Biden's Framework for Taxing Multinational Corporations

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. We had many headlines today. We talked about states and cities around the US having a growing surplus of COVID nineteen vaccines, and then you had that headline coming out of CNBC, specifically the CEO of Fieser saying what we might need a third vaccine. Yeah, that's right, the CEO saying, with any year potentially need

a third vaccine. It's something that we've talked a lot and asked a lot of our guests about what are the chances that this is something we are going to have to continue to inoculate ourselves against Yeah, exactly part

of kind of our annual taking care of ourselves. Also, don't forget that late yesterday afternoon you had US Public Health Advisors concluding a meeting on J and J's COVID nineteen vaccine without a vote no vote, effectively extending that pause on its use while they seek more data on a rare clotting side effects. So let's get our daily

check on COVID and the vaccine rollout. Dr Anna durban is Professor of International Health at the Johns Hopkins Bloomberg School of Public Health, of course, supported by Michael R. Bloomberg, founder, Bloomberg LP and Bloomberg Philanthropies. She's on the phone in Maryland. Dr Durbin, nice to have you here with us. How are you And when you look out at the COVID and vaccine rollout horizon, how does it look to you? Well,

thank you very much for having me today. I think we can look at the vaccine rollout really from the point of the United States and then globally, because I think we're in two very different circumstances, particularly with the pause on the J and J vaccine and then the restrictions on news that Europe has put in place for the Astra's NFA vaccine, so so so go ahead divide it for us. The US, I'm assuming you're saying, doing pretty good and the rest of the world not so good. Exactly.

In the US were very, very lucky to have options. We have the madinal vaccine, we have the Visor vaccine, we have J and J which has been UM given EAY but is currently on pause. And then we have a couple of other vaccines that are going to go before the FDA in the Nazi distant future, one of

which is Astra Zeneca. But the rest of the world has really um has really depended heavily on different vaccines, on the astro Zenica vaccine, and then UM of course there's the vaccine Sputnik five from Russian and some inactivated

vaccines that have been made in different countries. UM And with the concerns about the clotting, although I will and I do want to emphasize that it's a very rare um event, but it can be devastating, which is why I think it's appropriate that CDC and the Advisory committees are sort of taking a pause and getting more information to help us better understand what's going on, but that has made less vaccine available, um here in the US,

but also I think globally. Hey, Dr Derby, I want to we have a lot to cover here and I really want to hit on this idea of when those who don't qualify for a vaccine will be able to get vaccinated, specifically children, because we learned today, uh from the Mercury News out in California, that Stanford is starting to test visors vaccine and babies and young children. Does

this look promising to you? It looks very promising. And I want to say also Maderna has those pediatric childs planned and has started as well, not quite as young as Visor, but still in children, and I think that's very promising. I think our expectations are that we're going to start to see children being vaccinated probably late summer, early fall. Young six months is what they're testing. But yeah, they probably won't start in six months. Um well yeah,

go ahead. Well I'm just wondering how you know non pandemic vaccine trials go for children as young as six months. I mean, this is the type of thing that needs they need to be followed for a long period of time to make sure there aren't effects that that come after years, right right, Well, you know it's interesting this, you know we this, uh, the way we've been testing these vaccines and children is the way we've been testing

vaccines in children all along. So we always with children, were very very careful and start testing in adults first for safety, and then go down in age, gradually looking at safety and then of course immunogenicity. So this process is really not any different for the COVID vaccines. UM. I think what's interesting is of course that we're starting vaccination in adults as opposed to children. Most vaccines were

used to being given to children. UM. And we will proceed carefully, so the rollout will be for instance, in adolescents and then going down to younger children, for instance five to twelve years of age, and then going down. We're not going to start in the sixth month. Dr Durvin. Let me ask you. We've got about a minute and we're gonna do some news and we'll come back and

continue with you. But I can't help but feel there are people coming up to you, maybe in other's and just saying, see, I told you we did this too fast. Look at what's going on with the J and J vaccine. What do you say to them and just got about a minute. Oh, I say this this is showing us that our safety surveillance system works. So this is a very very rare event, you know, one in a million, that's not going to be picked up in clinical trials. But what we do have is what we call post

