since this lawsuit is what's called a shareholder derivative action, the proceeds may go to Tesla instead of the investors who sued the company. That is, if they win. In court, Musk denied that he placed any pressure on Tesla's board to buy SolarCity and that the company would have been able to raise the funds on its own.
And finally, five. After taking a break last year because of Covid-19, CNBC's Top States for Business is back and it has a new winner. Virginia took the top spot—the fifth time the state has won. The Top States for Business study ranks all 50 states on metrics like education, workforce, infrastructure, and cost of doing business. The big reason behind Virginia's victory? Education. Its strong public school system and elite-level colleges and universities supply companies there with a highly educated workforce. Nearly 40% of workers in Virginia have a bachelor's degree or higher.
Check out the rest of the Top States for Business rankings by going to cnbc.com and downloading the CNBC app. That's it for CNBC after hours. We'll be back here every Tuesday and Thursday. So be sure to catch us then.