The Bank of Korea: "G7 Minimum Corporate Tax Rate Agreement Expected to Have Minimal Impact on Stock Prices"
Goldman Sachs "IT Sector EPS Decline of 3%, S&P 500 Decline of 1-2%"
[Asia Economy Reporter Eunbyeol Kim] As the leaders of the Group of Seven (G7) approved a minimum corporate tax rate of 15% in a joint statement on the 13th (local time), the Korea Development Bank Foreign Exchange Operations Department forecasted on the 14th that the impact of the global minimum corporate tax on stock prices would be minimal.
In its report titled "International Financial Market Trends and Major Issues - The Impact of the Global Minimum Corporate Tax Rate on Financial Markets," the Foreign Exchange Operations Department of the Bank of Korea stated, "Since the companies subject to the (global minimum corporate tax) are limited and the tax rate is relatively low, the impact on stock prices will be minimal," citing Goldman Sachs analysis that "even in the IT sector, which is expected to be most affected, the decline in earnings per share (EPS) is estimated to be less than 3%."
Goldman Sachs estimated that the EPS decline for all S&P 500 companies would be only around 1-2%.
Earlier, Bank of America (BoA) also projected that if U.S. IT companies face higher tax rates in Europe, they might respond by relocating research and development (R&D) operations to those countries.
Regarding the impact on the U.S. dollar exchange rate, it was assessed that both strengthening and weakening factors coexist. Paying taxes in the currency of the source country of income would be a factor causing the U.S. dollar to weaken, but eliminating tax havens could reduce the incentive for U.S. companies to hold overseas reserves and promote repatriation of funds, which would be a factor strengthening the dollar.
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The Bank of Korea stated, "In the past, when the Homeland Investment Act (2005) and the Tax Cuts and Jobs Act (2017) were implemented, the repatriation of overseas reserves by U.S. companies acted as a factor strengthening the U.S. dollar."
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