life or post use surveillance for safety. And it was picked up very quickly, you know, within a month of the eu A being given. So I think what this shows this is that our safety surveillance works were able to pick up a very very rare event. We've you know, looked at it. Safety experts have said, okay, let's take a step back, let's pause, let's get more information, and

we'll proceed from there. So I say, it shows that the system is working, that we picked it up, we're dealing with it, we're going to see what's happening, and we'll proceed from there. Let's get right back to Dr Anna Durbin, Professor of International Health at the Johns Hopkins Bloomberg School of Public Health, joins us on the phone from Baltimore. The Johns Hopkins Bloomberg School of Public Health is supported by Michael or Bloomberg, founder of Bloomberg LP

and Bloomberg Philanthropies. Dr Durbin, I want to talk a little bit about data and numbers. We did just here from Charlie from Dr Amish Adulga, one of your colleagues at the Bloomberg School of Public Health. He comes on quick Take each week, and one thing that he's talked about is that we shouldn't necessarily judge things by the way that, uh, the cases are going up still, because it's not necessarily the right metric anymore because so many

vulnerable populations have been inoculated. So even though we're seeing a rising cases, we're actually not seeing a rise in deaths and potentially a fourth wave here. Um, what do you make of the fact that cases are going up but but deaths are going down. Well, I think he's exactly right, and I think there's a couple of things that we look at to sort of explain why the numbers of cases are going up. We've been in this

pandemic a year. The vaccine rollout has started, and I think people are are becoming more optimistic and sort of seeing light at the end of the tunnel and going out doing more UM, maybe wearing masks a little bit less. And then we also have the emergence, of course of the B one one seven variant, particularly in Michigan UM, which we know is more transmissible. The good news is that most of the vulnerable population, or a great deal

of the vulnerable population, has been vaccinated. So we are seeing fewer deaths, fewer hospitalizations, which is very very good news. And I think that also always brings me back to when we talk about vaccine efficacy, and you know, people try to compare numbers, and I think what gets lost in some of that discussion is that what we're really trying to prevent is diseased. We're trying to prevent severe disease,

prevent hospitalization, prevent death. And I think as all adults moved towards being vaccinated, we're really going to see that take effect. It does also feel like Dr Durbin at the we're getting to a point where we have this toolkit of things to deal with the virus. UH, We've got several vaccines right preventing people from getting the worst of COVID cases and keeping them out of the hospitals. I mean, we've really come a long way in thirteen months.

We have come a tremendous way in in thirteen months. I think it's really unprecedented, and I think we've learned a lot. We've learned a lot about, um, what to do in a pandemic, what we've done right, what we've done wrong. I think how important leadership and messaging is

around different public health practices. And it's interesting because they have a lot of colleagues and friends who say, even when the pandemic is over, they're going to wear a mask when they go to the grocery store because they saw the effect on influences and other things. So, you know, we've come a long way, and um, it's it's we still have a ways to go, but I think I think we're going to get there, and I think the

summer's going to look a lot better for everyone. There's this exclusive story that we talked about a little earlier by our own Anna Edney and Drew Armstrong talking about unused vaccines piling up across the US as some regions resist. How do we get that last portion of Americans, those ones who are hesitant to get the vaccine and what happens if we don't. Let's start with what happens if

we don't like what happens here? So I think what happens if we don't As we continue to see transmission, UM, we may see more variants arise, and I think what that's going to do is lead to UM requiring or or having to be vaccinated. UM again, get a third shot, UM, or even you know, a year from now, get another shot, because as long as we have ongoing transmission, I think we're going to keep vaccinating those people who are willing to get vaccinated. And I think, you know, that's where

we get to the global picture, the worldwide picture. UM. You know, the rest of the world is not going to be vaccinated for quite a while. And that's why I think we are going to need a third shot, a booster shot, if you will, because as long as the rest of the world is not vaccinated, or as long as we have ongoing transmission, we're going to need vaccination.

