What has been agreed?

The G7 has essentially agreed a framework to proceed. This is a framework that provides momentum to a process that the OECD has been pursuing for a number of years. Although the 15% minimum corporate tax rate (Pillar Two) is capturing the headlines, it is one of two pillars agreed by the G7. The other is the creation of a new taxation allocation right on foreign income (Pillar One).

There are a number of unanswered questions

Who is captured by the scope of the framework? What is the definition of a large and profitable company? Will the pillars be assessed at the group or individual entity level? Is the 15% global minimum tax rate set in stone? Is this the "right" rate? How can we model the impact of Pillar One and Two (given limited tax and segmented disclosures)?

Simulating the uncertainties, early

The reality is the landscape is evolving. OECD and G20 meetings are scheduled for July and through the 2021 summer, and these could see the framework and scope capture materially evolve. We believe the extent of reporting disclosure will frustrate the modelling and valuation process. Unfortunately, this doesn't address our questions – How could this tax framework affect fundamental valuation? Will companies pay more tax? Will equity values fall? Could a fairer international tax regime drive growth? We have built an initial interactive model (including data from 2,000+ UBS covered companies) that allows users to very easily simulate multiple scenarios and how these scenarios could play out in terms of the fundamental equity valuation.