Cover of MoneyWeek magazine issue no 763, 9 October 2015

Buried treasure

7 October 2015 / Issue 763

Gold miners are having a very tough time of it, but things can only get better, says Dominic Frisby. Read this week's cover story here.

• A risky punt on an emerging-market rally
• Why the future’s brighter than you think
• Are women really better investors than men?

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John Stepek

Blue chips just got riskier

A huge new trade deal – the Trans-Pacific Partnership (TPP) – grabbed headlines this week, as America and various Asian and Latin American nations finally signed on the dotted line after five years of back-and-forthing. Now, we’re all for free trade and the abolition of tariffs, and while the details of these deals usually reveal all sorts of loopholes and cop-outs and nods to special interests in one country or another, there’s enough there for us to like the look of in terms of what positives there might be for one of our favourite markets – Japan.

Any deal that can loosen the grip of the agricultural lobby “could have a significant effect on Japan”, which provides more taxpayer support to its farmers than pretty much any other wealthy country, notes Jonathan Allum of SMBC Nikko Capital Markets. Of course, the deal still needs to be ratified by the individual countries (although America and Japan are the most important signatories), so it’s likely to be a while before any impact becomes apparent.

But amid the TPP headlines you may not have noticed that another major transnational deal was agreed this week. And while you might not have heard quite as much about this one, its overall impact, both in the short and the long term, is likely to be far greater than the TPP’s. I’m talking about an agreement on corporate taxation between the G20/OECD group of major economies.

The key recommendation of the report from the “Base Erosion and Profit Shifting Project” (BEPS for short) was that companies should report their sales, profits and tax paid on a country-by-country basis. As Marcus Ashworth of Haitong Securities points out, this means it will be possible to “globally map where activities are and where tax is paid”.

In other words, it’ll make it harder for big companies to funnel profits made in one country through another with a more generous tax regime.

• Read the full editor’s letter here: Blue chips just got riskier