And probably though also every year just got thirty seconds here, yeah, well every year for a while and control this pandemic, and we'll see there may be emergence of other coronaviruses. But I think you're right, we'll be vaccinated for at least the next year or two. All right, great day, get some time with you. Thank you so much. I

know you guys are all busy. Dr Anna Durbin. She's Professor of International Health at Johns Hopkins Bloomberg School of Public Health, of course, supported by Michael R. Bloomberg, founder, Bloomberg ALP and Bloomberg Philanthropies. On the phone from Maryland. I like the idea of, you know, thinking about this from the perspective of we don't have to get a booster every year for the rest of our lives, and maybe this is something well we have to do for

a couple of years or even a year. Yeah, until the next virus. Oh, come on, Carl, I was gonna end on a good note a little. Yeah, you you think a lot about that next pandemic. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovich from Bloomberg Radio. Well. President Biden is among the latest to ignite or reignite the global effort to create a united front to prevent multinational corporations from playing one

country off against another million. It's all about Tim dodging taxes. Yeah, they're big question is, how do you do this in a way that every gets everyone around the world to work together and avoid what's been happening really since the nineteen eighties. Combine moment is what we need. Hey, this is a story in the magazine this week. Let's get more on it. Bloomberg business Week Economics editor Peter coy on the phone in New Jersey, along with Bloomberg Business

Week editor Joel Webber on the access line in Brooklyn. Joel, we love our tax stories here at Bloomberg. Yeah, and we love it so much. Business Week made this the International UH cover because I thought it was really an interesting insight into sort of a pretty significant change in

the zeitgeist around corporate taxes and UM. What we've been seeing UM is sort of an unfrustated moment where rich nations and poor nations are are sort of getting on a similar page, which is we need to raise corporate taxes and UH sort of end up penalizing those countries, the the Irelands of the world that attempts to sort of like set a lower bar. So so Peter talked to us more about this, this race against UH, the UH taxes going to zero right, sort of the race

against the race to the bottom. Yeah, exactly, there you go. There's a natural tendency for countries to seek advantage by cutting rates because then companies will shift their profits to your jurisdiction and you'll be able to get something out of it. It might be a low rate, but it's better than you would have gotten if it's probably weren't there at all. Sometimes it's real operations, factory and the song which is semi legit. But sometimes it's purely really

hoarded profits. It'll be like you'll you'll say, all your patents are in the Cayman Islands because of the zero corporate income tax rate. And these games have been going on for years. Governments have been trying to plug the holes, but the corporations have smart tax lawyers, and every time

one hole gets plugged, another one gets opened. So we've had this, as we say, race to the bottom going on for a long time, and corporate income tax from it affects domestic tax rates as well, because you can't tax your own companies very highly if they're well aware that they can escape it by going abroad. So there's an impact on the sovereign government. Yeah, you call it

a game of cat and mouse. Also, I'm wondering about incentives, though, Peter, because there is this incentive for for one country to attract a business, of course, So how do you align incentives in a way that prevents companies or countries excuse me, from creating policies that undercut some sort of international ena. Well, first of all, there's no rule that says you can't have a low tax rate the But what it does say is that they're called it the guilty rule, which

I love. It's spelled g I L T I, but it's pronounced guilty as in caught you cut, you cheating that if it's uh, it's intangible income such as from patents, trademarks, so on that, and it's in a low tax jurisdiction. The the U S or any other higher tax jurisdiction can tax it up to a certain level above what the local jurisdiction chooses to tax. And once you have that in place, it's sorty moves the incentive to move to the low tax jurisdiction because the taxes are going

to follow you wherever you go. So, Peter, the one big change here, obviously is the Biden administration, And I'm want to talk about that, and why don't we use Kimberly classing as a way to talk about that? Who is she Kimberly Classing? I interviewed her for an article in seventeen kind of about this theme, but at the time there wasn't a lot of progress, and she was sort of a voice crying in the wilderness. Shosa economics

professor Read College in Portland. She's said, you know, well, I believe Joel uh And and Read is also you know, the left of left. Yeah, it is. It's a kind of a lefty school. Since then, she moved to u c l A Law school in January. This January, five days after she arrived there, she got the call from the White House, or not the White House yet, but the incoming administration saying we want you on our team

at Treasury. So suddenly, this this person who was kind of as josh as on the outside looking in, is very much on the inside looking out and helping make policy, testifying before Congress, and and helping wholly the Biden administration, which under Trump had been sort of resisting some of the efforts by the O E. C. D in the Group of is now very much in concert with those other countries and with the poor countries as well. There's a hundred thirty nine rich and poor countries together trying

