Thijs Knaap in BNR on Taylor Swift and the race to the bottom

Published on: 12 December 2023

What do Taylor Swift, a global minimum profit tax initiative, and a bond aimed at women's financial empowerment have in common? All three were discussed by APG's chief economist Thijs Knaap, during the most recent investor panel of 'BNR Zaken Doen'.


It seemed too good to be true: 138 countries joined the OECD's initiative to introduce a minimum tax for large companies worldwide. But now that China, the US and other countries have been granted a deferment, it looks like the EU will be the only one to introduce the minimum tariff. And that is precisely not the intention, says Knaap during the investor panel.

 

At a time when international cooperation is becoming increasingly difficult, the conclusion of the agreement on a global minimum profit tax was striking. But now that the minimum profit tax of 15 percent for companies with a turnover of more than 750 million euros seems to be introduced only by the EU, the initiative misses the mark, according to Knaap.


"It appears that China and the US, among others, are not yet ready, which  is of course a false start. The global minimum profit tax is intended to end  the race to the bottom, in which countries compete with each other with ever-lower corporate tax rates. It could be up to two years before China and the US get on board. As long as the EU is the only one to introduce it, the original problem will remain. If we are the only ones to apply this minimum rate, companies will happily move to another country."

 

Mostly repaid
Also in the BNR Investor Panel: the economic benefits for the local economy of a Taylor Swift concert (Knaap calculated that Swift's two performances in July are good for a spending boost for the Amsterdam region of 107 million euros), forecasts about what the US Federal Reserve will do with interest rates, and the break-up of Belgium's largest multinational,  Solvay.


As transaction of the week, Knaap mentions the participation for APG's pension fund clients in the auction for a bond issued by the Impact Investment Exchange. The proceeds are used to finance projects and companies aimed at the financial self-sufficiency of girls and women in three countries in Southeast Asia, in India and in Kenya. For example, the money goes to an Indian financial services company, which in turn provides small loans to customers in disadvantaged areas, mostly women. Knaap: "Experience shows that these types of microloans are repaid in most cases. This is a good example of a bond that combines an attractive interest rate with positive impact."