Tax Upheavals Loom In The Wake Of Italian Elections

By Global Tax Weekly

Okay, imagine this scenario if you will: it’s November 2018, and finally you’ve got all your tax planning ducks in a row now that Congress has fixed the broken bits of the tax reform legislation, and the Internal Revenue Service has issued most of the necessary guidance to help taxpayers comprehend the more novel parts of the Tax Cuts and Jobs Act. You’ve got your deductions lined up, your QBI sorted, you’ve avoided a BEAT, and you’re sure you’re not GILTI. Now you can breathe a sigh of relief.

But what’s this? You’ve been so engrossed in tax planning that you’ve forgotten about the elections. “Didn’t we just have one of those,” you think to yourself? Yes, but that was the Presidential election, and that was two years ago. This is the mid-terms, and the Democrats have won Congress back. And their first legislative move is the Repeal Unfair Corporate Taxes United States bill (or RUCUS for short), introduced by House Ways and Means Chairman Richard Neal (D – Massachusetts). And a ruckus this will surely create.

Remember all that planning you just did? It’s been your life’s work for the past 10 months! But don’t tear it up just yet. The Democrats’ Senate majority is as wafer thin as the Republicans’ was after 2016. Surely, they’ll never get the RUCUS past a GOP filibuster? Well, the Republicans managed to push the TCJA through without the Democrats. And surely the Democrats will now try every procedural trick in the book to achieve their main goal.

You wake up – this nightmare scenario was just a dream. It’s March 7, 2018, and you read in the morning news about the Democrats’ proposed infrastructure plan. “I wonder how they will pay for that?” you ponder. After a quick glance down the screen, you break into a cold sweat…

Granted, this might sound like a rather fanciful scenario. But it’s not beyond the realms of possibility, such are the vagaries of democratic systems of government. Indeed, electoral cycles can play havoc with tax planning. We’re seeing this in Italy right now, where a somewhat unexpected turn of political events has left the country’s tax policy in a state of uncertainty. Then again, given the recent chain of events worldwide, that a G7 economy could be led by a professional comedian isn’t all that surprising. But perhaps it’s also no joke.

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