to come up with a joint policy. So and how has the Biden approach been received abroad? It's it's it's been received well because there are a lot of countries that, you know, they may be engaged to the race to the in the race to the bottom, but they don't like it. They'd much rather have a race to the top, or at least some kind of stability. So, for example, the Finance Minister of France, Bruno lemaire Um, has basically said, you know, this is looking like it could be a

revolution attacks revolution, that's what he called it. So yeah, the overall they don't agree with everything the Biden administration wants to do, but they sense tonally that they're they're more in sync than they have been in a long time. Well, I kidded coming into this, Peter, that kind of a Kumbaya moment when it comes to taxes globally, I feel like we're just this time where it's just hard to get anything done and get everybody to cooperate on something.

So likely that we do ultimately get something done and how quickly if we do. I do believe that it's likely something is going to happen here. There have been previous efforts. So there was another effort that was concluded in that went some of the way towards what we're getting at now, but they felt it wasn't enough, so they went back to the drawing board and they had the second effort, which is more comprehensive, more countries involved.

So there was a great quote from Pascal's sentim with a director of OAS Center for Tax Policy and Administration who said, you know, there's no plan B if the project fails, but there's a plan C chaos. So Peter, if if something does happen very briefly, we only have thirty seconds left. Um, what does it mean for the bottom line of for U S companies and global companies. Are they going to see higher taxes or they're going to have to have these lawyers come in and find loopholes.

Bottom line is that it won't be quite so easy to find loopholes, so taxes will go up modestly, But but the US companies will not be affected. US headquarter mostly net will be less affected because they have a harder higher tax race to start with, it's the companies that have been most effectively escaping taxation who will fule at the most, which does include some of us companies. Well, it's a great read and something that's certainly has caught

everybody's attention. Anything with taxes. Um, Peter, thank you, Thank you. Peter Koy, Economics editor, the international cover a Bloomberg Business Week this week, and Joe Weber are thanks to you as well. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic from Bloomberg Radio. Well, we did have another IPO today this year also, it's

been a busy ipo. Calendar mobile apps company app leven and existing shareholder kk are pricing an initial public off ferring at the midpoint of a marketed range, raising two billion eighty dollars of share. Stock began trading day a little bit of a delayed open, and they did open trading below their offering price. Right now, the stock at sixty fifty a share down. About let's get into the business and what's ahead for app Love and the CEO and co founder Adam Ferrugi joins us. Now he's on

the phone from the nastac Adam. Nice to have you here with us. How are you. Thanks, thanks for having me doing well well. Tell us a bit about your company, and you guys didn't go the traditional route of kind of tapping VC money and venture funds. You went the leverage loan market. Just tell us about your your whole approach to bringing this company and building out this startup. Yeah, for sure. We we built a technology platform to help app developers get their apps discovered, and we started in

two thousand twelve in market. We've been profitable ever since and the business today drives our partners over three billion app installs. To customer is the consumer, and we have software in the middle that does matching make sure the consumer discovers the best content. So wait, do me a favorite break it down, because I think somebody's listening and like, I don't know this world that he said, explain it.

So have you worked with a client, Pick a client if you can, or just be generic, but what you might do for them. Let's say you built an app, and you built this cool new game and you needed to find users for it. When we started, we built an app and we put it on an app store and couldn't get it discovered. So we built this platform to let you go onto our platform, market your app to consumers, and then get them to understand what you're

promoting and download the app and engage with it. We now see over four million daily active users on our platform, and we're matching them up with apps from our partners three billion times a year plus. How do consumers interact with the apps that your service recommends on a long term basis? Right? It's one thing. My phone is full of apps that I just do not use anymore that I've downloaded once. What are the metrics that you have?

It's the consumer sees the app through a commercial, typically anywhere from five to thirty seconds, think like a television commercial, highlighting what the app has to offer. Our software in the middle is matching up consumers that are going to become customers of that app developer. We do a great job of predicting what the consumers are actually going to be interested in, and we deliver performance to our advertisers.

