Tax Reform Plans: A Global Overview

Tax reform plans are often in the making in different parts of the world.  In this article we examine what is going on in the Philippines, the US and Great Britain.

First, the Duterte administration is moving toward more inclusive economic growth, with an assurance from the business community supporting tax reform plans. The  Comprehensive Tax Reform Program (CTRP) is being put to the BusinessWorld Economic Forum.  Chairman of the Metro Pacific Investments Corporation, Manuel V. Pangilinan, said “CTRP is central to DuterteNomics; it is in fact the catalyst to the government’s 10-point economic program. That is why I believe the business sector should support it.”

Second, it’s quite interesting what is happening with tax reform in America, primarily because of how concise the plan is.  In just one page, Trump outlined possibly the largest tax cut individuals have received (since Reagan’s administration) in his tax code reformation proposal. Should it go ahead, a reduction from seven to three in the current tax brackets would be implemented with rates of 10 percent, 25 percent and 35 percent. a married couple would have nearly double in their deductions and would not even have to any amount of taxes on the first $24,000 income they earn, effectively creating a zero tax rate. Tax breaks for charitable giving, mortgage interest and retirement savings would remain in place.

Trump also is seeking to eradicate state and local tax deductions.  According to the Tax Policy Center, the SALT deduction is one of the largest federal tax expenditures, with an estimated revenue cost of $96 billion in 2017 and $1.3 trillion from 2017 to 2026, in an effort to put an end to the Alternative Minimum Tax (AMT) which calls for over 5 million taxpayers to calculate their liability twice and then pay the higher amount.

Third, when looking at the situation in Great Britain, Theresa May is running on a platform of tax reduction for businesses and working families. She is promising no increase in value-added taxes and a maintenance of plans to cut corporation tax to 17 percent by 2020.

Beer Giant Flooding Capital into US Company

Anheuser-Busch InBev, announced its plan to invest $2 billion into its operations in the Unites States. The world’s largest brewery, AB InBev is looking to tackle declining volumes and shrinking market share of its flagship product Budweiser.

The company recently purchased its closest competitor, SABMiller for almost $100 billion.

They said that the $2 billion initiative is one of the largest capital investment programs in the history of the US beer industry. They stated that they will be putting close to $500 million into the company this year, and the rest of the $2 billion by the year 2020.

Plans for the money include over $200 million on brewery and distribution projects in 2017, with $82 million to improve the national supply outlets and to build distribution warehouses in Los Angeles and Columbus, Ohio.

In addition, they hope to expand production of aluminum bottles and begin to make a larger variety of beers through investment in its 21 US breweries. Adding non-alcoholic drinks are also on the to-do list, with products such as the ready-to-drink tea Teavana, which it is making together with Starbucks.

Climate Change Non-Issue for Business Schools

NASA 16-008 – January 20, 2016 – 2015 Global Temperatures . Picture courtesy of NASA Scientific Visualization Studio.

Despite the fact that climate change has enormous economic consequences, only a handful of US business schools which allow students to focus their studies on sustainability.

Recent closures of facilities owned by Nestle and Coca-Cola, as well as an imminent coffee shortages on the horizon, which will disrupt companies like Starbucks, has still not sent the message to business schools that climate change is an issue that needs addressing by the business community.

Climate change affects every resource used by business: agriculture, water, land, energy, and workers and the economy. No business will be immune from the transformation caused by climate change. Some observers believe that without radical change in our business models climate change will lead to disastrous consequences.

The scientific consensus is that the best way to avoid disaster is to keep the average global temperature increase to only 2 degrees Celsius. In order to reach this goal emissions of greenhouse gases need to be limited to 1 trillion metric tons which will mean a 49 to 72 percent reduction globally from 2010 levels.

Clearly business needs to take a leading role in the reduction of gases that contribute to climate change, but the schools that are educating our future entrepreneurs and business leaders are not taking the issue seriously enough.

One study looked at 51 schools out of the hundreds in the country. It found that when a sustainable business course is offered, it is usually just an elective. Just a few business schools offer minors, majors, certificates or graduate degrees in sustainability business and /or management.

The 51 schools that were chosen for the study are leaders in the study of sustainability. The vast majority of schools do not offer any kind of coursework on the subject. The study showed that even the best schools for sustainability are doing a bad job preparing students for the future that is coming.

Trump Getting Ready to Pull US Out of NAFTA

Reports have emerged that the Trump administration is taking concrete steps to pull the United States out of the North American Free Trade Agreement, also known as NAFTA.

According to Politico, two White House officials stated that a draft order to withdraw from NAFTA has already been submitted for the last stages of review, and could be released by the end of this week, or early next week.

The order was written by Trump’s head of the National Trade Council, Peter Navarro, in corroboration with the White House chief strategist Steve Bannon. It is still unclear what the order states, but the effect on trade can be predicted by an examination of the top 20 exports arriving from Mexico to the US.

In January Capital Economics’ chief emerging markets economist Neil Shearing published a chart in a memo to clients graphing the top 20 exports from Mexico according to their 2015 US dollar value.

About 25 percent of Mexico’s total exports to the US, by far the largest slice, came from the auto sector, valued at about $80 billion. The next three items are electrical components, food, and computers, together valued at about $55 billion.

“The upshot, then, is that targeted measures imposed on the vehicle, electronics, and food and beverage sectors would hit Mexico’s economy especially hard,” wrote Shearing. “Similarly, in the event of a blanket tariff across all sectors, producers in these areas would be among the hardest hit.”

In wake of the reports that Trump is on the verge of pulling out of NAFTA the peso is crashing, down over 2.2 percent at 19.2704 as of 12:53pm Wednesday afternoon.

Oil Prices Stay Steady with Pressure from Both Ends

Oil prices are performing a precarious balancing act as US oil production increases simultaneously with reduction in output from OPEC and other oil producers.

The price for Benchmark crude futures hardly budged from $55.86 a barrel at 6:57am. Yesterday’s price of $56.65 was the high for the month, just before it shrunk slightly today.

Only 6 cents separated today’s and yesterday’s price for US West Texas Intermediate crude futures, falling slightly. Yesterday’s price was the highest a barrel had been since March 7, at $53.76.

The weekly Energy Information Administration (EIA) report points to US oil output rising, while also showing that US stockpiles at the crude hub in Cushing, Oklahoma went up by 276,000 barrels during the week which ended on April 7.

Other data, however, showed a surprising fall in overall US crude inventories. Last week inventories fell by 2.2 million barrels while imports went down by 717,000 barrels per day.

“We saw a bit of a reversal in oil prices (on Wednesday) and it came despite some positive news,” chief market strategist at Sydney’s CMC Markets. “It does appear that there is bit of focus on the data that came alongside inventory numbers which showed further increase in U.S. production.”