Let’s get down to brass tax

QUOTE OF THE DAY

We can’t show up and tell them 30 of our shenanigans.”

Market Snapshot

• U.S. indexes closed at record highs for the second straight day.
• Oil rose after the IEA said the crude surplus is shrinking.
• Equifax dropped another 12%; it’s down 25% since the hack.
• Bitcoin fell more than 10% after Jamie Dimon called it “a fraud.”



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Let’s Get Down to Brass Tax

Developed countries around the world are increasingly lowering their corporate tax rates to compete for investment.

That’s per the Organization for Economic Cooperation and Development (OECD)—a group of 35 wealthy nations that meet every year to review trends in corporate tax rates (among other things). Here are a few takeaways from the world’s most elite country club:

* A total of eight OECD countries reduced their corporate tax rates this year, dropping an average of 2.7%.

* Since 2000, corporate tax rates in OECD countries have decreased from an average of 32.2% to 24.7%.

The biggest culprit? Hungary, which evidently wants to become the Next Big Thing in tax havens (look out, Cayman Islands). This year, it took a buzzsaw to its tax code, dropping the corporate rate from a 19% max to 9%, the lowest in the EU.

And it’s unclear whether governments are reaping the benefits. While lower tax rates drove more business spending and brought average corporate tax revenues to 2.9% of GDP in 2015, that figure is still well below the 3.6% in 2007.

Will the U.S. join the club?

Definitely a possibility. We know that Republicans have argued for a corporate tax cut in order to stimulate business growth, and they’ve got control of Congress and the White House.

We also know that at 38.9%, the statutory U.S. corporate tax rate is the highest in the developed world (just ahead of France and Belgium), though we should point out many American companies game the system by utilizing deductions and loopholes. Either way, the rate is still high.

But the wait on tax reform may be just about over—yesterday, leaders said they would reveal a framework the week of September 25. What’s in the plan is anyone’s guess, but the U.S. could very well shed a few points off the top.

At the very least, @POTUS is cheering them on from Twitter: “Go Congress, go!”

Toshiba Throws in its Chips

U.S. PE shop Bain Capital and its corporate cronies (Apple, Seagate, and Dell to name a few), signed a letter of intent to buy Toshiba’s ~$18 billion memory chip business by the end of September.

But this is far from a done deal. Toshiba’s partner in the chip biz, Western Digital, isn’t a fan of the sale, and even with its blessing, regulatory approval is a must.

And that’s bad news for Toshiba.

The Japanese tech firm has been scrambling for a buyer ever since its U.S. nuclear power unit, Westinghouse, dialed 1-800-BANKRUPTCY. And what does Toshiba have to show for it? Billions in losses and -$4.6 billion in shareholders’ equity on its books.

And that’ll be costly—if Toshiba can’t sell off its chip business and bring shareholders’ equity back into the green, it might be delisted from the Tokyo Stock Exchange.

A(nother) Brazilian Scandal

JBS CEO Wesley Batista was arrested by Brazil’s version of the FBI on allegations of insider trading.

Wesley who?

Wesley Batista, along with his brother Joesley, reportedly sold a bunch of JBS shares ($119 million worth) and bet against Brazilian currency while negotiating a plea deal for a completely separate corruption charge. Busy guy.

Once the market caught word, JBS shares tanked 37% and the Brazilian real plunged 9%.

JBS who?

• The world’s largest meat processing company, bringing in around $50 billion in revenue.
• This summer, it’s been the subject of bribery investigations involving the Batista brothers and the Brazilian president.
• A U.S. IPO could be in the works by the end of the year.

And following this arrest, it might be looking for a new CEO.

Facebook Sets Standards

Facebook finally established “monetization eligibility standards” for content across its platform…because you never know if your ad will end up next to a Jonas Brothers music video or a Jihadist hate group.

It’s the very problem YouTube has battled all year. After algorithms landed corporate ads on racist and anti-Semitic videos, companies like McDonald’s took their McNuggets and ran.

But Facebook is doing its darndest to get ahead of the game. Videos featuring illicit drugs, controversial social issues, hate groups, violence, inappropriate language, and porn are all considered “unmonetizable content.”

Which is crucial. As Facebook pushes its new Watch platform, where original content providers earn 55% of ad revenue, Zuckerberg needs to make sure a brand’s integrity is a part of the playbook.

What Else Is Happening…

• Amazon (+1.73%) will open a 1 million square-foot warehouse near Mexico City.
• Bain Capital reportedly raised $9.4 billion for a new fund, beating its $7 billion goal.
• Target (+2.80%) will hire 100,000 temporary workers for the holiday season…30,000 more than last year.
• The trial will go on as scheduled for Uber and Waymo after a U.S. appeals court denied Uber’s arbitration request.

Economic Calendar

• Monday     Earnings: No Events

                    Economic Events: No Events

• Tuesday   Earnings: No Events

                  Economic Events: Small Business Optimism Index (+)

• Wednesday    Earnings: No Events

                        Economic Events: MBA Mortgage Application (+), PPI (-), Treasury Budget (+), EIA Petrolium (-)

• Thursday   Earnings: Oracle

                  Economic Events: CPI, Jobless Claims

• Friday       Earnings: No Events

                 Economic Events: Retail Sales, Industrial Production, Business Inventories, Consumer Sentiment, Baker-Hughes Rig Count

The Backburner —Chinese Cash in the Caribbean

China is moving forward with plans to invest $30 billion into infrastructure projects in Haiti. It’s a much-needed influx of cash for one of the poorest nations on earth. Haiti’s GDP is only $8 billion.

This investment could go a long way to improve Haitians’ daily lives. A power plant will pump electricity to the capital, Port-au-Prince. And expect thousands of housing units, markets, sanitation facilities, and a railway to be built by a 20,000-person workforce.

But let’s talk about the giant panda in the room. Why is China sending its money 8,652 miles across the globe? The investment is a part of China’s massive “Belt and Road Initiative,” a $1.4 trillion infrastructure network aimed at linking China with Europe. The Chinese are underwriting ports, pipelines, and roads from Greece to Pakistan.

Don’t worry, geography buffs, we know Haiti isn’t in Europe or Asia. Which is why this news is particularly interesting. China’s pursued an aggressive policy of bringing countries under its sphere of influence through infrastructure financing. Is the Caribbean next?

The Breakroom

Question of the Day

What do these words have in common: polish, job, herb?

(Give up?)

Who Am I?

I’m an American clothing designer—I started my fashion brand with $350 in startup money—My company employs over 1,200 employees across 56 retail locations.

(Any guesses?)

Stat of the Day

$100 billion–The amount a single percentage point decrease in the U.S. corporate tax rate removes from government revenues over a decade.

Righting Some Wrongs

In yesterday’s Brew, there was a typo in the Question of the Day. The prompt should have read “1816=3,” not 6. Additionally, in our story on AT&T we incorrectly referred to Time Warner as Time Warner Cable.