How do you do that in a way that uses data so that what I would see recommended to me might be different. What than what Carol C. Is recommended to her. What's the data that you're using? Yeah, what's interesting is in two thousand eighteen, we expanded our platform by launching our own content. We published and and have bought over two hundred games. The games are played by over two hundred million people every single month. And then so that gives us great audience insights. We know what

our customer is interested in. That data, which is our own and engagement data through the customer accessing our games, feeds into our machine learning recommendation engine we call acts on and that does the matchmaking. How does games tell you a lot about me? Or tim? What tells us a lot? Or when someone transacts in one of our games? You're just playing a game does not tell us a whole lot. But if you go and spend ten dollars

on a game. Let's say one of our popular games is a game called Project Makeover excuse heavily female, If you spend ten dollars in that game, our systems can figure out what other types of apps you're going to be likely to engage with. We can probably guess that you're going to also be interested in e commerce shopping app. What does what does innovation look like in this space and in terms of gaming, focusing out on that rather than like an e commerce shopping app, because we have

seen the rise of in app purchases within games. But I mean, what makes what makes a game stick? And then how do you continue to build on that? These games are great access points to the will app ecosystem has given us the most affordable and accessible form of entertainment, which is this mobile gaming ecosystem. It's a billion dollar market still growing ten per cent plus year over year,

and these games continue to be live updated. So so if if you play Project make Over every two weeks, our developer adds content to it for you to engage with, just like a favorite TV show would add an episode every week. And so we see people engaging with our games for years. All Right, I know you're not the CFO. I know you're not the financial guy. But are you a little disappointed that the stock is below the offering price today? You're a smart guy. You know that this

is not what you kind of hope for in a debut. Uh, Like, we built a great company. We raised two billion dollars successfully. We're much more long term focused. Some of the best technology platform companies have had rough starts to the market as people start understanding why a platform is so powerful.

We've got a business. We have four daily active users on our platform, and then we have our own content being engaged with by two million of them, and just you put these pieces together, you can create a lot of growth into the future. We're excited about our prospects. We're coming off for best growth year and best growth quarter of all time, and we're thinking about this business three five years from now. Where is it stock going

to be? Not today? Okay, Adam, Once and for all, we have thirty seconds left answer the question the origins of the company's name. Is it from the movie super Bad and mclovin or not? Maybe subconsciously it's a good movie, but it's an eight dollar domain name. It did lead us to a great ticker app. We've been talking about this in the newsroom. Um, listen, come back and let us know the growth metrics as you guys move forward, because we'd love to hear a little bit more about it.

We've been talking with Adam Ferugie. He is the CEO co founder of Apple Love and making its debut today uh Stock. As I mentioned about here in its first day of being a publicly held company at sixty four thirty four a air. Just a quick check. Let's see if we've got a market cap number a thirteen point five billion in that fewsday. I'm bro mac journal. Yeah, but you let me drive? No, no, no, who's going

to drug home? Please? I'll do the right gravel. Let's I want to drive, Just drive, baby, the questions drying. This is the drive to the globe coming. Thanks, we'll drying us Dawn on Bloomberg Radio. All right, everybody, it is time for the drive to the close. Just a little more than nine minutes left in today's trading day. Let's get to it with Kelsey Barrow, fixed in come portfolio manager focusing on US rates and inflation sectors at

JP Morgan Asset Management, on the phone from Hoboken, New Jersey. Kelsey, nice to have you here with him and myself. When you look at today's market, I thought it was an interesting one. We saw stocks up, and we saw bonds up and yields backing off. Explain that to me, especially especially when it comes to the fixed income trade. Yeah. Absolutely, this is a really interesting day to be on with you, So thank you for having me Carol and Tim, so

I would say it was a data tsunami. We started out with record strong marked retail sales, and one thing that set out to me with the retail sales report is actually now every sector, every category within the report is above pre COVID levels except for restaurants. So of course, looking at that data and then looking at these thirty year treasury yields, which is down eight basis points on

the day, you think it'd be a disconnect. But for us, we see this as as somewhat not surprising, particularly because if you think about last quarters which US treasury yields, it was the worst quarter for government bonds since the nineteen eighties. So this is a bit of a validation

trade here. The data is confirming the strong recovery, and now that we've gone past the volatility inducing events the retail sales report, this pp I report, to our power speaking earlier in the week, people are dipping their toes into the fixing home markets again. So how much higher do interest rates go this year? So after this consolidation phase, we do think that yields are going to be higher

