Chronicle of February 2025
Stand Against Tax Overreach—Just Say No!
In a world of increasing global surveillance and tax overreach, the U.S. has made a bold stand for freedom and financial privacy. President Trump’s executive order to reject the Organization for Economic Cooperation and Development (OECD)’s Global Tax Deal isn’t just about tax policy—it’s a declaration that the U.S. values the freedom to protect personal wealth.
The Global Tax Deal
Between the 1980s and late 2010s, the global average of corporate tax rates declined from 40% to 23%. Many countries slashed their tax rates to attract foreign investment and boost national growth. The U.S., for example, reduced its corporate tax rate multiple times, from 46% in 1986 to just 21% in 2017.
Governments around the world became alarmed by this trend, as it eroded their revenues and exposed inefficiencies in their governance. To counter this, in 2021, they agreed to impose a minimum corporate tax rate of 15%, ensuring no country could undercut others to lure foreign investment. The OECD spearheaded this movement, known as the Global Tax Deal, and around 140 countries have happily joined this tax cartel.
But the deal doesn’t stop there. It also ensures that companies pay taxes in the countries where they generate sales, even if they have no physical presence there. At present, this applies only to companies with revenues exceeding €20 billion and profit margins above 10%, but there’s no guarantee it won’t be broadened to target smaller companies in the future.
The Global Tax Deal is claimed to promote tax fairness by preventing large corporations from shifting their operations between countries to benefit from lower tax rates, and by redistributing taxing rights to countries with larger consumer bases.
However, the deal actually eliminates competition by preventing countries from using innovative tax policies to attract investment. This stifles economic creativity and disadvantages nations that rely on low taxes to drive growth.
The deal is also unfair to countries where innovation and production occur. These nations invest in skilled workforces and infrastructure but see their tax revenues reallocated to larger consumer markets, rewarding population size over real economic contributions. It punishes effort and efficiency.
President Trump’s Effort to Stop Tax Overreach
One of the many executive orders President Trump signed on his first day as the 47th President of the United States was the rejection of the OECD’s Global Tax Deal. The premise is that such a deal allows extraterritorial jurisdiction over American income and limits the country’s ability to implement favorable tax policies that benefit businesses and workers.
This makes perfect sense. If the U.S. can implement a more efficient tax policy for the benefit of its citizens, why should it allow other countries to interfere?
President Trump’s decision to back down from the Global Tax Deal sends a clear message to the world: the U.S. will prioritize its workers, innovators, and businesses over the demands of a tax cartel. It’s a stand for fairness, freedom, and the right to self-determination.
The Common Reporting Standard
It is worth noting that the Global Tax Deal, which focuses on big corporations, is a continuation of the OECD’s previous tax program: the Common Reporting Standard (CRS), which focuses on individuals.
Introduced in 2014, the CRS aims to combat tax evasion by providing transparency about individuals and entities holding offshore accounts. The key element of the CRS is the automatic exchange of financial account information between participating countries. More than 120 countries have committed to implementing the CRS, with the majority already actively exchanging data, including financial hubs such as Singapore.
Under the CRS, financial institutions such as banks, insurance companies, and stock brokers are required to collect detailed information about their clients, including balances, income, and ownership. This information is then sent to the client’s country of residence via local tax authorities.
The CRS justifies such a breach of financial privacy by operating on the assumption that everyone is guilty of tax evasion, allowing governments to peek into individuals’ financial affairs without evidence.
Moreover, this blanket surveillance paves the way for potential abuse. With access to sensitive financial data, authorities could weaponize it to impose capital controls, target political opponents, or exploit vulnerable individuals.
On a practical level, such surveillance may discourage citizens from diversifying their assets, thereby putting their financial security at greater risk. It also deters average citizens from seeking cross-border opportunities, hindering a nation’s economic growth and innovation.
For these reasons, the U.S. has chosen not to embrace the CRS. It breaches financial privacy and creates the potential for misuse of sensitive data by other countries. By avoiding the CRS, the U.S. can protect its own data standards and avoid contributing to global data-sharing systems that it cannot fully control. This decision reflects the same spirit behind rejecting the Global Tax Deal: protecting freedom, privacy, and sovereignty.
The U.S. stands as one of the few nations bold enough to defy the global trend of tax overreach, refusing to surrender its financial sovereignty and ensuring that anyone’s assets within its borders remain shielded from foreign interference.
The U.S. is the ultimate financial fortress—the world's most secretive jurisdiction. More importantly, U.S. companies unlock unparalleled opportunities for global asset protection and wealth management.
What Happened in February
February was marked by negative sentiment, posing challenges to our portfolio. Notably, Microsoft ( MSFT 0.00%↑ ) canceled leases totaling several hundred megawatts with at least two private data center operators, raising concerns about a potential oversupply in AI infrastructure. This has cast doubt on the sustainability of the AI-driven stock market boom, putting pressure on related companies.
Additionally, market jitters intensified as the 25% tariff on Mexican and Canadian goods is set to take effect on March 4. New tariffs were also introduced—an additional 10% on Chinese imports and 25% on EU goods—sparking fears of economic uncertainty: rising inflation, and potential retaliatory measures. Meanwhile, Fed officials reaffirmed their cautious stance, signaling that interest rates may remain higher for longer.
Doubts over AI infrastructure should ease with NVIDIA's ( NVDA 0.00%↑ ) strong results, and neither the tariff news nor the Fed's cautious stance is new. We believe the market overreacted, as seen in how one of our top holdings suffer in late February.
Vital Farms Spectacular Results
Vital Farms (VITL 0.00%↑) results for FY2024 beat expectations, with 29% revenue growth and 100% EPS growth. During the earnings call, management revealed that the avian flu outbreak affected less than 0.5% of its egg production, thanks to the strict biosecurity measures implemented by its farmers.
In fact, sales per store per week increased by 38% year-over-year, and its market share (in units) rose from 1.9% to 2.5%. We believe the company is gaining market share due to egg scarcity and consumers being more willing to purchase premium eggs amid the avian flu outbreak.
Moreover, management provided revenue guidance of $740 million for FY2025, surpassing the consensus estimate of $728 million. Additionally, the adjusted EBITDA guidance for FY2025 is at least $100 million, exceeding the consensus expectation of $94 million.
Despite these impressive numbers and an optimistic tone, VITL stock declined by 15% from open to close on the earnings day.
Staying the Course Amid Volatility
Market volatility has increased in recent months, but we advise clients not to chase short-term movements, as it can lead to unnecessary portfolio whipsaws. Instead, we remain committed to our disciplined investment process—identifying great companies at reasonable prices and holding them as long as they continue meeting key milestones. Quarterly earnings serve as checkpoints, ensuring our investees stay on track.
For existing clients, we recommend sticking to your dollar-cost averaging (DCA) plan. For those in the process of joining us, this environment offers an opportunity to enter at more attractive valuations.