Focus falls on the small print of Donald Trump’s tax plans

On the last page of a nine-page tax plan that calls for slashing business rates, US President Donald Trump and congressional Republicans last week proposed a new tax that may hit companies like Apple and Pfizer.

Companies including Pfizer, which has a base in Ringaskiddy, Co Cork, could be affected by a new US tax.

It’s contained in one sentence: “To prevent companies from shifting profits to tax havens, the framework includes rules to protect the US tax base by taxing at a reduced rate and on a global basis the foreign profits of US multinational corporations.”

The rate and formula aren’t specified, but that lone sentence carries multibillion-dollar implications for multinationals. Their lobbyists are noticing.

Proposing a new tax on US companies’ foreign profits “is appalling,” said Ken Kies of Federal Policy Group, whose clients include General Electric and Microsoft. “The whole point of this tax reform was to make US corporations more competitive. It’s going to do the opposite.” As specifics begin to emerge, including at a Senate Finance Committee hearing later today, opposition may increase.

It’s not all bad news for multinationals. On the positive side, the framework would allow them to bring back to the US, or repatriate, years’ worth of foreign earnings after paying a low tax rate — perhaps 10% — on them.

And even the new minimum foreign tax might not be as bad as it could have been. Four tax experts told Bloomberg News the framework’s wording suggests that despite the tax’s goal, multinationals will be able to keep using sophisticated tax-winnowing techniques and tax havens. While they may still face billions of dollars in new tax payments, it won’t be as bad as it could have been for them thanks to one word in the framework’s language: “Global.”

It’s also unclear from the brief description in the framework how the tax would work. But here’s a general idea: Congress would set a low tax rate — say 15% — that would serve as a minimum rate for companies on their offshore subsidiaries’ earnings. Any multinational that paid more than that minimum to foreign governments wouldn’t owe the tax in the US. But if a company’s overseas taxes fell below the minimum — a sign that it made heavy use of tax havens — the company would pay the US the difference.

But because the framework says the new tax would apply “on a global basis,” it won’t be as tough on companies as it might have been — or as past Republican tax proposals have been, experts said. Companies will double down on tax-planning technologies, said Edward Kleinbard, a former chief of staff for Congress’s Joint Committee on Taxation.

— Bloomberg


Related Articles

Vladimir Putin thanks Donald Trump for CIA tip-off stopping St Petersburg bombings

Russia probe 'obtains thousands of Donald Trump transition emails'

US economy ready to rock after tax cut bill, says Donald Trump

Trump: We are cutting red tape to defend democracy

More in this Section

Irish customers miss out on Sky-BT channel share deal

GDP surge will extend next year, say analysts

Minister confirms 125 vacancies at Central Bank

Buy 10-year mortgages to beat ECB, says expert


Lifestyle

Review: N.E.R.D - No One Ever Really Dies: Their finest album to date

Everyone's mad at Google - Sundar Pichai has to fix it

Scenes from the analogue city - Memories of Limerick from the late 80s and early 90s

Ask Audrey: 'I heard that Viagra fumes from Pfizer’s were causing stiffys below in Ringaskiddy'

More From The Irish Examiner