over the balance of the year. Uh, we think that two on the tenure is a reasonable stopping point to expect over over a period of time once we see how the recovery continues through the summer. Wait, let me

go back to this. So you're saying that maybe we overreacted in terms of the fixed income market, the treasury market, uh last quarter, and that's obviously was playing out in terms of the performance when we start rates move up so much and then now we're just kind of calming down and understanding, yeah, the economy is getting back on track. This is what we expected, and that was already priced

into the fixed income market. Yeah. So I think that when I look back at the move in guilt, it was historic about a ad basis point rise last quarter, and there is an opportunity for foreign investors, particularly to look at our market and say things have gotten more attractive here from evaluation perspective, and maybe it's time that we put a few chips on the table. But it is really well wait, wait, I want to just jump in.

Is it a case that things have calmed down and this real worry about rates moving you know, well above two percent, inflation getting out of control, that's not happening. So I think you hit the nail on the head with the inflation conversation. So I think that we have been concerned about what what inflation would bring over the next few prints. And while the CPI report was strong, I look at the six months run rate on core c p I at one and a half percent, and

that's not runaway inflation at least for now. I've been wondering about the role of fixed income in portfolios and if there is still that traditional need for it for many of your clients, given what interest rates have done, what they're doing now, and where they're expected to go. Absolutely, and I think we all lived with fields are a

little bit higher in this environment. But we do still see this as a positive environment for the fixed income markets, particularly when the FED is still a good backdrop and default are falling, which is a good good backdrop for credit spread. So where do you want to be along the curve here? So when I think about the treasury curve, it has steepened a fair bit already, but it could

continue to steep in as the economy recovers. So where you're going to get the most protection is in the front end, the front ends, So you want to do the shorter end here, Yeah, because eventually we do see YOUELD continuing to rise. Uh, and that's where you're going to get the protection. What is the time frame there? You say, eventually? But but but what are you forecasting?

So we see two percent on the tenure for a year end um and after a period of consolidation, which is essentially what we think we're experiencing right now, that that is going to start talking about papering. They set the bar quite high to discuss papering. We are all wondering what substantial progress actually means. We think it's going to mean a number of months of job growth. So the one million print we got last months, that's great.

We're going to have to get a string more of those, and then they're going to start considering, uh, where we're going to be on the past normalization? Well, I mean, in general, do you feel like, um kelsey, things are kind of going maybe as we hoped. I mean, obviously there's been a lot of stimulus pumped into the economy, whether it's from fiscal poll to see, whether it's through the Fed uh and easy money moving around here. But listen,

this is what we wanted, right. We didn't want the economy to stay down for too long, because then it's much more difficult to get up. Is it kind of recovering in a productive and uh kind of normal and organized way, so that we don't have to be worried necessarily about inflation getting out of control. Absolutely, Fiscal policy and monetary policy makers have done a great job. They have responded quickly. Um. In fact, when I look at the coal in g d P during the depth of

the crisis, it was around two trillions. The fiscal response has been more than double that whole. With infrastructure it could be easily three times the original whole. So we are there to experience the recovery. It is coming through as we expected. Um. And at the same time, I think structurally inflation can remain contained. So what do you say to a client who comes at you and says, I want to go all equities because I just don't see any opportunity and fixed income and we only about

thirty seconds. Absolutely well, as I said before, I think we all wish yields are were higher, but there's still a diversification benefit from being in fixed income on the days where things are not going well, which would be not like today, but on a day when as these are struggling. We still see value, hedging value and having some fixed income in a portfolio. Just quickly fifteen twenty seconds,

corporates any what's your position there. So we are very comfortable with credit spreads at this time, particularly because we see default rates falling this year. In fact, when I look at the amount of defaults we've seen so far in the high yield market, it's about two point three billions. That's an annualized rate of just point six percent, so significantly lower than we experienced lash year. Right, we just had a headline JP Morgan itself setting a bond sale

at thirteen billion, the biggest ever for a bank. So you're own company certainly out there in the credit market, Kelsey, Thank you so much, klcy Barrow. She's fixed income portfolio manager, JP Morgan Asset Management, on the phone from Hoboken, New Jersey. Thanks week. Brisdoomberg is bliss. This massive, Carol We Brisdoomberg is bliss. This