7th June 2021
Good morning Over the weekend a UK ticket holder won the £111 million EuroMillions jackpot becoming the fourth British winner this year. In case the lucky person is reading this, here are a couple of ideas of what to do with the winnings:
- Big tech set for bigger taxes
- Government offers half price homes
Friday's market moves
FTSE 100 +0.1% 7,069
FTSE 250 +0.1% 22,834
Markets ended the week on a mildly positive note off the back of so-so US employment data.
The eagerly anticipated data showed that the US economy added 559,000 jobs in May, fewer than the 675,000 forecasted but still a marked improvement on the 228,000 created in April. The unemployment rate fell to 5.8%, the lowest since the pandemic began.
Big tech set for bigger taxes
What’s going on
On Saturday the Finance Ministers of the G7 (group of the world’s wealthiest nations) made history by agreeing to reform the global tax system. This could see a global minimum corporate tax rate of at least 15%.
Tech giants like Facebook, Amazon and Google are among the companies likely to be most affected.
Why is this important
Anybody who has ever filed a tax return will agree that the tax system can be overly complicated. For years companies have taken advantage of this to find loopholes that minimise their tax burden.
In recent years tech firms have faced heavy criticism for (legally) setting up local branches in countries that have low tax rates and then declaring profits there. That means they only pay the local rate of tax, even if the profits mainly come from revenues made elsewhere.
This has led to situations like the one just last week when Microsoft’s Irish business made a profit of £222 billion last year but paid no corporation tax.
The new agreement between Canada, France, Germany, Italy, Japan, the UK and the US aims to put an end to this in the following ways:
- Companies will pay more tax in the countries where they actually do business, rather than wherever they end up declaring their profits.
- Setting a global minimum tax rate will mean countries don’t try to undercut each other with lower tax rates in a “race to the bottom”.
The Chancellor, Rishi Sunak said ‘the fairer system will mean the UK will raise more tax revenue from large multinationals and help pay for public services here in the UK.’ Which would be welcome in light of a pandemic that has led to record levels of government debt.
Tax reform has long been on government agendas and it finally looks like change is on the way. But they are a couple of sticking points:
- Other countries will need to sign up as well to close the loophole.
- Campaigners argue that 15% is too low and won’t make enough of an impact.
- G7 countries will need approval from their own lawmakers which could be a real challenge.
Government offers half price homes
For all those who have wished that there could be Black Friday like deals on property then you may just be in luck.
On Friday the government launched the First Homes Scheme that will give discounted houses for first time buyers with priority given to local people and key workers.
Discounts will be between 30% and 50% compared to the market price, enabling people to buy with a lower deposit or to purchase bigger properties.
The scheme is a part of the government’s commitment to deliver 1 million homes by 2024.
The first properties in the scheme went on the market on Friday in the Bolsover district of the East Midlands.
The most expensive properties available under First Homes will be £420,000 in London, and £250,000 in the rest of England.
This is the latest government initiative to help first time buyers and boost the housing market. Stamp duty holiday, 95% mortgages and help-to-buy are just a few of the other schemes currently available to first time buyers.
Stat of the day
It's estimated that there's £30 billion of unused clothes in UK wardrobes
Other stories to keep you in the loop
- London health tech startup Babylon Health to go public for £3 billion (link)
- World's biggest record label Universal Music to go public for $40 billion (link)
- Nigeria suspends Twitter access after president’s tweet was deleted (link)
- Delivery firm Getir to expand into US after $550m funding round (link)