- About Us
- Contact Us
Earlier this month, the Senate voted in Donald Trump’s controversial $1.4 trillion tax reform bill by the narrow margin of 51-49. It represents the largest overhaul to America’s tax system in 31 years and is a major victory for the U.S. president. He proclaimed on Twitter:
“We are one step closer to delivering MASSIVE tax cuts for working families across America. Special thanks to @SenateMajLdr Mitch McConnell and Chairman @SenOrrinHatch for shepherding our bill through the Senate. Look forward to signing a final bill before Christmas!”
A key aspect of the bill is the reduction of the tax rate on corporate income from 35% to 20%. According to the Unified Framework for Fixing our Broken Tax Code, the rationale is to “prevent companies from shifting profits to tax havens” and limit “offshoring”. This means multinational corporations will now be able to repatriate foreign income on “high-profile returns” (such as intellectual property) back to the U.S. at a rate of 10% (12% for cash held offshore and 5% for non-cash assets). The end result is to try and substantially boost the household income of American workers.
Naturally, there are many differing opinions on what these seismic changes will actually bring. Bloomberg cites the banking, pharmaceutical, technology and fossil fuels industries as some of the potential winners. However, renewable energy companies look set to lose out. The Financial Times put it rather bluntly by saying: “If you are a global company that has made leveraged investments in U.S. renewable energy production in recent years, those assets now look like a bird that has run into a wind turbine.”
To get under the skin of these complex changes, a closer look at the current U.S. tax system is needed. As it stands, the U.S. takes a “worldwide” approach. This means that any American corporation’s profits are taxed at the same rate regardless of whether they are earned domestically or abroad. However, what must be noted is that profits made abroad aren’t taxed in the U.S. until they are “repatriated” from a foreign subsidiary to a U.S. parent company. According to Reuters, Trump’s tax reform bill promises a minimum tax rate on foreign income. It will calculate an average for all foreign earnings combined – the so-called “global minimum”.
Some analysts claim that this system has a fundamental flaw. The more an American company moves its profitable operations to countries that have tax rates of 20% or higher (often richer countries perceived as America’s economic competitors), the more it can shift profits to tax havens – without paying taxes on those profits. Ed Kleinbard, a law professor at USC and former chief of staff for Congress’s Joint Committee on Taxation, told Bloomberg, “Companies will double down on tax-planning technologies to create a stream of zero-tax income that brings their average down to that minimum rate.”
Conversely, pro-Trump commentators dispute this. In the article Trump hands American small businesses and workers a win, Stephen Moore and Alfredo Ortiz argue that “In reality, nearly all American small businesses, even those that don’t qualify for the new 25%, would get tax relief under this bill… [and that it will] save ordinary small businesses thousands of dollars a year in taxes that can be reinvested back into their businesses, employees, and communities.”
Ultimately, these tax reforms will have vast implications. Whether they will turn out to be what Donald Trump and the Republican Party envisage is still up for debate. Tax can undoubtedly be a convoluted and complex issue, and it’s in times like these that businesses need expert guidance to ensure they are complying with tax laws in the most efficient way possible.
If you have any questions on how these tax reforms may impact your business, or you would like to discuss business strategy, please contact us today.
Earlier this month, the Senate voted in Donald Trump’s controversial $1.4 trillion tax reform bill by the narrow margin of
To say that there’s been a backlash against globalisation in recent years would be an understatement. From demonstrations in France
“May you live in interesting times” goes the Chinese expression. In fact, it’s actually more of a subtle barb to
Earlier this month, the Slovenian Prime Minister, Miro Cerar, stated that he “want[s] to position Slovenia as the most recognised
In the UK, they’re known as Generation Y, in Germany Generation Maybe, and China has labelled them as the generation
Rodney Sutton, head of manufacturing at Kreston Reeves, recently shared his thoughts on the UK manufacturing industry following the referendum
The adoption of international accounting standards has brought many benefits to the private and public sectors. This being said, there
Remote working is becoming a way of life for many professionals and the ability to work in a variety of
A common global language for business affairs, IFRS Standards are required by more than 120 jurisdictions in the world. Recently,
Automated technologies and artificial intelligence in our society will challenge many professions in the future. Some of them may be
Crowdfunding is still relatively new but should still be considered as a viable source of equity. Nowadays, it is providing
A legal amendment to the Finance Bill recently accepted by the UK government may pave the way for big changes
In the business world, there are bumps on the road and financial setbacks. In this situation, it is easy to
Day by day, technology is becoming an essential part of our lives, as the way we manage our financial life,
A new generation is coming to challenge the market. The Millennials make up a quarter of the US population and
Managing change is one of the biggest challenges for businesses as it requires a huge effort from managers and organisations
Sustainability reports are released by companies and organisations of all types, sizes, and sectors, from all over the world. A
Accounting is an indispensable tool for entrepreneurs to manage their business. The data provided by competent
Thinking about the risks involved in business has become an essential part of an enterprise’s strategy. Risk management enables organisations
When a business does not achieve its expected results, it may be time to think about implementing change. In these
The Financial Times recently reported the dispute in the courts between the UK supermarket chain Sainsbury’s and MasterCard. The Competition
For many, the accounting profession may not seem the most attractive in the world. But with technology and innovation at our hands, this is about to change.
By following these five steps, communication has everything it needs to flow better, regardless of where your business is located and where the people you
The need to go global is something that has emerged over the past decade and promises to challenge business for the next coming years.
Recently a considerable change in the SME market was announced through business news on the internet. The Big Four have
There are five topics that we must remember when dealing with working personal relationships in international business…
Slowly, one of the last socialist countries in the world is preparing to make changes to its economy, but how will this be done?
Developing countries attract the attention of investors by offering good opportunities and new markets, making them attractive for anyone thinking of expanding their
Through a mobile app, a small business can promote its brand, products, and services, expand its sales channels, interact with the target audience and get
Last month, experts at the Milken Institute Global Conference in Los Angeles looked at certain megatrends and predicted several economic scenarios for 2040 to
Your browser (Internet Explorer) is out of date.
It is no longer supported by Microsoft and therefore may not display all features of this and other websites. Learn how to update your browser here